Why Retailers Are Losing Faith in Self-Checkout

• by Sarah Mahoney , Staff Writer @mahoney_sarah, 5 hours ago

Target is one of many retailers rethinking its commitment to self-checkout

Self-checkout’s moment seems to be fading fast. Retailers, who had been experimenting with the technology for a decade, piled on during the pandemic. Human-less checkout seemed like a perfect antidote to the COVID era’s never-ending labor shortages and a way to ease the long lines that irk so many shoppers. Yet Target has announced it is limiting self-checkout to 10 items or less. Dollar General is cutting back. And Costco is shifting more humans to self-checkout areas. Jennifer Fagan, EY retail partner, tells Retail Insider why stores are changing their minds.

Retail Insider: Once upon a time, self-checkout seemed magical, solving the biggest pain point of shopping: standing in long lines. Why are retailers reversing course?

Jennifer Fagan: Retailers initially thought self-checkout was promising because they needed more store productivity. They had labor challenges. Customers had become more independent and familiar with online shopping, so they knew how to check out themselves. So, adding self-checkout lets them prioritize speed, just as technology has caught up. Customers could figure out how to weigh their bananas. Maybe not as fast as a cashier, but they could do it. And there was usually an associate in the area who could help.

Then came the pandemic, when we wanted less human contact, so it seemed like an even better idea. But then customers started getting frustrated.

Retail Insider: How so?

Fagan: There’s a nervous reaction, and people start to hurry through. That led to both intentional and unintentional theft. And even before COVID, customers began to feel watched because of the assistance needed. So there’s a sales associate just observing.

Now, customers think they’re doing the work the associate could be doing. And there are frequent error messages. People are starting to say, "You used to help us for free. Now I’m expected to work through that myself." And there are no discounts associated with using it.

Retail Insider: How significant a factor is rising theft rates, known as shrink, in reducing self-checkout?

Fagan: Shrink is increasing, in general. For many years, it hovered at 1% and is now rising as high as 2% in some cases. Not all of that is happening at self-checkout, of course, and retailers are focusing on all the places where theft happens. However, self-checkout is one area they can control.

Retail Insider: Customer experience is also a factor, right? Drexel University recently published some findings indicating that self-checkout erodes loyalty. In some ways, people want to interact with a cashier, making them feel more valued.

Fagan: Shoppers want to control their destiny. Maybe you’re having a leisurely shopping trip. Or maybe you’re slammed that day, have just a few items and want to get out of the store as fast as possible. And there are generational differences. Gen Z, especially, likes self-checkout.

Retail Insider: Self-checkout is a step that stores have taken towards omnichannel thinking, bridging tech and in-store. Is stepping away from it a setback?

Fagan: Retailers have already reconfigured their stores for self-checkout. They’ve invested in the footprint, the technology and the backend systems. So they won’t eliminate it entirely. But they are saying, "Let's take a step back. Let’s evaluate it as a leakage point." That includes limiting the number of items, perhaps to 10. Or limit the hours it can be used. They want more control, and are starting to test and learn around that.

Retail Insider: What’s the next evolution?

Fagan: I would say the future may not be self-checkout lines. The progression of RFID and the ability to track items to the SKU level is changing things. In the next wave, we’ll see a combination of RFID use, so the store will know what I'm putting in my cart. I'm putting it in my app. They know who I am, and they have my credit card data. So I can just walk out the door. It’s a bit of a bridge too far for today, but the technology is there and getting cheaper.

Retail Insider: That was initially the promise of Amazon Go, Amazon’s cashier-less stores. But Amazon seems to be backing off, recently announcing that it will close eight out of its 20 Amazon Go locations.

Fagan: This kind of shopping is a little before its time. It’s also aimed at a unique customer set. Amazon also had an additional barrier to entry, which is that you need an Amazon account to shop there.

Retail Insider: Target has scaled back to a 10-item limit for self-checkout. And Walmart is reportedly testing the idea of using self-checkout as a perk, available only to Walmart + members. Will we see more kinds of experimentation?

Fagan: I can’t speak to those stores, specifically. They are audit clients. But in general, stores will find a balance that works for them.

Retail Insider: We’ve been talking about grocery stores, where self-checkout is most common. Do you see it expanding effectively in other formats?

Fagan: Fast fashion is adopting this rather quickly. And again, the benefit is that it lets the shopper create their own experience, depending on whether they want human contact.