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OM in the News: Wal-Mart Checks Out Mobile Checkout

September 8, 2012

How can operations management play a role in cost savings at Wal-Mart? Check out this quote from The Wall Street Journal (Sept.1-2, 2012): “The company says it spends $12 million per second on cashiers’ wages in the U.S.”  At $12 million per second, it is no wonder that Wal-Mart is testing a checkout system that allows shoppers to use their mobile phones to scan items as they walk through stores and pay at self-service kiosks, skipping the cashiers’ lines.

Called “Scan and Go,” the mobile-payment app is the latest attempt by the Wal-Mart OM group to reduce long checkout lines.  The system does not yet allow customers to pay with their mobile device, but is meant to make scanning easier for them. Wal-Mart also just announced plans to add more self-checkout lanes, as only 1,600 of the 4,500 Wal-Mart and Sam’s Club stores in the U.S. include this option.

Retailers have been using self-checkout for more than a decade to try to reduce labor costs and speed up transactions, but not all chains have been happy with their experiences. Companies like grocery chain Albertsons and housewares giant IKEA  are actually eliminating self-checkout, citing lost revenue, theft, and lack of interaction with customers. Many shoppers also complain the self-service systems are balky.

The scanning idea could serve as a loyalty program for Wal-Mart, which does not issue discount cards to customers in exchange for the ability to collect data on their shopping habits. Scanning will allow the firm to collect data on what customers buy and how long they spend in stores–and to send shoppers coupons for competitive products in real-time as they scan items. “If you scan peanut butter and immediately a $2-off coupon pops up to buy a competing brand, Wal-Mart can change customer’s behaviors right there in the aisle,” says an industry consultant.

Discussion questions:

1. What are the advantages of mobile scanning/checkout?

2. Why are self-checkouts not universal?

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