Cutting the Costs of Cash

Spotty adoption of digital payments and skyrocketing swipe fees along with rising labor costs are driving a wave of innovation around retail cash handling in a big way. 

And that’s a good thing for the grocery segment. With already famously thin profit margins, every facet of operations is under significant (and ever-mounting) pressure to reduce costs, and as such, everyone must look everywhere to figure out where they can increase efficiencies.

One oft-overlooked area is the processing of paper and coin currency.  Starting with the transaction itself, every time currency is touched, counted, moved or otherwise handled presents an opportunity for the grocer to reduce bottom-line costs. According to recent studies that looked at cash usage across retail, grocery is second only to fast food in terms of total volume of cash transactions, with the c-store space coming in third.

Think of the flow of cash through as an entire supply chain ecosystem similarly to that of the product supply chain, from consumers to stores to armored carriers to banks and back again. 

When entire process is optimized and managed from a cross-functional platform-based cash handling solution, grocers can extract value and reduce costs from every point in the cash journey. For example, consider change ordering and shrink reduction. Anytime change is needed, fees are charged. Imagine a cash management solution that relies on in-store data to calculate and predict change order needs that would drastically reduce the volume of change orders and virtually eliminate extra cash on hand or emergency change orders. And consider utilizing technology to track and manage labor in the cash handling space in order to drive efficiencies and free up employee time to perform more customer-facing tasks, which translate to increased sales and customer service.

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Cash Usage in the Grocery Category

Looking at the percentage share of cash, compared to credit and debit cards, check and various contactless payment systems (Apple Pay, Android Pay, etc.) cash’s share of total payments methods is trending downward. This is based on feedback we get as well as data that we collect from our grocery end-users. And, as merchant card acceptance continues to rise, and e-commerce continues to grow, we do expect cash usage will decline further. 

The 'Cashless Society' Idea

Retail pundits, academics and various stakeholders from across the payments industry have ramped up their predictions of the impending end of paper and coin currency along with the rise of a “cashless society.” The most basic method to measure where cash is in society is to look at its volume in circulation. In the United States, from 2007 to 2012, the amount of bills and coins in circulation grew 42%. Since 2012, that figure has continued to grow.

According to the Federal Reserve, the dollar amount of currency in circulation worldwide has risen pretty dramatically over the past decade—from $564 billion in 2000 to $1.5 trillion in 2017.

The reality of the situation is that cash usage in retail, specifically grocery, isn’t going away anytime soon. The fact is, consumer payment preference varies considerably in retail and even within the grocery segment. The important thing here is to look at cash volume and the total cost of cash handling borne by the retailer, then consider what kind of investment in technology will reduce the total cost of cash handling. 

Any process as labor-intensive, risk-filled and inefficient as cash handling is ripe for the picking when it comes to reducing costs for most grocery retailers. By way of perspective: The cost of labor for store cash handling in a typical 10-register store can easily reach $35,000 annually, and retailers are desperate to find more labor hours to remain competitive, especially in the grocery space with the boom in home delivery. 

According to Robert Hetu, research director with the Gartner Retail Industry Services team, the “new customer experience paradigm moves hours of customer time spent gathering products, and transporting them home, from the customer to the retailer, making the labor quotient even more out of balance for retail.”

It’s clear that automated platform-based cash handling solutions offer tremendous potential to increase operational efficiency in the grocery space while maximizing profitability. The meaningful benefits span multiple functions, including store operations, treasury, IT, loss prevention and human resources.

John Van Slingerland is VP of business development at G4S Retail Solutions. Reach him at [email protected].