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June 14, 2024

The Failure of the Self-Checkout Experiment

AiBot
Written by AiBot

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

Jan 16, 2024

Introduction

Major supermarkets and stores across the United States and Australia have been rapidly adopting self-checkout lanes over the past decade, allowing customers to scan and pay for their own items instead of going through traditional cashier-manned registers. This was done under the premise that it would save stores money on labor costs, while also providing customers more flexibility and convenience.

However, self-checkouts have been plagued by problems from the start. Research is showing customers hate using the finicky machines that are prone to errors and stealing accusations. Even worse, stores are losing billions each year in missed scans, theft, and the cost of monitoring and maintaining the complex systems. After over 10 years, experts are calling the self-checkout experiment an abysmal failure that has taken customer experience backwards while failing to provide cost savings.

The Promise and Hype of Self-Checkout Technology

Self-checkout lanes started emerging in major chains like Kroger and Albertsons around 2008. Companies like NCR and Toshiba worked with stores to sell the high-tech systems as the future of grocery shopping – a way to empower customers to scan items quickly so they can get in and out of stores faster.

The technology was touted as having benefits for both consumer and retailer:

Benefits for Customers

  • Faster checkout times
  • Avoid standing in line
  • More flexibility and independence in the shopping experience

Benefits for Retailers

  • Reduce labor costs by employing fewer cashiers
  • Improve productivity – more customers could check out faster
  • Better use of floor space than traditional check-stands

By 2013, self-checkout uptake was growing rapidly. A study that year found that over 30% of respondents used self-checkout lanes, indicating rising consumer acceptance. Companies like NCR boldly predicted that self-checkout would reach almost 50% adoption in US stores by 2019.

Self-Checkout Adoption Predictions

Year % Adoption Predicted Source
2019 47% NCR Research

| 2023 | 20-25% CAGR | Business Insider Intelligence

Grocery executives bought into the hype and invested heavily in the pricey systems which require constant monitoring and ongoing costs. For example, some estimates found Kroger spent over $1 billion implementing self-checkout across their stores.

There was clearly massive potential upside if the systems worked as advertised. But over a decade later, this promise has failed to materialize.

The Self-Checkout Nightmare: Shrinkage, Theft, Errors

On the surface, self-checkout seems like a relatively simple automation task – customers scan a barcode and then pay. However, the systems have complex weighing scales and sensors to prevent mistakes and catch intentional and unintentional theft. This has only fed into an epidemic of “shrinkage” that was not anticipated.

High Shrinkage Rates

Shrinkage represents inventory losses, including both shoplifting/theft and loss from errors like accidental missed scans. With self-checkout, those rates have skyrocketed compared to cashier lanes. Some examples:

  • Average shrinkage rates using cashier lanes tend to be around 2-3% of inventory
  • With self-checkout, shrinkage rates have been found to be 3-5 times higher
  • For a large supermarket, this can represent over $500K in losses annually

Self-Checkout Theft

The biggest source of loss is actually intentional theft at the self-checkout, which happens much more easily than cashier lanes. Examples of common techniques:

  • Ringing up inexpensive produce like bananas instead of high-cost produce
  • Swapping barcodes between items
  • Bagging items without scanning anything
  • Passing off two items as one that is weighed

One survey found nearly 20% of shoppers admitted to stealing via self-checkout. And those that admitted represented only a fraction of actual incidents occurring.

Unintentional Mis-scans

Even law-abiding customers struggle with properly scanning and bagging items. Self-checkout machines have extremely sensitive scales and sensors to catch errors and deter theft. But this overwhelms most shoppers, especially the elderly who did not grow up with this type of technology. Examples of triggers that commonly stall transactions:

  • Forgetting to put an item on the weighing scale after scanning
  • Placing an un-scanned item into a bag by accident
  • Picking up or moving a bag before the system registers it as scanned
  • Entering produce codes incorrectly leading to a mismatch

One study found that average transaction times at self-checkout were much longer than cashier lanes when these types of delays were factored in.

The Domino Effect

Not only do the losses and errors cost stores revenue directly, but it starts a domino effect of expensive consequences:

More loss → More staff monitoring required → Higher investigation costs → Poor customer experience → Lost sales from customers who avoid self-checkout → Lower ROI of entire self-checkout investment

Even with advanced camera systems, stores still depend on people to monitor self-checkout areas. The following chart illustrates how this dramatically lowers the potential labor cost savings:

Self-Checkout Labor Savings

Staff Model Est. Cost Savings Issues
1 staff monitors 6 self-checkouts 46% High shrinkage from lack of oversight
1 staff monitors 3 self-checkouts Only 18% Requires too many monitors

Bad ROI: The Economics Don’t Add Up

For years, businesses built ROI models that banked on self-checkout efficiency and lower overhead costs from cashier staff savings. However, very few chains have disclosed actual performance data. Most have remained suspiciously silent.

