Walmart and McDonald’s face a tough balancing act in digital payments

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Many retailers want to beat Amazon at its own game, providing fast and streamlined checkouts that attack the tedium of waiting in line or staring at a card terminal screen for further instructions.

Walmart and McDonald’s are among the latest to attempt to reinvent their checkout experiences, adding a decidedly digital flavor. What makes the task trickier for these mainstream merchants is the need to cater to a broad swath of consumers who are happy with the status quo. The end result can be a clunky hybrid that risks alienating both audiences.

Walmart this month introduced the Scan & Go checkout app developed for its Sam’s Club warehouse unit at several Walmarts in Texas, Florida and Arkansas, in what the company is calling an “expanded test” that features a new twist for customers not yet ready for the full digital experience of self-scanning items as they shop with their own mobile device.

With these tests, customers can use either their own smartphones or a handheld scanner to tally products as they shop. The scanner, which is provided by the store, generates a QR code to be presented at the payment terminal. Walmart configured shopping carts with holders for the scanners at stores participating in the test.

Walmart is testing using the mobile app alone at some stores, while other stores support both the mobile app and the handheld device.

“Our goal is the provide customers with a variety of options, so they can check out however they prefer,” a Walmart spokesperson said, noting that customer feedback so far has been positive.

McDonald’s faces a similar dilemma in accommodating a diverse audience of customers with different levels of comfort with disruption. After a successful test of mobile order-and-pay, McDonald’s last month announced an aggressive goal to expand the service from 1,300 to U.S. restaurants to 14,000, reaching a total of 20,000 stores worldwide by the end of the year.

To accommodate customers not ready for the full mobile order-and-pay experience, McDonald’s is following in Burger King’s footsteps, testing self-order kiosks designed to streamline ordering by leading customers through the process with pictures of menu items and options to redeem deals. Payment terminals support contactless payments and enable customers to scan coupons or QR codes.

In a test of its kiosk approach in Arizona, patrons receive a number to place on their table for dining in, and an employee delivers their meal — a baby step toward table service.

In China, self-order kiosks are shouldering 30% of all in-store orders so far, Stephen Easterbrook, McDonald’s CEO, told analysts in an earnings conference call last month.

“We’re seeing higher average checks and curbside pickup is a convenience that consumers value and thus it’s enabling us to grow capacity at peak times,” Easterbrook said about the push toward mobile ordering.

It hasn't all been smooth sailing. McDonald's had "some interesting learning” early this year when it began its expansion of mobile order-and-pay around the challenge of delivering customers’ food to them, Easterbrook said. “But we want to drive behaviors (toward mobile),” he said, noting that sales volume at stores ticked up overall during the third quarter ended June 30.

McDonald’s has a lot of catching up to do compared with other quick-service restaurants that operate on a smaller scale and can thus be more nimble, analysts say. Starbucks, with 7,500 U.S. stores, has just half the scale of McDonald's but still struggled to smoothly implement mobile order-and-pay. The problems stemmed from trying to add a new ordering process to stores that were not originally designed with mobile ordering in mind.

“McDonald’s is late coming to the order-ahead infrastructure, but getting it right—including with these kiosks to improve in-store traffic flow—is life or death in their competitive environment,” said Richard Crone, president of Crone Consulting LLC.

Nudging more consumers to order and pay through mobile apps and kiosks also will naturally drive more customers to pay with cards, Crone said.

“Walmart and McDonald’s both have a lot of customers that currently pay with cash, but with each customer they convert to using a digital channel for ordering or checkout, they’re that much closer to propelling that person toward mobile payments, which is the final step in driving a seamless store,” Crone said.

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