You’re at your favorite ice cream shop. It’s a warm day and the worker behind the counter hands you a big cone of your favorite flavor. With your free hand, you pass your credit card to the attendant. They swipe the card, hand it back, and turn the iPad check out system around to face you. Your hands are full and you’re unprepared, but they are asking for a tip.
IPad checkout systems are sweeping the over-the-counter food market. Coffee shops, ice cream parlors, bakeries – you name it, iPads are there. The dominant platform for iPad check out is Square, a young start up company based in San Francisco. As iPads and Square sweep the marketplace, consumers are often faced with a tricky question: should they give a tip?
Before answering this question, let’s dive into some history. Michael Lynn, a consumer behavior professor at Cornell University, gives a brief history of tipping as a guest in NPR’s Planet Money podcast. Tipping originally started in coffee houses. Wealthy customers would toss a few coins in the tip jar to get service before others. Tipping in this context essentially functioned as a bribe, and while the bribe aspect is largely diminished, tipping still persists today.
So why do we tip? Conventional wisdom argues that consumers tip for good service. Lynn says this is inaccurate, pointing to studies that show sunshine levels have more impact on tips than does perceived service. He instead argues that tipping buys consumers out of guilt. Diners have fun, servers do not, thus, to compensate, diners tip servers.
Tipping in this sense is extremely inefficient. Even if tips did incentivize better service, waiters and waitresses have little incentive to work harder given the ubiquitousness of the 15-20% tip. Economists, among others, suggest doing away with tips. Few ever listen to economists; this is no exception. Even restaurants that do attempt to do away with tips and inflate menu prices often end up reverting back.
Rather than phasing tips into extinction, Square is doing the opposite by expanding substantial tips into markets where they used to exist only in dirty cups by the register. After introducing Square check out, some shops experience tip increases of over $20 per 8-hr. shift. Other data suggests that Square merchants experience 35-100% increases in tips.
Square is effective at increasing tipping for two primary reasons. First, guilt nabs many customers. The cashier is standing less than 5 feet away from you – are you really going to slight them? Even if not tipping isn’t a slight, it is inconvenient to click the “No Tip” button tucked in the corner of the screen. Second, Square merchants can choose to suggest tips in dollar amounts instead of percentages. A one dollar tip may not feel like much, but for a $2.13 drip coffee, it’s a tip of nearly 50%! To choose a smaller custom tip requires multiple extra key strokes, which are made even more unwieldy with a dirty chai or ice cream cone in your hand. Square makes it convenient to tip extra.
For their part, Square stresses that their product increases efficiency and claims to have no strategy to extort tips from consumers. Square did, however, reemphasize tipping when they redid their interface. Clearly, it’s in Square’s best interest to increase tips for its customers.
Tipping, however, might already be obsolete. Shopping is progressively shifting online, and while some argue that we ought to begin tipping online, tips are almost never expected or paid. Online shopping eliminates the personality from exchange, thereby dismantling tipping habits. Even in-person checkouts are becoming more and more automated. Apply Pay and similar platforms do not suggest tips themselves, decreasing the likelihood of shoppers to tip. Amazon is currently testing a store where no checkout is required, effectively eliminating tips.
Whether or not tipping is on its way to extinction, tomorrow when you buy your coffee you will likely be asked for a tip. What should you do? Tips do not create higher quality service. Your baristas are already getting paid and interact little with customers – you have no guilt to reconcile. Economically, you have no reason to tip. But there is no shame in being a little generous.