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[26 comments]

Does Self-Checkout Cause Theft?

April 10, 2012

We've talked about the plusses and minuses of self-checkout over the years. Our discussions tend to revolve around convenience and speed vs. a lack of personalized service. Most commentators seem to prefer a full service checkout as long as they don't have to stand in line and the cashier is friendly and speedy. But the reality is that in many places the self-checkout experience is quicker and the absence of a human connection is preferable to an unfriendly or indifferent cashier.

Focusing on an additional dimension to the issue, a recent USA Today article points out that many retailers are seriously questioning the use of self-checkout at least partially due to an increase in theft. A video from StopLift, a security company specializing in checkout loss prevention, demonstrates that there is a myriad of ways to steal via self-checkout. Newer self-checkout systems, according to USA Today, do provide for more automation of the process, and video and other monitoring of the lanes make it easier to determine when a customer is actually a thief.

[Image: StopLift ScanItAll]

In the face of an apparent higher theft rate in self-checkout lanes, some stores are removing them, while others such as Walmart are continuing to add them because of the convenience factor and the cost reduction possibilities. The net effect is that self-checkout continues to grow. The Big Y supermarket chain announced they were getting rid of them last fall but a spokesperson told USA Today they had seen no decline in theft since doing that.

Discussion Questions:

Discussion Question: Is the theft risk from self-checkout so high that retailers should ban them from their operations? Are they safer for certain types of retailers or channels?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Is the theft risk from self-checkout so high that retailers should ban them from their operations?

Comments:

When I revisit trade areas that I haven't been to for a few years I'm often surprised to see the increase in the number of self checkouts at the various competitors. Some have gone from having 4 to perhaps 10 or more self checkout registers. The stores all have their reasons, from cutting labor, unable to find appealing and approachable employees, or this is what the customer wants. However for obvious reasons, in neighborhoods where the propensity of crime is much higher, stores don't have self checkout and security is beefed up. Shoplifting is always going to be an issue regardless of area, but some areas are just worse than others. If the risk of self checkout was that high, stores would not be installing them with such furor.

Most still have an attendant that is stationed to handle store coupons, bag credits, and settle disputes. They should all be on the lookout for shoplifters. Screaming announcements every 10 minutes of "SECURITY TO THE SELF CHECKOUT AREA!" might also discourage shoplifting.

David Livingston, Principal, DJL Research

Let's start with the headline. To paraphrase a famous right wing dictum, self-checkouts don't cause theft -- people do!

Self-checkouts may facilitate certain kinds of thefts, but they aren't the cause. Remove the self-checkouts and your thieves will just find another way to, "access inventory."

By the way, here's a hint for Big Y. In most cases, the root cause of the majority of theft are your associates, not your customers. As the kids put it, just sayin'.

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Ryan Mathews, Founder, ceo, Black Monk Consulting

It strikes me as strange that this has suddenly popped up as a public issue. Back in the early days of SCO, we received several inquiries from retailers asking if shrink had risen at retailers using the technology. My recollection is very clearly that shrink had actually gone down, or at worst stayed neutral.

At that time, we surmised that given the high percentage of theft associated with employees (I think it's approximately 47% of total shrink in general), keeping them out of the check-out process was a plus, not a minus.

Greg Buzek at IHL has pointed out one downside -- a significant decrease in impulse purchases at the checkstand. Shoppers tend to be more focused on the SCO line than on the magazines and candies that line the counter.

Our recent surveys do tell us that perceived benefits from SCO have been realized and there's not a lot of additional up-side. But I can't imagine they'd be pulled out because of theft. More like loss of high margin impulse sales and not as much employee savings as originally promised.

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Paula Rosenblum, Managing Partner, RSR Research

We have done extensive research with self checkout shoppers and find a core group who sees them as a preferred option. Retailers need to view them as a source of improved shopper satisfaction and competitive advantage.

