Feasibility of self-checkout machines in Dubai supermarkets
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This document presents the findings of a feasibility study on introducing self-checkout machines in supermarkets in Dubai. It finds there is demand among consumers for self-checkout due to the benefits of reduced waiting times, increased privacy and control. While retailers have concerns about costs and security, the study estimates self-checkout machines would pay for themselves within two years due to reduced labor costs. It recommends a phased introduction along with promotional discounts and awareness campaigns to encourage adoption.
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Feasibility of self-checkout machines in Dubai supermarkets
- 1. Feasibility study of self-checkout machines at supermarkets in Dubai Chetan Goenka & Kushagra Jain
- 2. Changes in consumer behavior SpeedPrivacy Control Psychological needs
- 3. Current scenarios “10 minutes in line just to buy a can of soda …Its ridiculous!!!” “I don’t want to hand over my card... and I think the cashier swiped my goods more than once… also he didn’t give me right discounts” “Ohhh…I am not going to buy them (personal goods)… the lady at the counter smirks at me when she sees them”
- 4. Self checkout Enter -----Select ----Collect---- Scan---- Pay ---- Bag ---- Exit I can be sure of what I pay now I can buy anything without any embarrassment Can buy even one item without getting delayed
- 9. Why not in Dubai ? • Largest – Dubai Mall • Tallest – Burj Khalifa • Luxurious– Burj Al Arab, Atlantis • Techno-marvel – Palm
- 10. About NCR • NCR –ranked 10th global hardware maintenance and support provider across all the industry segments • Their Clients include: – 17 of the world’s top 20 retailers – 19 of the world’s top 20 banks – 8 of the world’s top 10 telecom providers – 6 of the top 7 airlines Source: NCR website
- 11. What and How to find? Are the Retailers ready ? Are the Consumers ready ? Qualitative Research Quantitative Research
- 12. Demographics 28% 24% 22% 26% Income Range Less than 5K 5K to 10K 10K to 20K 20K and above 34% 66% Gender Female Male 54%34% 12% Frequency of visits Weekly Fortnightly Monthly 8% 20% 24%22% 18% 8% Nationalities UAE Nationals Expat Arabs Indians Other Asians Americans Other Westerners 24%50% 12% 14% Occupation Student Salaried Self Employed Housewife4% 42% 42% 12% Age 13-21 21-30 30-45 45-60
- 13. Market Potential North America 59% Western Europe 30% Asia Pacific 7% MENA and Latin America 0 100 200 300 400 500 2006 2008 2010 2012 2014 2016 Installed Base of SCO (in thousands) Source: RBR Report, 2009 Predictions for 2014
- 14. Strengths • Reduces long waiting time. • Increases Privacy & control. • Payback period of less than two years • Compatible with other POS machines Opportunities • GCC has demand for it • Test market for China and India • Consumer education can lead to wide acceptance Threats • Alternate technologies like handheld scanner Weaknesses • Perception of cost cutting • Occasional hitches may frustrate customers • Initial slump in Impulse purchase at counters S W TO
- 15. PSA Model Perceived attributes of Innovation Relative Advantage Degree to which an innovation is perceived better than competing products Compatibility Degree to which an innovation is consistent with existing values, experiences and needs Simplicity Degree to which an innovation is perceived as complex and difficult to use Trial-ability Degree to which an innovation may be experimented with on a limited base Result of adoption process—Rate of Adoption—usage of innovation
- 16. Concerns expressed by retailers in implementation Customer Profile High Initial Cost Cheap available labor Security & Imperfection in machines Large shop footprint Current Economy Issues
- 17. Retailers Concerns Concern of Retailer Spinneys Lulu Al Maya Choithram's DDF Auchan Customer Profile Cheap Labor Economic Scenario Security Concerns Large footprint High installation cost
- 19. LAUNCH IT !!!
- 20. 0 2 4 6 8 10 12 14 16 Most Likely Likely Less Likely Not likely 8 6 4 1 5 4 3 3 Waiting Time v/s Usage likeliness 1 to 3 3 to 5 5 to 10 more than 10 10% 56% 30% 4% Waiting time 1 to 3 3 to 5 5 to 10 more than 10
- 21. 0 2 4 6 8 10 12 14 Most Likely Likely Less Likely Not likely Time of Shopping V/s Usage Likeliness Peak hours Non- Peak Anytime 26% 67% 7% Try New Technology To reduce waiting time While buying personal goods
- 22. Spread Awareness
- 25. Costs • Installation • Implementation • Training • Maintenance • Supervisors Cost Benefits • Salaries of Cashiers and Baggers • Reduced Shrinkage • Reduced turnover cost • Increased sales • Increased customer satisfaction Cost Benefit Analysis
- 26. Payback Period 1.9 years Discounted Payback Period 2.2 years Returns Net Annual Benefits 6,327,000 AED Net Onetime Costs 11,909,000 AED Results of the Model (10% discounting) PV of Future inflows (4 years) 20,055,739 AED PV of outflows 11,909,000 AED NPV 8,146,739 AED IRR 39% Results
- 27. Retailers say people wont accept IS IT SO ?
