Rising theft is forcing major retailers, like Walmart and Target, to close self-checkout terminals and replace them with human cashiers – prompting the machines to evolve, adapt, and incorporate artificial intelligence (AI) to ensure their survival.
Retail loss, called “shrink,” has been surging, jumping nearly $20 billion in a single year to more than $112 billion, according to the 2023 National Retail Security Survey. The loss rate at companies with self-checkout lanes and apps (4%) is reportedly more than double the industry average. Shoplifting accounts for nearly three-fourths of shrinkage.
“Retailers are seeing unprecedented levels of theft coupled with rampant crime in their stores, and the situation is only becoming more dire," National Retail Federation Vice President for Asset Protection and Retail Operations David Johnston warns.
There are currently as many as three hundred thousand Self-Checkout (SCO) terminals operating in the U.S. today, according to Kiosk Industry estimates. At grocery stores, SCOs accounted for about half of all checkouts and transactions by the end of 2022. Larger chains (like Walmart, Costco, Kroger, Amazon, etc.) can average as many as ten self-checkout machines per store.
Those numbers have been falling lately at some large national retail chains, as they try to combat the shoplifting surge. In the past month, retailers including Target, Walmart, Dollar General, and Five Below have all announced they’re closing SCO terminals and hiring more human cashiers to replace them. Safeway has removed all self-checkout terminals at some stores.
The prognosis for self-checkout is far from terminal, however.
While the retail rise of the machines may have stalled, it’s poised for a comeback as SCO’s technology and business paradigm continue to evolve.
Target, for example, is using artificial intelligence (AI) to develop a new system that uses cameras and sensors to detect items that shoppers fail to scan. It will create audio and visual alerts and identify shoppers who ignore notifications and repeatedly fail to scan their items after being prompted, Daily Mail reports. Target is hoping to deploy the new AI-powered SCO technology in all stores by the end of 2024.
The SCO business model is also adapting to prevent shoplifting:
- Costco has created “attended” self-checkout terminals, where human staff supervise customers as they scan and pay for their purchases, which have proved effective.
- Target has begun limiting self-checkout to 10 items or less.
- Receipt-scanning gates are reportedly being deployed at grocery stores, such as Safeway.
- Retailers are reexamining their SCO-to-Cashier ratio.
The one of the biggest problems is that retailers been too zealous, often overweighting their checkout mix of SCOs and cashiers, industry analysts say. While a good rule of thumb is to have ratio of one SCO for every one cashier, some retailers are currently using a ratio of four or more SCOs per human cashier.
Thus, as retailers continue to gain experience with self-checkout, they’re adjusting their store’s ratio to find a mix that both improves the customer’s shopping experience and also protects the retailer’s bottom line.
The business and economic reporting of CNSNews.com is funded in part with a gift made in memory of Dr. Keith C. Wold.