As to the theft risk, we believe the problem is more perception than reality. Actually, the largest source of shrink for a retailer is employee theft, and this would be reduced for self checkout.

There have been studies of shrink from self checkout conducted in the UK. They show the rate of shrink at self checkout to be slightly lower than regular checkouts. Of course, this may also depend on store demographics.

Clearly, retailers must take reasonable steps to avoid shrink at self checkout through proper supervision and appropriate intervention. Assuming this, they should not expect to see higher shrink at self checkouts.

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Raymond D. Jones, Managing Director, Dechert-Hampe & Co.

I'm not sure the thief wants the added scrutiny of the self checkout monitor, but accidental theft is most likely higher in self checkouts. The shopper who leaves the case of water or bag of dog food under the cart will cause shrink.

It's safer for channels that have mostly packaged goods -- I'm always curious how the Home Depot customer process that 2x4 at the self check, probably similar to the bag of seedless grapes in grocery.

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Robert DiPietro, GVP Product Strategy & Business Development, Affinion Group

I caught that report from USA Today as well, and I was surprised to hear that retailers are seeing more theft from Self-Checkout lanes (SCO). There are a lot of different ways you could go with this one:

- One of the initial benefits of SCO was that consumers tended to be more honest than employees when it came to ringing things up. That was why the report surprised me - because even talking to friends and neighbors about SCO, they seem hyper-paranoid that the reason why no one mans those registers is because they assume the retailer has super-strong controls on them and SCO will be impossible to steal from. Some of my even more honest friends don't like to use SCO because they're worried they'll accidentally steal something and get in trouble.

- I can guess that consumers have adapted to SCO and gained a better understanding of what it actually can and can't do, which is why theft rates have increased in those lanes. But I also think that tough times and a general tendency for consumers to maybe feel pressured to steal more are not alone a sufficient explanation for the challenges arising around theft and SCO.

- In the lanes where theft is increasing, are retailers staffing their SCO lanes appropriately? Yes, they must be staffed -- you know, that one lone employee who now manages 4 SCO pods. I've been in a lot of stores where that employee is either not there at all, or not paying the least amount of attention to what is going on in the pods. What do you think theft rates would look like in a store that had no employees in it?

- There also may be a punishment factor involved in theft. SCO is still not the most user-friendly experience. There's often a lag time between the scanner and the scale, so that the user is forced to wait until the SCO says you can scan more items. When the machine gets hung up or glitches, and there's no employee to help out, where do you think that item is going to go? Straight back into the cart, and forget about the stupid scanning process! In a parallel, airlines reported that customers revolted against bag fees by being meaner to flight attendants and leaving more trash on the plane -- generally being less helpful to the flight crew. I can definitely see the potential for that kind of dynamic at SCO.

My conclusion: Don't blame SCO if theft is increasing there. It's really not any more or less vulnerable to theft than any other place in the store. Take a long hard look instead at the service you're providing, whether overall or specifically around SCO. If you're leaving customers entirely to their own devices, then you kind of deserve whatever comes out of that.

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Nikki Baird, Managing Partner, RSR Research

The only people who can steal from you are the people you trust. The US Justice Department reported that one third of all employees are hardcore thieves who will look for ways to steal from employers. These same people are shoppers who will look for ways to steal from you.

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Mel Kleiman, President, Humetrics

To Ryan's point, the headline should be "Does Self-Checkout Lead to Increased Theft?" (Unless the machines that are getting smarter and smarter are actually doing the stealing!) Side note: about 20 years ago I saw a sign posted in the manager's office at a Shoprite in New Jersey, but visible for all to see, that said "Make sure to look under shoppers' carts or our customers will rob us blind!" That might have been a weird but effective way to reduce theft but it sure didn't do much for the relationship with 'valued shoppers'.

