Ready for pickup lockers? What to consider

Customer acceptance of self service took off big-time during the pandemic, and pickup lockers were no exception.

With consumers looking to minimize human interaction, technology providers responded with a wealth of offerings for both in-store and outdoor pickup lockers to meet consumer needs and at the same time help retailers struggling with insufficient labor.

And while retailers welcomed more technology options to choose from, they also faced a learning curve.

A panel of decision makers who have taken the plunge with the nascent pickup locker technology shared their experiences during the recent?Self-Service Innovation Summit ?in Hollywood, Florida. The panel was moderated by Steve Martin, head of product development at Camlock Systems, the session sponsor.

(The Summit is one of several industry events organized by Networld Media Group, the parent company of Kiosk Marketplace and Vending Times. The media company's next event is the?Restaurant Franchising & Innovation Summit ?being held March 20-23, 2023, in Coral Gables, Florida.)

The pickup locker panelists agreed the investment in the technology is steep and requires extensive research, but most felt the benefits justify the cost. The key benefits cited were offering more service options to customers and improving labor costs.

Panelist calls on restaurants to act

Panelist Kurt Pahlitzsch, vice president of operations at Doherty Enterprises, an Allendale, New Jersey-based franchise operator of casual dining and QSR chain restaurants at 150 locations in New York, New Jersey and Florida, was outspoken in his support of pickup lockers.

"Today we have to embrace technology and embrace mobile ordering…even at the store level," Pahlitzsch said, faulting many restaurateurs for not embracing the technology more aggressively. "Get out of your comfort zone, let the restaurant speak to an audience and let people use their phone to engage, control and pay for the online (service.)"

Pahlitzsch acknowledged that self-service technology has not been embraced by the over-35-year-old customer, but he nevertheless insisted restaurants should not let this hold them back.

In time, the customer base will shift to those who know what they want and want it fast, he said, and they don't want to be upsold. "I know what I want, I know when I want to pick it up, and I want to grab it," he said, explaining the customer's mindset.

Labor savings significant

The labor saving is an especially important factor, Pahlitzsch said, noting that where a typical restaurant has from eight to 11 employees, the technology can allow three and a half to four employees to service up to 600 people in one day.

Another restaurant panelist, Stratis Morfogen, founder and director of operations at Brooklyn Dumpling Shop, a restaurant based on the historic Automat, concurred with Pahlitzsch on the benefits of pickup lockers.

Morfogen found the pickup lockers especially beneficial when he couldn't find employees during COVID.

"The fact that I can't get people to do the job has changed the makeup of our business," Morfogen said. "You can reduce your staff quite a bit and be more efficient and have less human error by embracing this medium."

In addition to having a hard time finding employees for his restaurants, sometimes the third party delivery services Morfogen works with don't have a sufficient number of drivers, causing issues with his delivery orders. The pickup locker gives him a chain of custody if he has to see how long it took a driver to pick up an order from a locker.

Extend store hours

Panelist Sassan Rahimzadeh, president of Arya Cleaners, a five-store laundry service based in San Diego, found pickup lockers helpful for extending his hours of service. In addition to pickup lockers, his company offers drop-off kiosks.

"That (24/7) has been the major advantage for our customers," Rahimzadeh said. Sunday night is the busiest time for locker pickups, when traditional stores are closed.

Ironically, however, most of his customers are using the lockers during regular business hours.

"Ease of use and convenience is more important to them than even the 24/7 part," Rahimzadeh said.

User interface critical

In his view, the most critical component is the user interface.

"You don't want to lose that touch — they (customers) have to feel good about it… Creating that experience has to be the forefront at every single screen," Rahimzadeh said. "During that transaction time, we have to be able to engage with them enough even in an automated way where we can build trust, we can build a relationship and get them to become loyal to us over and over again.

"If it can provide the same experience in an automated manner, it's more reliable, you don't have to train it as much, it doesn't talk back to you, there's a tremendous amount of upside to the retailer," he added.

Rahimzadeh said the next phase for self-serve kiosks will be voice activation to make it more personal.

In search of tech partners

The panelists agreed finding technology partners remains a challenge in the pickup locker space.

Rahimzadeh was unable to find a technology that met his needs when he began exploring pickup lockers in 2015, so he designed a system working with hardware and software providers.

Panelist Kevin Hutcheson, program coordinator at Second Harvest of the Big Bend, a food bank in Tallahassee, Florida serving 16 counties, said trying to find information on pickup lockers was hard. He eventually stumbled across a company, Bell Howell, that met his exact needs, which includes temperature-controlled lockers for storing and serving food.

Pahlitzsch said he lost a lot of money and time exploring technology vendors until he found?Panasonic , which offered a system controlled by a smartphone with heated and refrigerated lockers. Other models he looked at were not compatible with smartphones and did not have the level of temperature control and the platform to connect the delivery drivers.

"You've got to have the software where customers can pick on their time, their schedule," he said. "The bottom line is they pay for it, they pick a time and they're in and out of the restaurant in nine, 10 seconds max… that's when this hardware works really well, when the software matches it."

Quantify the benefits

The panelists agreed the economics of pickup lockers are good, and offered insight on how they assess ROI.

Rahimzadeh considers whether the units are going to be sustainable long term and if the investment pays off in a three-year period. Operating costs for pickup lockers are a lot lower than manual pickup, he said, but sales need to catch up. His traditional store still surpasses the automated stores in revenue "by a long shot."

Morfogen said he can recoup his ROI in 18 months with his current model and he believes he will eventually reduce that period down to less than 12 months. During Superbowl Sunday there are traditionally six or seven people working in the restaurant, along with two or three managers. This past year, with pickup lockers, he did it with one manager and two employees, "and the accuracy is huge," he said. "It's quick, it's seamless, and you're not waiting on anybody," he added. "The convenience is huge."

Hutcheson, operating a non-profit, did not have the same ROI requirements as his fellow panelists, but pays close attention to the economics nonetheless. The investment is $75,000 considering the hardware, software, site prep and operation. "I need to have something that's going to work because I'm going to have to sell it again down the road to get another grant," he said, and agreed with his fellow panelists that the benefits are worth the effort.

"Being able to have these lockers that are on-demand, that you can pick them (items) up 24/7/365 — there is something both empowering and also it just gives somebody an extra hand… we can have it ready in a couple hours," he concluded.

Head photos provided. Cover photo by Willie Lawless.