- 28. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% UAE Nat Expat Arab Indian Other Asian European Oth. Westrs Nationality v/s likeliness of usage Most Likely Likely Less Likely Not likely 0 1 1 2 2 3 3 4 4 5 5 Most Likely Likely Less Likely Not likely Satisfaction on a 5 scale v/s Usage likeliness 3 4 5 Aware 52% Not aware 48% 0 2 4 6 8 10 12 14 16 18 Most Likely Likely Less Likely Not likely Monthly Income V/s Usage Likeliness < 5K AED 5k-10K AED 10k-20K AED >20K AED
- 29. 50% 45% 5% Extra work Lack of confidence Machine may be faulty 0 2 4 6 8 10 12 14 16 18 Most Likely Likely Less Likely Not likely No. of items bought V/s Usage Likeliness < 5 5 to 10 10 to 20 20 to 40 > 40 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 13-20 years 21-30 years 31-45 years 46- 60 years Age V/s Usage Likeliness Most Likely Likely Less Likely Not likely
- 30. TAKE SMALL STEPS
- 31. Phased Implementations • T1 first T2 will follow • Strip down versions • Loans • Strategic locations • Integrate with employees 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% UAE Nat Expat Arab Indian Other Asian European Oth. Westrs Nationality v/s likeliness of usage Most Likely Likely Less Likely Not likely
- 32. PUSH PUSH PUSH
- 33. • Discounts • Promotions targeting the young generations • Integrating up the value chain – Express checkouts/ 24/7 stores Most Like 24% Likely 52% Less Likely 24% On giving 1% discount
- 35. …so finally Spread awareness, Show retailers the money and launch it. There is Demand for it, Take strategic steps to push the technology and it would be a success
- 36. Thank You!!!
- 37. Questions
- 38. Limitations • We have not interviewed age group below 13 years of age and above 60 years of age. • Only few people were interviewed among age group of 13 to 21 years and 45 to 60 years of age. • As a matter of personal inconvenience to the Emirati women and Expat Arabic women, we could not interview more of them. • Some survey responses were obtained online. • We tried to interview the educated people, Asians who have stayed in US/ UK for a year or so and know about technology.
- 39. Cost benefit analysis Figures as told in Interview No. of stores of the supermarket 75 Average number of lanes in the supermarket 30 Annual sales of the store 3,000,000,000 AED Average Weekly sales in the store 769,231 AED Cashier and Baggers work in 2 shifts Industry Averages Cashier Labor rate per month 3000 AED Bagger Labor rate per month 1200 AED Annual shrink rate 3.00% Shrinkage due to cashier 30.00% Labor turnover rate 40% Traditional POS lanes removed 75 No of cashiers that can be reduced – Cashiers work in 2 shifts 150 No. of baggers that can be reduced – Work in 2 shifts 150 NCR Self check out that would be installed 75 No. of supervisors required for 75 37 Salary of supervisor per month 4000 AED Each Old POS Machine can be scrapped 1000 AED Cost of Deployment and training of people 500,000 AED Discounting Rate 10 % New Machines will work for 4 years Assumptions Estimated self-checkout adoption rate 10 %
- 40. Cost of 75 NCR Self-Checkout terminals (as provided by NCR) Installations + Implementation Licensing cost + Software + 1st terminal (USD) 600,000 Remaining 74 machines @USD 35,000 each 2,590,000 Total Cost of 75 terminals (USD) 3,190,000 Total Cost of 75 terminals (AED) 11,484,000 Cost Benefit Analysis Onetime costs and benefits Cost of Installation and Integration of 75 terminals 11,484,000 AED Cost of Deployment and training of people 500,000 AED Receipts from selling of 75 old terminals (75,000) AED Total Installation and Implementation Cost 11,909,000 AED Yearly Costs and Benefits Yearly Costs Involved Cost of employing the supervisors for SCO machines 1,800,000 AED Increased Cost of Maintenance 1,500,000 AED Total Yearly Costs 3,300,000 AED Yearly Benefits Involved Reduced cost in respect of cashiers 5,400,000 AED Reduced cost in respect of reduced baggers 2,160,000 AED Savings due to shrinkage rate 2,025,000 AED Saving due to reduced turnover cost 42,000 AED Total Yearly Benefits 9,627,000 AED Net Yearly Benefits 6,327,000 AED
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