Shake Shack ends cashless experiment

Discussion
Photo: Shake Shack
May 07, 2018
Tom Ryan

Shake Shack said last week it was ending its test of a cashless location in lower Manhattan following customer complaints.

“In the first rollout at Astor Place, we did not accept cash at all, and there are people who have told us very clearly, ‘We want to pay with cash,’” Shake Shack CEO Randy Garutti said Friday in response to an analyst’s question on the company’s first-quarter conference call. “So in this next phase, we’re going to go ahead and have cashiers as well as kiosks.”

Reviews of the kiosk-only location on Yelp and Google show annoyance by some at not having a cash option or a human to take an order. One Yelp reviewer wrote, “You can barely customize your food the way you can when you order with an actual human being.”

Added another, “I understand it’s 2018 but that doesn’t mean at all that everything has to be computerized and automated.”

Some felt the cashless system discriminated against younger and older individuals who aren’t able to qualify for a debit or credit card. Security and privacy issues are also a concern with card-only payments.

When the location opened last October, the system promised to “eliminate friction time,” allowing orders to go straight to an optimized kitchen where staff can focus solely on the food. Customers were promised “fewer lines, less wait time and quicker speed of service at every channel,” including digital orders.

Experimentation with cashless stores is continuing in the industry. Starbucks opened a cashless location in its Seattle hometown in January and is making more expansive efforts internationally. For retailers, such systems promise labor savings, theft reduction and time savings as cashiers avoid fumbling with money. Using kiosks as well as digital ordering can also offer a higher degree of personalization not readily available through cash payments.

Said Mr. Garutti, “We’ll continue to gather learnings around kiosk-based ordering, with the goals of enhancing our guest experience, improving speed of service, and providing an opportunity to offset some degree of the increasing labor costs we have.”

DISCUSSION QUESTIONS: Was being cash-only or kiosk-only likely the bigger drawback for customers at Shake Shack’s Astor Place location? How do you see the cashless movement impacting retail in the near and long term?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Who does it serve best going 100% cashless? The organization. Not necessarily the customer."
"...this move is alienating to travelers, the underbanked or just people who prefer to pay in paper. Not surprised at the complaints at all."
"While I applaud Shake Shack for experimenting like this, I believe they took on too many changes at once at a single location."

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26 Comments on "Shake Shack ends cashless experiment"


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Mark Ryski
BrainTrust

There is no learning without experimentation – the outcomes are never certain. It’s likely cash-only and kiosk-only both contributed to the customer complaints at Shake Shack’s Astor Place location. Retailers will continue to experiment with processes and technologies that reduce/eliminate transaction friction – and rightly so. While Amazon Go-type implementation is still out of reach for most retailers, there is no shortage of other solutions retailers can deploy and test. Cashless retailing is not a matter of if, but when.

Bob Amster
BrainTrust

My sentiments, exactly. See below.

Phil Masiello
BrainTrust

Kiosk-only ordering works in several other channels, like the convenience channel and several fast food chains. The issue I see here from the feedback is the customization aspect. Customers did not feel like it was easy and there was no one to speak to.

Shake Shack needs to ease into this transition. Handle it like the kiosks at the airport where there is a person who can assist if there was an issue.

Cash-less would be an easier transition, given all of the ways to pay. But coupled with the kiosks, it became too much change too quickly for the customers.

Evan Snively
BrainTrust

Agreed Phil, I think there is a happy medium where kiosks are the first offering, but there is also a line where people can interact with a human if they would prefer. If businesses can design their kiosk experience to have a clear advantage for the customer over the human experience (i.e. faster, less errors, etc.) than people will continue to adapt.

Max Goldberg
Guest

Customers of Shake Shack’s Astor Place location have spoken, and they want human interaction. It’s one location, but it demonstrates what happens when technology gets too far in front of what the buying public is willing to accept. Cashless may someday come to dominate retail, but the transition may be slower than originally thought.

Bob Phibbs
BrainTrust

As an operations guy, I totally get why being cashless is a great idea. But when you see the big D — discrimination for those unable to get a debit/credit card because of age or other factors, that’s a high hurdle. I don’t see how you can get around it — a cash-only line will by nature be slower and less efficient providing friction in a retail setting. None of that is worth the feeling of being judged “less than” just because you want to use cash.

Shep Hyken
BrainTrust

I applaud Shake Shack for taking the cashless initiative. Maybe they pushed it to the consumer too early. That said, they are listening to their customers. Those that want to pay cash will have the typical lines. By the way, we’re talking about Shake Shack. While they have delicious hamburgers and milk shakes, it’s not fine dining. Expect the fast casual experience.

Today, for any business, cashless may be an option. In the future it may be the only way retailers take payment. In 1995 Bill Gates wrote about this in his book “The Road Ahead.” It’s going to happen. Actually, it already has.

