Can Retailers Overcome Self-Checkout & Online Shopping to Keep Impulse Shopping Strong?

March 20, 2024
By Mike Wilkening, Communications Manager, ARC (CMA | SIMA)

Think back for a second. When was your first impulse purchase?

Here’s our guess: you were just old enough to walk, and you were with your mom, dad, or other loved one at the grocery store. When it was time to check out, you saw a rack of candy. You saw something you liked, and you grabbed it. And there was your first-ever impulse buy.

Sound familiar?

Whether it’s gum, a bottle of soda, or a celebrity-focused magazine, impulse buys at the front of the store – the checkout category – are big business for retailers, with the category estimated at $6.5 billion, according to data from Impulse Marketing Co.’s Mindy Asper. Overall, the category grew 5% year over year in 2023, and it is almost universally a profitable category for retailers.

However, it’s a category facing challenges on numerous fronts, including the rise of online shopping and the increased prevalence of self-checkout machines. Given these hurdles, “capturing impulse sales in new, meaningful ways is a critical problem to solve for the Category Management / Shopper Insight community,” said Mike Gervasio, former CMA board chair and vice president of category leadership at PepsiCo.

Let’s take a closer look at each challenge – and see if there are opportunities within each for retailers and brands.

The Online Challenge

Checkout category purchases are challenged due to:

  • Smaller baskets are becoming more common. According to data from Symphony AI, baskets of 20 items or less made up 26% of purchases in Q1 2023, compared to 16% in Q1 2019.
  • The rise of online grocery shopping. How’s this for an eye-opening statistic? According to Capital One, 28% of U.S. adults order groceries online at least once per month. Online grocery delivery means the impulse buy must occur before fulfillment, and the speed of online, point-and-click shopping would seem to work against impulse shopping.
  • The shopper need states are different online than in-store for single-serve. With online grocery, shoppers are buying for future consumption and single-serve items tend to be purchased for immediate consumption. Said Asper: “Immediate consumption solves a need state for the shopper in-store – hunger, thirst, convenience – and will likely be consumed within 30 minutes of leaving the store.”

The Online Opportunity

So how can retailers and CPGs surprise and delight shoppers while nudging them toward adding more to their baskets? Experts offered a couple suggestions.

One key, according to Craig Hodnett, vice president of category management and strategy at The Simply Good Foods Company, is to find ways to create “relevant interruptions” during the online journey for shoppers – a balancing act, yes, but one with upside for CPGs and retailers if done right. The trick, Hodnett said, is capturing the “treasure hunt” feel that club stores are so good at creating.

“We don’t want to annoy the shopper by interrupting them when they shop online,” said Hodnett, speaking on the CMA’s CatMan Leaders Panel at the 2024 CMA-SIMA Conference. “But we also found out surprisingly that a retailer’s website can be actually more favored than others if they have relevant interruptions that made the total shopping experience a better one.”

Another key, according to Asper, is the click-and-collect ordering of groceries, where shoppers buy online but pick up groceries at the store.

“In that case, they could be looking for something on the go, so engaging shoppers in that environment is an opportunity,” Asper said. “And there are retailers already testing merchandising and assortments where shoppers come and pick up orders at the store, both inside and outside.

New chair of the CMA advisory board James Ford, vice president of category leadership at Coca-Cola, is another believer in the click-and-collect opportunity.

“One of the things that we’ve discovered is that with click-and-collect, many times they’re coming to the store and they’re getting their back seats filled up with groceries, but a good percent of the time they’re going in to buy those items they want to choose themselves or last-minute items,” said Ford, speaking at the CatMan Leaders Panel. As Ford noted, “understanding where those most-purchased, last-minute items are in the store, and making sure you understand the heat maps of where they are, and then putting impulse categories close by them, is another way” to win impulse purchases.

The Self-Checkout Challenge

While online grocery spending continues to grow, it is still just a little more than 7% of the total North American market, per McKinsey data. The in-store experience — the future of which is fretted over by so many in the retail ecosystem — remains the dominant experience for shoppers. Think of it this way: try finding a parking spot at your local grocery store before a major holiday. It’s still an adventure, because going to stores remains ingrained as consumer behavior.

However, should you go to a grocery store these days, the data suggest it’s a coin flip that you’ll have an actual person as your cashier. In fact, you’re really a slight underdog to talk to a person and not interact silently with a point-of-sale scanner. According to Asper, who cited IMC’s 2023 Proprietary Retailer Research, 51% of all grocery transactions last year were self-checkout, compared to 34% four years earlier.

The risks to impulse purchasing in a self-checkout world are numerous. Most self-checkout spaces are designed to be operationally efficient and often don’t leave as much room for merchandising typically found at the front end of the store, making space a premium.

What’s more, the risk of shrink at self-checkout is real. In a 2023 survey conducted by LendingTree of 2,000 shoppers, 15% admitted stealing while ringing up their own goods.

“There is no question that as more retailers are moving to self-checkout they are experiencing a loss of impulse sales of snacks, candies and publications,” said Phil Lempert, a consumer trends and behavior expert and food trends editor and correspondent for NBC’s Today show who’s written extensively about the self-checkout landscape.

How big is that loss? According to Asper, the average retailer sells about 17.5 units of impulse items (snacks, magazines, etc.) per 100 transactions – a rate that can drop as much as 70% in a self-checkout environment.

Ugh.

The Self-Checkout Opportunity

What can be done at self-checkout? Improving merchandising near the checkout aisles, which remains a work-in-progress, as Lempert noted. However, regardless of whether shoppers choose an assisted or a self-checkout transaction, the need state still exists, and shoppers can still have interest in a beverage or candy bar.  Making merchandising easily available to them at or near the transaction point can significantly increase the conversion opportunity.

Also, the evidence shows retailers are getting better at merchandising self-checkout spaces working more closely with their operations departments. While still typically having less merchandising space at self-checkout than assisted lanes, best-in-class retailers are closing the gap in sales and conversion with self-checkout and driving 52% higher conversion, per Asper’s data.

Impulse, for what it’s worth, is controlled by the brain’s frontal lobe, and the science of impulse predates us and will outlast all of us. Ultimately, maybe that’s what this is all about for retailers and CPGs: the fact that part of us will always be that little kid who sees a chocolate bar — and has to have it, right then and there.