Will Cashless Retail Really be a Thing?

There is an emerging trend in retail that would have seemed implausible not too long ago. Many of you have already observed this or will soon experience it on your own. Retailers and other business owners are politely telling their customers that “your cold, hard, cash, will no longer be accepted as a form of payment at our establishment”. What I first observed in a few smaller retail establishments and restaurants the past few years in my home city of Atlanta, is now rapidly spreading to larger business across the country. Just last week, Mercedes-Benz Stadium in Atlanta announced it will now go cashless, becoming the first NFL and MLS stadium to do so. This is just another example of business such as Bonobos, Indochino, Everlane, Reformation, Amazon bookstores, and Drybar hair styling that are cashless. United and Delta airlines have also gone cashless at both their ticket counters and in-flight purchases. Amazon Go is checkout-free and plans to open 3,000 stores by 2021

So why the sudden momentum swing to cashless commerce? Afterall, it wasn’t too long ago in large cities such as New York, that you needed to check if that establishment took credit cards as many operated on a cash only basis. Well for one, the rise of digital wallets such as Apple and Googles pay has had an impact as well as the growth of debit card transactions. Also, as retailers are looking for ways to reduce friction in the brick and mortar channel, cash payments are a slower transaction to execute. A cash transaction can usually be in the range of 10 seconds longer to perform and for a retailer doing millions of transactions annually, that can be significant. It is estimated that across all sectors of retail, 30% of transactions are cash and this percentage is decreasing every year. There are also other benefits of going cashless such as employee safety, cost of armored car pickups, trips to a local bank for cash deposits, and reduction in employee theft. If retailers elect to go this direction, they will need to consider their labor model and needed adjustments. Labor standards must be adjusted to account for efficiencies realized by a quicker transaction time. Other operational processes may be eliminated or reduced and the labor impact but be quantified.

So, should retailers make the jump to go cashless? Well, there are many factors to consider. The demographic of your target customer is critical. Millennials are less likely to use cash as payment than older generations. Low income may be negatively impacted by removing cash as an option of payment. Some retailers are addressing this by offering in-store kiosks that allow customers to use cash to obtain pre-paid store debit cards. Analysis must be performed to determine if the benefits achieved are greater than the incremental expense of credit card transaction fees. Certainly not a decision to be made without understanding all the ramifications.

One thing is for certain and that is this trend will continue to grow. However, it is now facing another obstacle. Cities and even some states either have legislation in place or are introducing legislation to ban cashless operations. In recent weeks, New Jersey and Philadelphia have passed laws prohibiting cashless stores, and four more cities — Chicago, New York City, San Francisco and Washington, D.C. — are contemplating doing so. The city of Atlanta is already pushing back hard on the decision by Mercedes-Benz Stadium and feels cashless establishments discriminate against the poor.

It will be interesting to see how this all shakes out, but one thing is for certain, the velocity of change in the retail segment continues at a rapid pace as they are all trying to create an enhanced customer experience while achieving efficiencies and driving down costs to both survive and thrive.

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