Store of the Future   //   March 20, 2024

Why retailers like Target and Dollar General are limiting self-checkout

The self-checkout bubble is starting to pop.

This month, Target announced it was limiting self-checkout to 10 items or fewer at most of its 2,000 stores across the U.S. Meanwhile, Walmart is reducing self-checkout hours at certain locations and reserving lanes for Walmart+ customers and Spark drivers during certain times. Dollar General is also pulling self-checkout stands at 300 stores and limiting self-checkout to five items or fewer at another 4,500 stores.

Self-checkout surfaced in the 1980s as a way of making shopping more efficient for retailers and faster for consumers. Retailers ramped up self-checkout at the onset of the pandemic to address labor shortages and limit contact between workers and customers. In 2021, self-checkout represented 30% of transactions, almost double from 2018, according to a Food Industry Association survey. What’s more, 96% of retailers surveyed in 2021 offered self-checkout.

Now, with many shoppers back to their pre-pandemic habits, retailers are starting to reverse course on self-checkout. While self-checkout as a whole isn’t going away, retailers have made changes to how often and in what capacity they offer the service due to concerns around retail theft, errors with the technology and other factors.

While self-checkout wanes, however, technologies that focus on frictionless checkout are gaining steam. Amazon is now working with Grubhub to deploy its “Just Walk Out” technology on college campuses, while the AI startup Mashgin is partnering with the biometric ID provider Keyo to make it possible for retail customers to pay for items by scanning their palms at a reader. Whole Foods is also allowing customers to pay with their palms through Amazon’s Amazon One feature.

Checking up on self-checkout

Some retailers say they see less of a need for self-checkout today, as customer priorities and habits have changed from 2020. Target, for instance, said in a press release that “ease and convenience” have become top-of-mind for consumers and that a pilot test of its 10-items-or-fewer rule revealed transaction times to be “twice as fast.” In December, Dollar General’s CEO Todd Vasos said that the company had started to rely “too much” on self-checkout. “We should be using self-checkout as a secondary checkout vehicle, not a primary,” he said.

Other retailers say they’ve had issues with self-checkout technology. The managing director of Booths, a British supermarket chain, told the BBC that customers had complained that self-checkout stations were “slow,” “unreliable” and “impersonal.” It removed self-checkout stations in all but two of its 28 stores in November.

As The Atlantic wrote in October, self-checkout technology can be buggy or glitchy, and customers may end up scanning the same item two or three times by accident. Many times, shoppers will go to a kiosk and start to scan their products, only to hear that there is an “unexpected item in the bagging area.”

Some retailers say they are limiting self-checkout in an attempt to cut down on theft and shoplifting. A 2016 study of retailers in the U.S., Britain and other European countries found that companies with self-checkout lanes and apps had a loss rate of about 4%, more than double the industry average of 1% to 1.5%. This can be due to several things, including barcodes malfunctioning, customers not scanning items or customers pretending to buy cheaper items while subbing in more expensive ones.

Retail leaders have mentioned needing to curb retail shrink in earnings calls and press releases, although as Modern Retail has reported, “shrink” can include not only theft but also employee errors and operational loss. A week ago, Dollar General’s CEO said he believes the company’s changes to self-checkout “have the potential to have a material and positive impact on shrink.” In August, Five Below’s CEO said the company expected “higher-than-originally-anticipated shrink levels for the year.” Five Below now says it isn’t getting rid of self-checkout stations, but is increasing its number of staffed cash registers in response to theft. Last May, Target warned it could take a $500 million hit in profitability from inventory shrink that fiscal year.

Costco, meanwhile, said it has noticed that non-members have been sneaking in and using membership cards that don’t belong to them. It’s now asking shoppers to show their IDs and membership cards at self-checkout. “We don’t feel it’s right that nonmembers receive the same benefits and pricing as our members,” Costco said in a statement.

Consequences for consumers and employees

Retailers have already tried to curb theft by locking everything from shampoo to cold medicine behind glass cases. Unlocking the items has proven cumbersome and frustrating for many customers, and sources tell Modern Retail that limiting self-checkout — like any change in retail policy — could cause similar headaches for shoppers.

For one, closing down self-checkout lanes means shoppers will have to go to traditional checkout stations. But, the retail industry is still dealing with a labor shortage, meaning that there might not be enough employees on hand to staff the registers. More than 30 million workers quit their jobs from January to August 2023, the U.S. Chamber of Commerce reported. That was down from 2022, when more than 50 million workers quit their jobs, or 2021, when 47.8 million did. There were 8.9 million job openings in the U.S. on the last business day of January, per the Bureau of Labor Statistics. That was also down from a high of 12.2 million in March 2022.

When modifying self-checkout in the way that Target is, “retailers must ensure they have enough staff available to cover checkout lanes to avoid long lines,” Gary Stonell, svp of sales and operations at retail cloud solutions provider Opterus, told Modern Retail via email. “If not, policy changes like this will only create more confusion for both customers and employees.”

Retailers should also be sure to adjust their checkout policies based on consumer behavior, Michael Osborne, CEO of Appriss Retail, said. Without understanding how their customers shop, retailers who simply restrict or shut down self-checkout “are taking away a benefit to the consumer,” he told Modern Retail. “The vast majority, when they use [self-checkout], are being truthful and honest. They may make mistakes, but they’re probably not trying to commit actual fraud or theft.”

“It’s going to come back to balancing the right systems with the behaviors of your clients and your product use,” he said. “I feel like retailers are going to have to adapt by providing the best balance, and somewhere between zero self-checkout and wide-open self-checkout is the answer.”