David Weinand
BrainTrust

Who does it serve best going 100% cashless? The organization. Not necessarily the customer. We know that at the end of the day the customer wants what the customer wants and as we write about every day in this forum, retailers need to cater to these wants. The convenience of cashless may be of value to some but as the article states, some see it as more convenient to give an order to a cashier. When customizing an order, I certainly have found more friction in a kiosk than just giving the order to a cashier. The cashless movement will continue to march forward, but especially with formats like QSR, the service element of a cashier should not be eliminated entirely.

Steve Montgomery
BrainTrust

Many QSRs, c-stores and others have successfully implemented kiosk ordering. Other restaurants have gone cashless. Shake Shack’s error was in testing both concepts at the same time. Of the two implementing kiosks is a less risky proposition for a QSR. The use of CSRs to help customers learn the ordering system learning that you can’t pay with cash after you have already come to their location and perhaps as one stated already ordered a meal, was a bridge too far for many of its customers.

Lyle Bunn (Ph.D. Hon)
Guest

This bold experiment in customer experience at checkout has provided some useful insights, that can be optimized in future. Many consumers will still want the ease of cashless (digital) commerce, so the key question is “what was the spill rate of revenue by consumers who are cash (analogue) focused, and what is the net spill considering processing requirements?

Bob Amster
BrainTrust

Having recently written, and recorded a video forecasting the end of the wallet (not just cash) as we know it, I will say that the absence of a human in a food location has probably more to do with the apparent failure than the cashless aspect of the location. Regardless, the transition to a cashless environment is an evolution and, as such, different businesses will learn more about how to present a cashless environment. For many kiosks (such ticket dispensers) this is not a problem. For food, the issues may be as much about service as about cash.

Neil Saunders
BrainTrust

The use of cash might be declining, but it remains an important payment method. It was likely a mistake for Shake Shack — a place where many will pay with cash — to curtail it.

As for the kiosk system, what Shake Shack did is transfer the friction of ordering to the customer. Kiosks may be faster for simple orders, but for anything customized they can be stressful and hard to use.

The bottom line is that Shake Shack needs to create a good customer experience. Both of these things failed to do that.

Lee Peterson
BrainTrust

A couple years ago, we designed a concept in Suburban Chicago called “Standard Market.” A high-end grocer (doing well, btw), where the super progressive owners insisted on having a “cashless” opening. It did not last long. The biggest opposition came from older generations who were just not on board with the whole idea. Others were surprised as well, but not as much as the Digital Immigrants.

It’s inevitable IMO, but retailers will have to do what the airlines did when it comes to changing “rote” behavior (a hundred years of paying in cash): plant humans and explain, explain, explain, until adoption starts to take hold — however long it takes. Airlines STILL have folks to talk to.

I believe that for American retailers, this is going to be the only way to get us to the obvious cashless world of the future.

Camille P. Schuster, PhD.
BrainTrust

I applaud the experimentation. Whether the kiosk-only or the cashless pay system was more problematic has to be determined by Shake Shack. They saw the consumers; they heard the customers; presumably they collected data from consumers. However valuable the goal of eliminating friction, retailers have to think about processes from the consumer’s point of view. If the kiosk system made it difficult to customize an order and customization is important, the innovation will not suit everyone. In this time of data breaches, some consumers prefer cash to a credit card. Any one choice of ordering or paying does not suit all consumers. At least in the near term, retailers need to provide options for consumers.

Ken Lonyai
BrainTrust

Interestingly, a week ago in NYC I was at a food place that used Square and was card only too. I was surprised and understand the downsides, but they were ringing up sales quite smoothly.

This example is not a referendum on card-only payments or kiosks. Kiosks can be enabled with bill acceptors. As described, this is an example of very poor implementation. To make a drastic change to credit only purchases, consumers need to be prepped for weeks and months in advance and given instruction on alternatives like nearby locations that accept cash. Most kiosks are horrible (refraining from more descriptive terms here). UX/customer-first thinking has always been lacking in the industry and nowadays anyone can slap out a kiosk with cheap browser masking software. So poor implementations are ever more rampant.

If Shake Shack really wants to get this right, call a professional and don’t risk alienating customers with poorly planned/executed “experiments.”

Ryan Mathews
BrainTrust

This is a clear case of, “Just because you can doesn’t mean you should.” While the cashless system was good for Shake Shack, on paper at least, it clearly didn’t work for a substantial number of the chain’s customers.

As retailing and foodservice become more and more automated and efficient, there is going to be a growing opportunity for companies that go anti-trend, which explains the rise of independent bookstores, record stores, restaurants, etc. The real issue here may just be that people — even at a Shake Shack — want to interact with other people. Now, that’s not to say that cashless doesn’t have a bright future. But, it is to note that cashless only is an idea who’s time has not yet come. Customers want choice — for any number of reasons, not all of them easily understood or rational. It would be interesting to see a cashless option experiment and compare results.

