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Queue Management blog

Powered by Irisys Technology, Kroger Saves $250 Million in Operating Costs

Posted by Allen Haynes on Nov 15, 2016 3:52:20 PM

The Kroger Co.’s faster checkout initiative has made serious waves over the past few years. In 2014, it ranked No. 3 among the InformationWeek Elite 100 listing of the top business technology innovators in the United States. And just last week, the grocer detailed its QueVision technology, which is powered by Irisys’ intelligent Queue Management solution, has saved Kroger $250 million in labor costs since its deployment in 2010.

The solution, across the Kroger family of stores, has reduced the time a customer waits in line to check out, on average, from four minutes before QueVision to less than 30 seconds today.

Additionally, the technology has helped Kroger’s impressive industry-leading streak of 51 consecutive quarters of same-store sales growth, according to a recent article from the Dayton Business Journal.

And yet Kroger is just one example of the many retailers and grocers that are investing more – not less – into continuing to improve their brick-and-mortar locations. However, are they investing in the right technology?

Some retailers have implemented interactive screens that bring about new merchandising and message-delivery strategies. And facial-recognition technology is being utilized to determine shoppers’ moods. Creating in-store sizzle, however, is only effective when it is accompanied by superior, measurable service. Retail analytics technology like queue control, queuing systems and queuing management systems, for example, have created a new customer-service metric that retailers can truly measure.

They empower retailers to set a performance standard – customer wait times at the checkout – and gives retailers the intelligence they need to improve customer waiting time.

The Irisys Queue Management system removes objectivity from staffing and replaces it with real-time data that is gathered by sensors that count footfall at the door and at the checkout. It constantly feeds that information to an algorithm that determines how many registers should be staffed now – and predicts how many should be in 15 minutes and 30 minutes – to achieve the service level.

The implementation of Irisys Queue Management system has achieved the results that drive truly loyal customers, just ask Kroger.

As follows is a case study of the roll-out of the Irisys Queue Management solution across Kroger’s 2,400 locations.

Overview

Industry sector: Retail, grocery

Geography: USA

Service solution: Intelligent Queue Management

Project size: Over 2,300 locations

Organization

Headquartered in Cincinnati, Ohio, USA, and established in 1883, Kroger is the USA's largest traditional grocery store chain, its second-largest general retailer based on revenue, and the world’s fourth-largest retailer.

Business Issue

A key component to Kroger’s business strategy is a “Customer First” commitment that is central to guiding every strategic decision. As part of this effort, Kroger felt a better checkout service would reward loyal customers and differentiate its service delivery from competing national discount chains and regional grocers.

Kroger decided to move from a 1+2 service commitment (1 customer being served in the checkout with 2 customers waiting in line) to a 1+1 service level (1 customer being served in the checkout and no more than 1 waiting in line).

In deciding this commitment, Kroger also assessed the level of additional cashier labor that would be required in-store to deliver 1+1. At the time, company officials anticipated they would need – and were willing to pay for – more cashiers if it reduced customer wait time at the checkout.

Solution

Irisys met with Kroger in 2007 and began trialing the Queue Management solution in 2008 with its IS&S Department to prove the technology. Once the technology’s accuracy and efficacy had been validated, Store Operations engaged in a four-store trial.

Initial results showed that Kroger, using the Irisys Queue Management system, could deliver a required 85% 1+1 service level with existing, already scheduled cashier labor.

To prove the system further, Kroger progressed to a 19-store trial in Toledo, Ohio, in 2009. The results again showed the goal improvement in checkout service could be achieved with Irisys Queue Management system – and, again, without deploying additional checkout labor.

Moreover, the response from customers in Toledo was extremely positive and led to a noticeable improvement in customer satisfaction scores and uplift in sales. Kroger successfully trialed the Queue Management solution in two additional regions. In all of its regional trials, Kroger consistently identified improvements not just at the checkout – but in customer loyalty, shopping frequency, overall customer spend, and significantly increased sales.

While a defined ROI measurement underpinned Kroger’s business justification – i.e. a single capital investment in the Irisys system versus an ongoing revenue investment in additional cashier labor – the real driver behind deploying the Queue Management system was to improve checkout service.

Kroger commenced a rollout to all stores in 2010. The rollout of the system was accompanied by an in-store marketing campaign - advertising a “Faster Checkout at Kroger” – that extended externally via TV, radio, and print. Kroger branded the system internally as QueVision and began publicizing its results in 2013.

Business Benefits

Rodney McMullen, Kroger President and COO commented during Kroger’s 2nd quarter 2012 earnings conference call: “Our market share gains are a result of our investments in all 4 keys of our ‘Customer First’ strategy. People often talk about investments we make in price, but there are many ways we have invested in our non-price keys, people, products and shopping experience, to strengthen our connection with customers in our stores.

“For example, over the last several years, we've set out to improve the shopping experience by reducing customer wait time at checkout,” he said. “Customers have told us they do not like waiting in long lines. Based on that feedback, we developed a solution that has reduced the average amount of time a customer waits in line to check out to about 30 seconds today compared to around 4 minutes in the past. Our customers tell us they noticed the difference, and we are delivering a shopping experience that makes them want to return.”

Getting shoppers through checkout as quickly as possible is key to building customer loyalty and reported by Kroger as one reason earnings were up 9.6% in the three months ending May 25, 2013, compared to the same time a year ago.

Kroger Chairman and CEO Dave Dillon cited “inspired, Customer First service” for strong financial results including earnings of $481 million in the quarter ending May 25 - the 38th consecutive quarter of profits for the retailer’s continuously operating stores.

And Marnette Perry, Senior Vice President of Retail Operations, said: "The technology enabled us to execute at the front of the store without that additional [labor] expense. It's remarkable that we've been able to improve execution as much as we have without a big price tag.”

“Nobody likes to wait in line,” she said. “If we wanted to develop loyalty from our customers, we really had to respect their time and improve the checkout experience.”

Since the technology was deployed, Kroger’s score on customer-satisfaction surveys has improved 42 percent on the speed of checkout, Perry said. “There are 7 million shoppers at Kroger stores today – we’ll save them 25 million minutes today.”

Kroger executives said they learned something surprising from Kroger QueVision data that helped them boost certain orders. The system showed more customers than Kroger realized bought a small number of items in the morning and at lunchtime – and that express lanes would back up.

So Kroger added 2,000 new express lanes to its stores nationwide, which it credits with growing the number of small orders over the last two years.

And Kroger cites additional benefits besides happier customers. For example, the technology has helped boost sales at smaller urban stores with limited parking space – because customers get in and out faster, they free up parking spaces more quickly.

And though company officials originally anticipated they would need – and were willing to pay for – more cashiers if it shaved customer wait time, the cost of staffing did not rise. Irisys Queue Management technology is so smart, it makes scheduling more efficient.

 

Topics: queue management, Kroger QueVision, checkout, faster checkout

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