Freshii's Nicaraguan cashiers
Why is Freshii outsourcing one of their core business functions?
Many Freshii customers have already encountered “Percy.”
The video-calling device is attached to cash registers at a select few Freshii locations across Ontario, and it lights up when customers approach the counter.
On the other end of the screen is a cashier wearing a headset, ready to take orders. Unlike the Freshii workers that wrap burritos and mop floors, these “virtual” workers are nowhere near the store. Instead, at least some of them process orders from a Nicaraguan call centre nearly 6,000 km away, where they earn much less than Ontario’s minimum wage.
The program is only in the early stages of testing, but Freshii’s virtual cashiers are part of a wave of outsourcing and automated technology that is slowly changing Canada’s retail industry.
I’ve seen a lot of backlash for this from an employment point of view. Jobs in Ontario are being outsourced to Latin America! Exploitation! Unions! These things are all true and important, but many businesses have been complaining that they can’t hire enough staff1. In this case, this isn’t taking jobs away from Canadians, but giving away jobs no one wanted. Devil’s advocate is that that isn’t Freshii’s problem though, since they’re a firm in a competitive marketplace. That doesn’t appeal to their self interest.
I want to put these ideas aside though, as I thought it would be more interesting to examine this from a business perspective, rather than a societal one. Is this a good idea, business wise?
I’ve also seen some people comparing Freshii outsourcing a support function to banks, telecoms, etc outsourcing their support functions. You call your bank and you often will speak to someone in India, Philippines, etc. You call, you get bad service, you move on with your life. There’s not a whole lot you can do about it since all the banks, telecoms, etc do it.
I think that that is a very naive way of looking at these virtual cashiers. The difference between Freshii and a bank is that banks operate at a much higher rate of market power. There’s only so many banks. If they are all outsourcing, you’re in trouble. Restaurants are not in the same position. There’s dozens of individual restaurants in any given city sector, if not more. They also are competing with grocery stores, take out places, chip trucks, etc. There’s tons of options that customers can move to if they don’t like what you’re doing.
Banks, telecoms, etc offer shit service because they don’t really care about offering good service. Their margins on each individual problem are low, so there is not a lot of money left over to service each purchase. They make money in volume, and support is a secondary function. So, they do the bare minimum and hope for the best. Google is also known for doing this - if your Google account gets banned, the best way to get it unbanned is to hope that you make a viral stink on social media because there’s essentially no way to talk to a human there, even if you’re a paying customer.
For restaurants, the three main competing factors I can see in the restaurant industry are price, quality and service. Industry insiders might consider other factors, but when I am looking for a restaurant, that is what I’m looking for2. Some restaurants focus on price, some on quality, etc. Freshii outsourcing their cashiers is essentially, in my opinion, akin to a software company outsourcing their software development, or an airplane manufacturer outsourcing their manufacturing. They’re taking one of their supposed core competencies and giving it away. Now some virtual assistant is responsible for one the key moments of customer interaction. They’re giving up control over their business.
And what happens if the software they are using crashes (most software is terribly made), or the internet goes down, or there is a cyber attack? What if the internet goes down in Nicaragua? What if there is a political crisis in Nicaragua and services shut down? The restaurant can’t sell its products, as opposed to before when they could say “cash only”. They might have perfectly reasonable safeguards for these things, but they’re dramatically increasing their own risk exposure (multiple countries instead of one) and fragility. They’re more exposed to external shocks, and they are reducing their resiliency to save some money.
I also have a feeling that this won’t even save them money. The variable rate paid per hour goes from $15? $16 to $3.75, but they also have to pay for the software, the hardware that goes with it, implementation costs, etc. They’re going to be paying money up front for a risky venture that increases their fragility to market events.
Also, has Freshii quantified the effect of reduced revenue because of the public opinion backlash? I can’t imagine these numbers look good. The optics on this are atrocious enough that even if the pilot project doesn’t continue, they’ve burnt a significant amount of good will and reputation in the community. They are winning no friends with this. They’re outsourcing crappy jobs at a time when other businesses are trying to rapidly onshore. Freshii’s cashiers don’t have the same supply chain problems that other offshore jobs have, but the optics from a public perspective are just awful.
Of course, the way this can also be framed is that businesses can’t hire enough staff at the wage they want to pay. I drove past a sign advertising a warehouse job for $17/hour in Ottawa this weekend. That works out to be around $35k per year, which is not a lot of money!
There’s a well known restaurant downtown Ottawa that I refuse to go to anymore because we always get terrible service there. I made the mistake of becoming a ‘regular’ by going too often, so the managers apparently stopped caring about serving our table well, since they knew we’d be coming back regardless. The food was expensive and mediocre enough that we just don’t go anymore.