By Sylvain Charlebois (AIMS Senior Fellow)
According to a recent survey by Payments Canada, 42 per cent of consumers use cash fewer than four times a month when purchasing food. A year ago, it was only 20 per cent.
Our food transactions are becoming more digitalized and the conversion rate away from using cash is phenomenal. There has been a lot of talk about Amazon Go’s cashier-less model in the United States, which will come to Canada at some point.
However, little attention has been given to how a cashless world could affect how we shop for food in the future.
It’s convenient, easy and, frankly, as soon as your food is picked or served, most of us want to enjoy the food and then leave the grocery store as soon as possible. This is an ideal exit scenario for most of us and so, more and more consumers are going cashless, with the industry playing along.
This doesn’t sit well with everyone, though. San Francisco lawmakers are now considering a proposal to ban cashless stores. New Jersey and Philadelphia are considering similar bans. Ban supporters argue that cashless stores discriminate against low-income shoppers who may not have a bank account or the means to have credit or debit cards. Close to a million Canadian adults are unbanked and have no credit or debit cards. Many of them are single mothers. These are arguments that can hardly be overlooked, especially if food is involved.
The pressure was so intense for Amazon.com Inc. that it had to backtrack somewhat. The company announced that its Amazon Go stores will accept cash eventually. No plans have been released yet, but the company intends to launch a new program that will allow anyone to go cashless, regardless of socio-economic status. It is piloting a new program called Amazon Cash that allows shoppers to add cash to a digital account.
Given this narrative, the food retail industry going cashless will be a process aimed at making it a more inclusive experience for all.
In food service though, the cashless agenda is very different. Some argue that digitizing food transactions is allowing food service companies to inconspicuously increase food prices. If the price of a cup of coffee was raised by 5 or 10 cents, it is easily noticeable when you visually see your money before paying the cashier. Now, though, you’re just a tap or a swipe away from that coffee. No paper, no coins, no visuals. When it takes less time to pay, a business will likely increase its sales, and since these shoppers don’t visualize any money physically leaving their wallets, the focus is more on satisfaction and experience while prices go up. As such, shoppers are likely to spend more. Furthermore, when transactions are repetitive, are part of a daily routine and need to be quick, a moneyless world can make a difference when managing margins and can boost profits. Recent studies in behavioural economics suggest that such a theory is not only academic, it works.
The optics of a cashless food economy can be imperative especially when the industry is dealing with higher labour costs, more environmental and food safety regulations. Managing cash can also be quite costly. On average, a cashier can spend anywhere between 40 to 80 minutes per shift handling and counting cash. Some managers can spend almost 20 hours each week validating the work of others and dealing with the bank. The economic case for a cashless food economy is quite strong. It does make the system more efficient and convenient for the consumers, plus a cashless economy is also less prone to theft and human error.
Online, where cashless is really the only option, convenience of payment is becoming a huge factor. According to the same survey from Payments Canada, 73% of Canadians will choose a food-purchasing website based on what method of payment is available. Shoppers are increasingly considering how they can exit their experience before even looking for what products they will be buying. Psychologically, it is a totally different game as an increasing number of shoppers are driven by transactional convenience rather than what they intend to buy.
Though the cashless movement is primarily urban and confined, for now, to the food service industry, a growing number of businesses in Canada are turning a cold shoulder to cash. Grocers and restaurants will continue to offer options and will accept cash, but we all should expect things to change. The adage suggests that cash is king, and although that remains true for now, cash may leave its throne in the not-so-distant future.