Based on research estimates, here is the stark reality:

  • Per Lane Cost: $75K-$100K for hardware + software licenses, upgrades, processing fees

  • Store Investment: Around $250K for a typical pilot, not including labor and ongoing expenses

  • Cumulative Investment: Billions across major chains like Kroger and Walmart

  • Actual labor cost savings is extremely small after factoring in higher staff levels for monitoring and managing theft, as shown earlier.

  • Increased shrinkage eats away an enormous chunk of potential cost savings

  • Poor customer experience decreases basket sizes and shopper loyalty/frequency

When all factors are considered, industry experts say most grocers are almost certainly losing money in the self-checkout equation. One retail data analytics firm estimates stores recoup only $3-8K of their initial investment over 10 years. The ROI math simply fails when shrinkage, loss prevention costs, and lower revenue are considered.

Customer Hatred: A Terrible Shopping Experience

The hardest part for supermarkets to swallow is that customers passionately hate using self-checkout lanes, despite what the initial surveys many years ago indicated.

Sentiment has shifted as shoppers encountered frustrating experiences first-hand. Consumer complaints detail a laundry list of grievances:

  • Stress dealing with unexpected errors and freezes during the transaction
  • Annoyance when forced to wait for staff help to override problems
  • Embarrassment when mistaken for thieves after innocent mistakes
  • Not enough staff around when needed for assistance
  • Reduced personal connection with cashiers they built rapport with

Many customers feel nickel-and-dimed into doing free work for the store without any benefit. Retailers are not even passing back cost savings to shoppers in terms of lower prices.

Overall sentiment continues to degrade to the point where swaths of customers now avoid stores perceived as overly aggressive in removing cashiers. Multiple news stories in 2022 chronicled customers boycotting chains like Kroger due to bad self-checkout experiences.

In addition, elderly customers and those less tech-savvy have stopped shopping at many locations within driving distance of alternatives. This has further eroded revenue for stores.

The Beginning of the End?

After over a decade failing to deliver on promises, retail experts say chains must re-think their self-checkout strategies in 2023. Problems clearly run deeper than finessed hardware or software will fix going forward.

Surprisingly, several major chains like Kroger and Albertsons have already started reducing their reliance on the technology. Some locations have removed banks of self-checkout stations completely – shifting capacity back to cashier-manned registers based on customer feedback.

Additionally, technology upstarts focused specifically on automation like Amazon Go have had very slow growth despite big initial fanfare. The standalone unmanned store concept has failed to scale up and prove sustainable financially so far.

It remains unlikely that chains will abandon self-checkout systems completely after investing so heavily. However, experts predict stores will halt further expansion without dramatic changes. Expect to see self-checkout stall to as little as 20-25% of transactions from nearly 50% previously forecasted.

The future may lie in a hybrid model – with a balanced mix of self-checkouts and traditional cashiers, keeping stores from appearing too void of employees. Chains also may need to incentivize shoppers to use the unmanned lanes through discounts or rewards integration.

Without changes though, grocers will likely continue bleeding money on maintenance costs and grow more dependent on unreliable facial recognition systems. They still lack a clear path to profitability. For now, the self-checkout revolution so many predicted seems to be fading rather than escalating.

Conclusion

The rush towards self-checkout lanes has become a cautionary tale about believing in technology hype. The reality has shaken out quite differently from the early promises of empowered customers and cost efficiencies.

Stores eagerly invested billions chasing the automation dream – looking to shed labor expenses from cashiers who customers knew and valued. However, they created a living nightmare instead: fussy unreliable machines, losses from dynamics they still cannot control, and legions of frustrated shoppers who feel disrespected.

It remains shocking how long it took businesses to admit the staggering failure and stem financial bleeding through these systems. This stands as an important business case study about carefully validating innovations on a small scale before buying into claims completely.

The coming years will determine whether companies can sufficiently reinvent their automation efforts – both for their survival and the experience of shoppers just looking to buy groceries in peace. But for now, self-checkout stands among the most colossal technology product failures in retail history.

AiBot

AiBot

Author

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.

By AiBot

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

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