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Al McClain, CEO, Founder, RetailWire.com

One of the retailers I consult with recently told me that theft at self-checkout is very indirect. Consumers will charge themselves for an apple, using the weigh-in code for a cheap apple, while placing something much more expensive on the scale. In addition, consumers will often conveniently forget to charge themselves for something in the cart that never made it onto the table. I hope that technology can fix these issues so that supermarkets and mass merchandisers can continue to offer self-check outs for the convenience of the consumer.

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David Biernbaum, Senior Marketing and Business Development Consultant, David Biernbaum Associates LLC

If Walmart is increasing its use of self checkout, it must have better gear than most other retailers do. There's nothing more annoying than scanning a bottle of shampoo, placing it in the bag, and hearing a loud automated voice tell you that the bottle is the wrong weight for the item.

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Cathy Hotka, Principal, Cathy Hotka & Associates

Because of the lack of supervision, self-checkout opens up opportunities to the unscrupulous to steal. The issue is really how a retailer should balance a shopper benefit (easy, fast checkout for do-it-yourself Americans) and cost reduction (fewer expensive cashiers) against the losses incurred. To deploy videos and other surveillance equipment (such as conveyor belts and "tunnels"), as well as any other security measure (such as a checker at the door a la the club stores) adds to the cost and narrows the benefit of self-checkout to the retailer. However, when all is said and done, I'm guessing that there are by now an enormous number of shoppers that like self-checkout (for speed and ease, not theft!) so that a retailer's decision to abandon this form of checkout would be self defeating.

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Roy White, Editor-at-large, RetailWire

Once again, just anecdotal but in my experience, SCO at Ralphs and Walmart can be frustrating, depending on sensitivity settings and maintenance. I find Fresh & Easy to be uniformly user-friendly (thankfully since F&E is 100% SCO) and it may in part be due to their long conveyer belt rather than the "bag-only" setup at Ralphs and Walmart.

And back to the point about theft -- at Fresh & Easy, with the long belt, employee assistance in bagging while I'm scanning, I don't see how theft could be possible. With a clerk and a thefty-friend to go thru checkout, the clerk can skip a scan on an expensive item but not at F&E. And the clerk can check out my cart to ensure all items have been scanned.

So IMHO, IF a retailer sets up,their hardware and employee stationing in a manner like Fresh & Easy, the retailer gets it all: lower shrink, higher customer satisfaction, quicker checkout and lower overall employee costs.

'JackPansegrau'

I think that Big Y made a mistake by dumping self-checkouts and I think this article is using only a small sample size to analyze a large portion of the market. In fact, I know they made a mistake based on bad data analysis. Even Big Y admits that their shrink has not gone down since removing the self checkout lanes.

When properly managed, self-checkout is a BENEFIT to both consumers and retailers. And, we have the data to back it up. We perform POS Auditing for about half of our grocery customers. Of those 26 customers, we have been auditing almost 1,000 (924) self-checkout lanes for at least 12 months.

What we have found is that self-checkout can actually have far less shrink than the manned lanes. Instead of just proving incidents to our customers, we perform a root cause analysis to determine what factors lead to losses. At the self-checkout it all comes down to the podium clerk. Look at these actual results for one customer who was experiencing high transaction cancels. Our auditing found over the course of a single month that 70% of the time, the podium was unmanned. When a transaction was cancelled 75% of the time, the customer left without purchasing anything (a serious customer service issue), the other 25% of the time, the customer walked out with the product!

We found that too many times, the store was understaffed and the podium clerk was pulled off to do other tasks. No other task is as important as manning the podium. But, its more than just putting a body at the self-checkout. The person working the self-checkout must be a senior person. They must be able to multi-task and they must engage the customer.

We have found that if the podium clerk simply says hello to the customer and engages them even for a few seconds, the person is far less likely to steal. Engaging a customer directly and making eye contact is even better than a public view monitor! Next, the podium clerks too often never look at the alarms and simply clear them. They need to question the alarm quickly. Do a very quick analysis and then clear the alarm. In fact, our best practices show that podium clerks should even go over to the customer and help them scan if they are having an issue and pay attention to what is happening.

