Self-Checkout: The Good, The Bad & How to avoid the Ugly

Is self-checkout effective? The short answer is YES.

People's love affair with self-checkout is far from over. According to market data, the global automation and self-checkout system industry will have catapulted from USD 4.51 billion in 2022 to a whopping USD 12.01 billion by 2029 - highlighting an incredible 15% CAGR growth rate during that timeframe!

With US surveys showing that 85% of customers prefer this technology for their shopping trips, companies are investing more in automatizing checkout systems than ever before, but why? What has sparked such adoration towards these machines?

There are always positives and negatives experienced around using them depending on your perspective as either a customer or store owner – so what might you expect when getting involved with self-checkouts?

In this discussion, we will be looking mainly from the perspective of a retail store owner.

Have you ever stopped to compare the experiences of self-checkout? When next in a store featuring self-checkout, consider your psychological reaction when faced with the option of a self-operated machine or several long lines with possibly an overworked, disgruntled cashier on the 9th hour of their shift.

A survey by Raydiant found that many users overwhelmingly prefer self-checkouts over waiting in line for less-than-stellar customer service. With nearly half wanting only access to automated checkouts and just 3% rejecting them outright, it is clear why stores are quickly adopting this technology into their businesses.

In another 2021 survey by Toshiba and PYMNTS, the majority of respondents are embracing self-checkout as their go-to option for shopping convenience. With 66% claiming their preference lies solely in automated checkout systems, customers have accepted this modern solution with open arms.

On the other hand, every business understands the importance of catering to modern generations as Millennials and Gen Z continue to come into their own. Recent U.K.-based studies have determined Millennials' preference for lesser human interaction, leading us closer to a future where self-checkout systems are commonplace.

This information should be considered by companies looking ahead to plan customer service strategies; adapting to current trends can mean the difference between success and survival in today's market.

Despite the growing popularity of self-checkout systems, no automation is without its downsides; for retailers, one such challenge lies in rising amounts of 'shrink' - loss due to theft or oversight.

In 2018, retail stores lost a staggering $50.6 billion due to theft and shoplifting - an astounding 1.38% of total sales for the year, as reported by researchers from the University of Florida in collaboration with the National Retail Federation (NRF).

Retail shrink can be defined as the difference between inventory on records and physical inventory in stores. It is usually caused due to shoplifting, employee theft, administrative errors, and/or vendor fraud. However, retail shrink has always been an area of concern for retailers.

As self-checkout has risen, so too have unlawful activities in retail stores. Self-checkout is a major catalyst for shoplifting and shrink. Thieves and shoplifters are finding creative ways to exploit this technology by slipping additional items into their cart without scanning them or even replacing barcodes with those of lower-priced products for a bigger discount!

This "shrink" effect on retailers costs them thousands of lost profits annually.

Walmart recently contemplated potentially closing stores due to increased losses. While the CEO kept their reasons close, employees have pointed fingers at self-checkout systems as the culprit - with shoplifting and barcode swaps being key offenders when it comes to those pesky bottom-line numbers.

One significant benefit of self-checkout is, decreased overhead costs and increased productivity. Instead of staffing checkout lines for 4-8 hour shifts to cover a single 1–2 hour busy period, one employee can oversee 4-6 self-checkout kiosks and assist customers as needed.

Customers can also enjoy an efficient checkout process using self serv machines by lowering the average wait time.

Using self-checkout is also a great way to utilize space better. In a retail store, space usually means money and is at a premium. Self-checkout allows storing more products at the checkout, the place with the highest foot traffic, which drives more impulse buys, ultimately benefitting the business.

Self-checkout and automation make perfect business sense; they reduce labor costs, thus eliminating the risk of customer dissatisfaction due to human error. However, this also increases the chances for dishonest individuals to take advantage of unmonitored checkout systems and reap undeserved rewards.

This is where business intelligence comes into play and can help reduce shrink related to self-checkout.

How? The solution is a perfect complement to your self-checkout system helping and helps you tackle two issues at once, which will likely result in not a reduction in shrink but a better overall customer experience.

EMPLOYEE ENGAGEMENT or, to be more precise, in-your-face customer service is the key to drastically reducing shrinkage at the self-checkout. The only question is, do you, as a retail store owner, have complete trust in your employees to provide that kind of customer service round-the-clock, or how do you ensure and improve your store's employee engagement so that the crime doers are demotivated to steal?

This is where technology can help you. The specific tool is based on video and ai-analytics. This business intelligence tool will be an add-on feature to the already powerful and affordable existing i3Ai cloud, winner of the SIA's best-in-hosted solution award at the ISC west 2022.

Vy Hoang described this technology in layman's terms as "The ability to learn, teach & identify any normal and abnormal behavior within the vicinity of the premises by using your pre-existing CCTV infrastructure."

This technology, he says, "Will be extremely affordable since it's built on the already existing cloud and can be scaled as you go."

Using the video feed from your existing cameras, the Ai engine will learn the surrounding behavior of the self-checkout area and will be able to differentiate between employees and customers and generate reports detailing how engaged your employees are, which has a direct correlation to shrink.

The key here is evaluating your customer service experience. This, when combined with POS data, can provide you with a detailed report, which can help you make critical business decisions regarding the training and development of your employees.

Have a chat with us over a coffee and see how we can help your retail store to optimize operations for a more profitable store!