Cate Trotter
BrainTrust

Isn’t this the reason that you experiment? To see how customers respond to changes before rolling them out? In that respect this was a good move by Shake Shack. It’s also given them valuable insights into their customers. Perhaps customers prefer to deal with staff because of the level of customisation that happens at Shake Shack — which may well be higher than a lot of fast food outlets. The company may well choose to adopt something like the McDonald’s model in the future where kiosks are available for quick ordering, but customers can also order from a cashier and pay in cash if they desire.

Jennifer McDermott
Guest

The experiment feels like a PR grab to me. Going cashless with big ticket items such as cars, electronics and appliances may make sense, but when we’re talking about fast food, this move is alienating to travelers, the underbanked or just people who prefer to pay in paper. Not surprised at the complaints at all.

Brandon Rael
BrainTrust

While we nearly are at the stage where every transaction could be mobility, digitally, and self-service driven, cash as a payment option is not quite ready to disappear. Companies are perhaps too quick to make such a rapid transition to this model, and this appears to be the case with Shake Shack.

However, as we all could agree with, there are still other customer segments who would be discriminated, as they do not have the means, credit, or ability to go completely cashless. Society is all about making everything frictionless, seamless, real-time, yet the crawl-walk-run approach applies to a world without cash, as physical currency still has relevancy with convenience items.

Doug Garnett
BrainTrust

No surprise at all that they had to walk away for the moment. The people I hear ask for cashless kiosks are futurists who live fast lives with high income.

Which was more critical — being cashless or kiosk only? Both were of equal error.

The theory of “eliminate friction”? In retail as in physics, friction is neither good nor bad. When it’s helpful to consumers, use it. When it hurts consumers, get it out of the way. But don’t assume it’s always bad.

There are many ways friction is good for consumers. The pause before I order. Asking one question of the help staff to make a quick judgement. Putting things in a shopping cart then looking at them a second time and taking them out.

Mark Price
BrainTrust
Mark Price
Managing Partner, Smart Data Solutions, ThreeBridge
1 year 7 months ago

I would agree with Phil below. The lack of customization options appears to be an issue of execution, not an issue of the value of the strategy of kiosks. After all, the airlines have trained us to use kiosks or our phones to place transactions, get boarding passes and even check our bags. Over time, fast food will move toward kiosks, to reduce transaction time and the time until a customer gets their food. And they will save some money too.

The biggest value may be in leveraging the transaction data for dynamic pricing and the customer data to market to improve retention. Those benefits may very well outweigh the labor savings, in the long term.

Ken Morris
BrainTrust
Ken Morris
Retail industry thought leader
1 year 7 months ago

While cash continues to decline as a percentage of purchases, many people still rely on cash and, in certain instances, prefer it over credit or debit cards. According to a consumer study by TSYS, about 1/3 of consumers prefer to pay with cash at fast food restaurants, while less that 20% prefer to pay with cash at a dine-in restaurant.

Shake Shack is listening and responding to customer preferences. Until cashless is more accepted, retailers and restaurants will need to continue offering customers options. The same goes for self-ordering kiosks. While some like using kiosk, many other would prefer to place their order in the traditional way – with a human.

It is all about options, options, options.

Ricardo Belmar
BrainTrust

While I applaud Shake Shack for experimenting like this, I believe they took on too many changes at once at a single location. Had they chosen one location to go cashless and another to try kiosk ordering, I suspect they would have found different results. Small transactions still have appeal to anyone paying cash and suddenly taking that away, plus forcing orders to be taken by kiosk was surely too much for some customers. I’m sure they have data that tells them what percentage of transactions are cash today that led to this trial, but I hope they don’t give up completely on the experiment based on this one location.

Mike Osorio
BrainTrust

If this were China, where use of mobile wallets is ubiquitous, this would be a yawn. In the US, however, we’re still quite a bit away from pure cashless and/or pure kiosk environments. Testing is still important so that companies can learn which segments embrace this experience and those that do not, so I applaud the effort. If they hadn’t gone 100% to this method by retaining a person to help, the data would not be as valuable. I personally look forward to more companies offering kiosk and cashless options, but 100% solutions are likely not quite ready for prime time.

Ed Rosenbaum
BrainTrust

This was almost a throwback to the earlier days of Horn & Hardart, the New York cafeteria where you took your selection from a window. But there was human interaction. This is necessary when there is food being sold. I do give them credit for experimenting. Nothing can be gained without trying to push forward or in a different direction.

Javier Cazares
Guest

Of course being cash-only or kiosk-only was the biggest push back for SS customers at this location. It’s a mistake other retailers are falling into when trying to be disruptive but not: 1) fully understanding based on data-driven analysis what their customers demographics are or/and 2) not thinking about implementing these tests gradually or with a back-door strategy (in this case having a human helping in case a customer wanted to pay with cash).

wpDiscuz
Braintrust
"Who does it serve best going 100% cashless? The organization. Not necessarily the customer."
"...this move is alienating to travelers, the underbanked or just people who prefer to pay in paper. Not surprised at the complaints at all."
"While I applaud Shake Shack for experimenting like this, I believe they took on too many changes at once at a single location."

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