When a podium clerk understands the importance of their role, when they are able to multi-task and when they engage the customer the self-checkout becomes a profit center for the retailer and a pleasant experience for the customer.

Don't get rid of your self-checkout. Staff them properly.

Derek Rodner, VP, Marketing, Agilence, Inc.

This is absolutely a concern. We just did a piece on Thursday about Costco's loss problems from one of their self-checkout experiments. The difference was that they specified the nature of the inventory losses and the IT cause behind it. It involved how the self-checkout systems dealt with weight mismatches by alerting the customer, but not a store associate (for an intervention). The result? Many customers didn't notice so they proceeded to put it in their cart and assumed they had paid for it. If caught, it would be an awkward and false accusation of shoplifting. If it wasn't caught -- and it often wasn't -- that caused the inventory shortfall. Not a good pair of options. The full Costco details here.

Evan Schuman, Editor, StorefrontBacktalk.com

Rather than totally 86ing self-checkouts, it seems a more reasonable solution is exploring ways to decrease theft at the terminals. Depending on the chain, that could involve various solutions, e.g., increasing signage alerting self-checkout users that they're being monitored, limiting the number of items or type of items that can be bought at the lanes, or stationing a permanent store associate at the terminals while also limiting the number of terminals in operation.

For a handful of retailers, it may make sense to completely nix or severely limit the use of self-checkouts, e.g., home improvement chains may want to ensure that no higher-end hand tools are checked out via self-checkout. But in channels like grocery retailing, self-checkouts should remain an option -- albeit a better guarded option.

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Tim Henderson, Editor/Writer, Independent

Technology does simplify and reduces labor at checkout. However, as we make the mundane more idiot proof, we seem to come up with better idiots ... and more innovative thieves.

'GMROI'

The shrink issues aligned with the many present day self-checkout technologies should not be a surprise to anyone looking at this article. Here lies an IT problem that the improvements to date push the cost of ownership and maintenance through the roof. With a large pool of available cashiers to draw from, it may be some time before easy-to-own self-checkout systems catch up with the present day payment system needs.

'gjarnoldjr'

This is why building an outstanding test and learn capability is critical to major retailers. By testing self-checkout in a balanced subset of stores, retailers can understand the incremental impact on both sales and theft (and satisfaction and labor costs, etc.). Further, they can understand what types of locations have greater sales, theft, and other impacts, and they can use that information to predict the site-by-site impact of deploying self-checkout at each store in the network. They can put it in only the places that they know in advance will work, and they can eliminate the second-guessing.

That's the power of analytics -- preventing the "guardrail to guardrail" approach of "let's put them everywhere" followed by "whoa, let's ban them!"

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Jonathan Marek, Senior Vice President, Applied Predictive Technologies

Self-checkout experiences can range from fast and simple to awkward and unpleasant, depending on technology and staffing. Some items don't scan properly, setting up a time wasting, awkward event at the SCO station. If staff are available to correct, it's just annoying; if no one's available, it becomes unpleasant pretty quickly.

Product loss surely is an unintended consequence when the system doesn't perform. Add to that the loss of impulse sales in register lines, this would also work against revenue. I agree with the panelists saying that Walmart has experimented with a number of solutions, from an express checkout corral with impulse items in the racks to SCO, which seem to be working for them.

Anne Bieler, Sr. Associate, Packaging and Technology Integrated Solutions

I'm not sure I agree with Ryan's premise. I can't imagine, for example, that a store which didn't lock its front door(s) at night wouldn't have higher loss than one that did.

That having been said, the concept that letting people check themselves out might facilitate theft seems a safe winner of this week's "DUH!" Award; as for the (melodramatic) suggestion that retailers "ban" them, that's something done TO retailers not BY them; they can install them or not. I'm assuming each is smart enough to decide for themselves.

