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Ideas for Leaders #169

How Checkout Lines Affect Consumer Purchases

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Key Concept

While retailers know that lines or queues are inevitable, new research shows just how much impact a long line can have on purchase behavior. The research, conducted by a team from Duke University’s Fuqua School of Business and Columbia Business School, also demonstrates that, contrary to the accepted wisdom, short lines each served by one checkout clerk is better than one line served by several clerks.

Idea Summary

For many strategic decisions such as product development or market expansion, retailers have access to sophisticated information on which to base these decisions. When it comes to customer service, however, the information is less complete. Retailers may have extensive data on customer purchases, for example, but no data on how long those customers stood in the checkout line before they made the purchase.

New research offers some quantitative assessments of customer service issues — specifically on how the length of lines might impact customer purchasing behavior.

Lines in retail stores are typically organized in one of two ways. The pooled system is to create one line, and have that one line served by all the counters. The split system strategy calls for having separate lines for each clerk position.

Using in-store cameras combined with purchasing data, professors Yina Lu and Marcelo Olivares of Columbia Business School and Andrès Musalem of Duke University’s Fuqua School of Business, working with Ariel Schilkrut of Scopix Solutions, were able to assess which system might be the most effective.

To ensure the accuracy of their deductions, the researchers chose to observe deli lines rather than checkout lines. The reason is that a customer who is committed to checking out is not likely to abandon the effort — although they might switch lines if it is convenient. In contrast, it is much easier for deli customers to react to the length of a line or the length of a wait and decide not to pursue the purchase. 

The researchers discovered that the length of a line, and not whether that line is moving, was the more important consideration for consumers. Wait times depend on both the number of people in line but also the number of clerks serving that line. Thus, the people in a longer line being served by three clerks will wait less than people in a slightly shorter line served by one clerk. However, according to the research, most customers pay more attention to how many people are waiting and do not factor in the number of clerks on duty.

The researchers also discovered a correlation between price sensitivity and tolerance for waiting in line. Price sensitive customers — e.g. mass market buyers — are more willing to wait in line longer than customers who are less price sensitive, for example those who are buying more expensive products.

Business Application

The split system of lines is generally considered the less efficient system since customers might be waiting at one line, while another one might become free (customers are often either not willing or not able to switch lines). However, this research indicates that the alternative, a pooled system, might be scaring away customers who don’t pay attention to the number of clerks serving the single line. The only thing that these skittish customers observe is the length of the line.

The research leads to clear implications concerning the choice of system: While the pooled system may seem more intuitively effective, the choice might depend on the expected length of a single line. If the line is typically less than nine people, the research shows that the impact on customer purchases is minimal. However, a change from 10 to 15 people could, according to the researchers, reduce the chance of another customer joining that line by 30 percent.

Another implication for businesses involves pricing. Typically pricing strategies are based on the individual product — that is, retailers will set a price for a product without seeing any correlation to the price of another product. However, when products are sold behind the same counter, they suddenly become intricately related. Remember that customers buying expensive products don’t want to wait, while customers buying inexpensive products are willing to wait. If there are expensive and inexpensive products sold behind the same counter, the customers who were intending to buy the more expensive products will be the first to be discouraged by a long wait.

As a result, retailers need to be careful about setting prices for products that might seem to be independent from each other but actually have strong interrelations with each other. For example, one product may be marked down considerably, leading to more customer interest… and longer lines. Will sales of the less expensive product make up for the lost sales of the more expensive products behind the same counter? These are the kinds of unexpected questions that this research raises.

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Authors

Institutions

Source

Idea conceived

  • January 2013

Idea posted

  • July 2013

DOI number

10.13007/169

Subject

Real Time Analytics