Why a union victory against Macy's matters to digital checkout

Just because a payment takes place away from a cash register doesn't mean it was completely automated.

A Macy's implementation of in-store digital payments cut out the sales staff at a crucial moment — right when the salesperson was about to earn a commission. As a result, Macy's has lost a ruling that favored a union representing about 11,000 of its approximately 75,000 total employees based on how the retail chain compensates commission-based staff, mostly in sales-oriented departments such as men's and women's clothing and cosmetics.

The arbitrator's ruling found the Macy's contactless payment app does not require consumers to complete their purchases at a cash register. This means the sales rep who completed the sale cannot be immediately identified and thus is a violation of the store's collective bargaining agreement. As part of the ruling, Macy's has been required to ensure its app can identify the salesperson who completes each sale.

Macy's and the union, the United Food and Commercial Workers, did not return requests for comment by deadline. Macy's had reportedly shelved the mobile app's e-checkout feature in October for an upgrade with no timetable for its return.

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For the broader retail industry, the Macy's case shows how hard it can be to automate shopping, ordering and checkout. While not all retailers are unionized and not all staff earn commissions, the digital migration does run up against long-held traditions of marketing and compensation.

Additionally, some staff and consumers may have no digital option.

Most of the attention given to the impact of cashless and checkout-free retail focuses on the lack of access for underbanked consumers. But employers can expect the same pressure to ensure accommodation for staff, according to Ray Pucci, director of merchant services at Mercator Advisory Group.

"Regulatory issues and labor grievances have surfaced related to cashless store operations, employee staffing levels and compensation, which need to be addressed by retailers as the emerging technology and hybrid shopping behavior changes the retailer-consumer relationship," Pucci said

Similar to the political pressure Amazon and other retailers face when installing cashless technology, a migration to checkout-free or no-cash stores threatens claims of financial exclusion. States such as Massachusetts, New York, Pennsylvania and Oregon have passed laws mandating cash acceptance as checkout-free and self-serve businesses expanded.

Partly because of this pressure, most facilities and retailers still have cash options. Even sports stadiums that market contactless shopping have a way to bring cash into the system, typically as a stored-value card obtained at the venue.

While the Macy's labor ruling does not require Macy's or any retailer to abandon mobile payments for goods or payroll, there's pressure to maintain some form of the links between payments and sales commissions.

The complication derives from the mistaken assumption that new technology automatically means reduced friction, said Lana Schwartz, a professor at the University of Virginia and author of "New Money: How Payment Became Social Media." "But in the on-the-ground reality, that is rarely the case. Advanced only happens because of collaboration between digital technology and workers, who are usually made invisible."

In most cases, new retail technology only functions at all because workers are there to train customers and solve problems, Schwartz said. "So workers find themselves doing just as much work, and new kinds of work, but getting paid less for it, whether they are no longer earning commission for sales they facilitated or because their jobs are seen as deskilled because they don't have to handle money," she said.

There are several general areas where self-service intersects with store operations, according to Pucci. There is the express self-checkout, which is usually next to traditional checkout lanes. There's scan-and-pay devices provided by the store; mobile apps on smartphones; online order with curbside pickup; and the most ambitious, Amazon Go-style checkout-free retail, where the payment is handled automatically when the consumer leaves the store.

Each of these models changes staff workflow in ways that remove connections between staff and consumers.

Contactless retail has been part of the pandemic response for many retailers, but it also changes staffing decisions related to how stores accept payments.

"Cashless restrictions can be solved at autonomous shopping stores, [which] have in-store employees for stocking and customer service; and they have contingencies that can enable a staff member to accept cash or a SNAP EBT card," Pucci said, adding compensation for staff that is tied to sales is not as easy. "CBAs will have to be renegotiated and then the related technology changes made as required. Another challenge for self-checkout occurs in convenience stores as alcohol, tobacco and lottery sales need proof of identity that needs verification from a store employee."

The rapid uptake of mobile payments over the past year ensures checkout-free features will also continue to grow, as executives at Visa, Mastercard and other large payment companies predict digital acceptance among merchants and consumers is permanent. There are ways for merchants to ensure automated and more traditional engagement between consumers and staff can be maintained, said Eric Grover, a principal at Intrepid Ventures, who contends the union is protecting an existing way of processing transactions as opposed to future innovation.

"While most retail self-checkout systems only support electronic payments, there’s no reason they couldn’t support cash as well," Grover said. "And that will be all the more true with digital currencies."