POS VAR: Cashing In On Grocery Self-Service

Chances are, you've "served yourself" at least once this past week. From banking at an ATM to paying for gas at the pump, many people enjoy the convenience and speed that self-service offers. Optimal Robotics, Corp., a software developer/POS VAR, is counting on this self-service trend to continue. The Montreal-based company introduced self-service to the grocery market with its U-Scan Express™ System in 1995. The automated self-service checkout system is designed to reduce the cost to retailers while increasing shoppers' convenience. Shoppers scan, pay for and bag purchases with limited, if any, assistance from store personnel. To date, more than 35 units (made up of four U-Scans each) have been installed in grocery chain stores including Kroger's and "big box" retail stores, such as Wal*Mart, in the United States. An additional 20 units are slated for installation during the next six months. According to Wechsler, POS VARs can find new opportunities in the growing grocery self-service market.

Explaining U-Scan
Wechsler says the U-Scan includes all the components of a typical grocery point of sale (POS) system, including a CPU, scanner, touch screen monitor, keyboard, receipt printer, and magnetic stripe reader. It also includes electronic tendering equipment to handle cash payments and a closed-circuit TV to deter grocery theft. The system runs Optimal's U-Scan 8880 software. The components reside in a metal housing that combines, to some degree, a standard grocery store checkout lane and an ATM. It includes bagging stations and offers users a full range of payment options. (See sidebar on page 74 for an explanation of how U-scan works.)

U-Scan is not intended to replace store personnel. "U-Scan addresses the labor shortage and employee turnover problems many retailers face," says Wechsler. It allows one cashier to monitor several checkout lanes at one time.

Bringing The Idea To Market
"My challenge was to bring U-Scan to market," says Wechsler, who joined the company in mid-1994. Optimal Robotics began in 1991 as an R&D company solely dedicated to designing a point of sale (POS) self-checkout for grocery express lanes. The concept was the result of available technology, such as automated POS system components, and the trend in self-service ATM machines. Funding for product development came through a combination of private funds and venture capital. Once the product was marketable, Optimal became a publicly traded company on the Nasdaq National Market. (Nasdaq: OPMRF)

The original developer, a medical doctor and MIT engineer, has since left the company. He stayed with Optimal to make U-Scan a viable product. "As a medical doctor, he was more interested in pursuing his practice," explains Wechsler.

Wechsler admits that in the beginning, there were no statistics to prove that U-Scan would be accepted by grocery store chains or consumers. "ATMs and kiosks were becoming increasingly popular. We had to believe that self-service would reach grocery retail at some point," he says. Today, Wechsler does have statistics and survey results that verify Optimal was making more than a leap of faith. "Now, when we ask customers if they think U-Scan improves customer service, 75% answer ‘yes,'" says Wechsler.

Building A Company Infrastructure
One of Wechsler's first tasks was to build Optimal's infrastructure to support U-Scan sales and service. At the same time, U-Scan had to be refined and readied for market. "Optimal had only four employees when I joined," says Wechsler. He hired additional programmers to rewrite the software code and prepare U-Scan for a beta test. Working with Kroger's Louisville, KY, division, Optimal tested U-Scan. Kroger became the first U-Scan customer, installing 10 in the Louisville division.

Partnering For Success
In bringing the U-Scan to market, Wechsler says Optimal looked for a proven provider of POS solutions that could help pave the way. After all, Optimal was new to POS, he explains. PSC, Inc. (formerly Spectra Physics) proved to be the right partner. The company, based in Webster, NY, is an established vendor of scanning products. "PSC scanners are already used in many grocery store chains. It's a familiar name in grocery retail," Wechsler explains. While PSC manufactures U-Scan housing, Optimal concentrates its efforts on the software development and upgrades. Both Optimal and PSC resell the components used in the U-Scan, customizing each one as needed for a particular grocery store chain. Wechsler explains that customizing includes using Southern-accented voice prompts for installations in Southern states. It also includes using components, such as monitors or keyboards, from certain vendors at the customer's request.

Adding A Second Product
With U-Scan a marketable product, Wechsler says Optimal was ready to expand its product line. "Our strength is in POS software for grocery stores," he says. Optimal used its POS knowledge to develop the Optimal 6300, a PC-based POS system. Having a more traditional POS system to sell helps Optimal maintain steady revenues while selling its self-service product. As with U-Scan, Optimal worked closely with a grocery store chain, Price Chopper, to refine its product. The company recently completed a rollout of the Optimal 6300 in 96 Price Chopper stores in New York state.

Making The Sale
With two different products to sell to one market, Wechsler divided the sales force by product. Two salespeople sell U-Scan; two sell the 6300 system. "There are differences in selling the two products," says Wechsler. For one thing, the typical sales cycle for U-Scan is at least six months. Depending on the size of the chain, the sales cycle for the 6300 can be as short as three months. Another difference is competition. Wechsler admits there are many players in the PC-based POS system market. Optimal must work against other brand-name products already on the market. With U-Scan, the reverse is true, says Wechsler. As the first company to bring self-checkout to grocery express lanes, Optimal is ahead of the competition. Wechsler acknowledges that other companies, such as Symbol and NCR, have self-service grocery products. The difference, however, is that Optimal's U-Scan is designed specifically for express lanes, says Wechsler. U-Scan offers the full range of payment methods and is the only system of its kind to achieve "roll out" status with any customer in North America, Wechsler claims.

Providing Service After The Sale
Wechsler says to stay ahead in the game also requires a good service and support department. Many of the grocery stores using U-Scan are open 24 hours a day. Service to these customers includes online software support, depot maintenance and a 24x7 help desk. Customers can also choose to use a third-party service provider in their area, explains Wechsler.

"We are able to service the majority of software problems online over the Internet," says Wechsler. Seven employees, trained to diagnose software and hardware problems, work the help desk in pairs. Most of the calls are related to operating U-Scan, says Wechsler. "It's often a call about how to swap out and replace hardware or about a step in operating U-Scan."

Checking Out The Future
Optimal took a slow route from research and development (R & D) to bringing the U-Scan product to market, says Wechsler. This approach, however, is beginning to pay off. The company expects revenues to increase from $5 million to $10 million (Canadian) this year, thanks in part to the success of U-Scan. With numerous installations scheduled over the next several months, Optimal is looking forward to expanding its customer base, including overseas.