'notcom'

Here is a use for the dreaded affinity card! Only allow card holders to use the DIY checkout. As retailers supposedly have every shred of information on their card holders already, it would seem to be fairly easy to put a camera over the checkout area to spot theft. You could then easily trace it to a consumer via the card. Okay, now that we have solved that problem, go see what you can do about OOS!

Ed Dennis, Sales, Dennis Enterprises

Self-checkout shrinkage provides no more theft risk than the goods being properly checked in the back door, a customer walking out the door with a gallon of milk between her legs or a candy bar in her purse, or a fellow that might change a label or price tag on an item.

Self-checkout is a boost in terms of labor savings, and speed through checkouts for increasingly small tickets, due to changing and smaller household units. Look for more self-checkout, not less. A larger base of consumers have accepted them.

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Roger Saunders, Managing Director, Prosper Business Development

Self-checkout when properly executed is an enhancement to customer service by providing more lanes open, all the time. Depending on the provider of the equipment, it is no more susceptible to theft than a full service cashier lane. In fact, it could be less open in some cases.

Cashiers are much less likely to validate product to weight and many studies show that the consumer is better at identifying produce than the cashier. Thus, it is rung up more accurately.

If there are retailers experiencing more theft, it is much more likely over their execution than the checkout lane -- cashier lane or self-checkout. Reduction of theft and shrink at the front end, regardless of the systems, is a mind set and requires active leadership and a constant conversation.

Like anything else, you get what you talk about. Most likely those experiencing theft are likely blaming it on something rather that focusing in on a shrink control attitude that begins at the top and goes all the way to the bottom.

'Scanner'

The good news, based upon numerous studies over the years, is that people are inherently honest. SCO has proven to be virtually no contributor to increased loss at the store level. This may actually be the one shining example in the US of a successful "honor system," whereas the honor system works well in other areas internationally.

The challenge remains to keep the customers flowing through these lanes, so at least one attendance per four terminals must be on duty at all times.

I think SCO is a great alternative and a productive use of technology for most retail environments.

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

SCO may change the method used by customers to steal, but I don't believe that they change the prediction of people to be honest or not. Those that are not honest have and will continue to find a way to steal. Will they steal as much? I believe the answer to that questions is yes.

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Steve Montgomery, President, b2b Solutions, LLC

I routinely shop at... large chain grocer with self checkouts in probably 80% of its thousands of stores. I use self checkout on about 65% of my visits. I routinely shop at one specific location of large chain grocer. I have found when I use self checkout, I get charged the exact prices for the exact items I am buying. I tend to buy things like butter lettuce (1.79), danish from the bakery (0.99), pink apples (1.59/lb)...

When I go through self checkout I somehow charge myself for all of those items. Sometimes I go to the regular cashier. I look at my receipt and find I have not been charged accurately but I am ALWAYS undercharged. I see things on my receipt like "lettuce leaf 1.09" or "bkry donut 0.59" or "apl gala 0.98/lb" yet I did not buy leaf lettuce, I bought the more expensive. I did not buy a donut, I bought the more expensive danish... I see this with multiple cashiers at said large chain grocer. They seem to be trying to move so fast that they do not take the time to accurately identify the product.

Earlier this week I stopped to purchase lunch at... small regional grocer with no self checkout. I had 4 items, two weighable and two non weighable. I watched the cashier put my two weighables on the scale so fast then quickly take a gun scanner and scan the other two items without actually touching them. She then told me "confirm the amount" as she threw all of my purchases into the bag. I saw a total of $0.65 on the screen. Wrong. Way wrong. She charged me for only one item and basically no weight on one of the weighables. She corrected it and I paid them the amount I should have, but had I not been paying attention I'd have gotten about $7 of stuff for 0.65 due to a careless rushing cashier. Had I gone through a self checkout this would not have happened.

'storewanderer'

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