Is self-checkout tech the answer for DSW and other retailers facing associate shortages?
Source: DSW promotional video

Is self-checkout tech the answer for DSW and other retailers facing associate shortages?

Designer Brands Inc., the parent company of DSW, reported in May that its first quarter performance marked the first time the shoe retailer had turned a profit since the pandemic disrupted its business last year. With business on the rebound, however, DSW has not been able to attract the number of associates it needs to staff its 500+ U.S. locations. This situation, not unusual in retailing at the present time, is reportedly behind the chain’s decision to test self-checkout technology at some stores.

Karen Cho, senior vice president of human resources at Designer Brands, told CNN that the company began testing self-checkouts last year in response to associates’ COVID-19-related health and social distancing concerns but that challenges recruiting employees has provided additional impetus for the pilot.

DSW has been offering hiring bonuses and expanding benefits to primarily attract part-time associates as most of the chain’s full-timers continued working throughout the pandemic. Ms. Cho said that the company has “relatively lower hiring needs,” but that recruitment has been tougher than in recent years.

Self-checkout technology is typically positioned by retailers as a consumer service at the front end of stores that enables associates to be deployed in other areas more valuable to shoppers. The labor savings aspect, which is typically pitched as one of the benefits to stores that deploy the technology, may become more important if current labor challenges persist.

Around 649,000 retail workers gave their notices to employers in April even as the industry sought to staff up in response to the rebounding economy. Amazon.com, Costco and Target have raised their starting wages to $15 an hour, but retail is still seen by many as offering low paying jobs with difficult hours. Retailers have raised hourly wages, offered bonuses and improved benefits, including extending them to part-timers in an effort to boost recruiting.

Best Buy and Walmart are among chains that have shifted a greater percentage of their workforce to full-time while investing in employee training and career development for associates.

Walmart is giving more than 740,000 associates free Samsung smartphones this year to support the launch of an app designed to help make it easier for them to do their jobs. The devices can also be used for personal use outside of work hours.

BrainTrust

"Self-checkout could be an option in a few stores to test the market but it is not a long-term solution."

Liza Amlani

Principal and Founder, Retail Strategy Group


"Self-checkout is generally not a pleasant experience for consumers, so while it may close the worker shortage gap it won’t delight buyers and will eventually phase out."

Natalie Walkley

Sr. Director, Marketing @ Optoro


"Look to Japan, which has turned to automation in response to labor shortages and I think you will find the answer is YES."

Nikki Baird

VP of Strategy, Aptos


Discussion Questions

DISCUSSION QUESTIONS: Do you see current labor challenges hastening the expansion of self-checkout technologies in retail stores? What do you see as the most effective and sustainable path to addressing retailers’ staffing shortages and, at the same time, profitability concerns?

Poll

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Melissa Minkow
Active Member
2 years ago

I do think more retailers are going to roll out self-checkout as an attempted solution to the labor challenges, but I don’t think self-checkout is the right solution. Self-checkout already struggles to prove more efficient, and when it serves as a replacement for sales associates all the knowledge possessed by staff is lost. Retailers would greatly benefit from focusing more on the value missing because of the labor shortages, rather than the operational inefficiencies created. Providing better perks and culture to employees, investing in allowing consumers to feel better informed when making purchase decisions, and raising wages mean everybody wins – employees are happier, culture is strengthened, and shoppers experience a more positive environment.

Rick Watson
2 years ago

Unless you are at a discount store, most consumers will not be willing to do this. I think this is fraught with a lot of challenges.

Ananda Chakravarty
Active Member
Reply to  Rick Watson
2 years ago

Rick, I disagree with you on this issue – this Forbes article highlights the acceptance rates of consumers. This is a familiar technology and, more important, customers are expecting some level of self-checkout at most retailers, especially those with many terminals or high traffic. Customers want the option, and it will become part of the checkout mix of manned, self-checkout, hybrid, and even Just Walk Out tech in the store.

David Weinand
Active Member
2 years ago

In short, yes. The habits formed over the last 18 months have contributed to a desire for more contactless buying journeys from shoppers. Combine that with a massive labor shortage at the associate level and it sets up for technology to come and fill that gap. What I’m confounded by is that where have these associates gone? I understand the unemployment benefit rationale from 2020 but that is over – so where are these employees going to make a living? I get the sense that a certain percentage will be knocking on retailers’ doors in Q2 2021.

DeAnn Campbell
Active Member
Reply to  David Weinand
2 years ago

I agree with you David that the hiring wheel will eventually come back around. If retailers can up the pay rate a little and, more importantly, create a more fulfilling work environment, workers will come back.

Ken Morris
Trusted Member
2 years ago

Self-checkout will be an essential response to the labor shift. Tech has a whole bag of tricks for this, including leveraging RFID. The goal is to turn shoppers into cashiers. Tag all possible items with RFID and enable customers to pass through an RFID reader station and walk out.

Another option (or in conjunction with RFID) is to turn shoppers’ phones into self-checkout devices. This approach is riskier than RFID for LP purposes, because it’s just using the honor code. Still, it can offer shoppers price lookup and potentially item location in the aisles — both labor-saving features in their own right.

With RFID, retailers can move to authenticated returns via serialized inventory. It also enables real-time inventory management for BOPIS and BOPAC. There are labor-saving implications for all of this.

We are at an inflection point with the increased cost and decreased availability of labor meeting the decrease in the technology price of RFID. That’s why RFID use cases that have not been leveraged are now front and center. Faster self-checkout and traditional checkout, better LP, faster returns, simpler markdowns, self-service fitting rooms, etc. The time is now. (Full disclosure, we’re doing a comprehensive white paper on RFID in retail as we speak.)

Richard Hernandez
Active Member
2 years ago

While I have seen more self checkouts in stores other than supermarkets, I don’t see this becoming the norm. Businesses are going to have to offer perks other than increased pay to get people to come back to work.

Paula Rosenblum
Noble Member
2 years ago

I think this is a terrible idea. If you want people to go to stores, you have to make it convenient and actually create a differentiated experience.

The other thing that we forget is a lot of shoppers don’t like self-checkout because they see it as a job killer. Then there’s the matter of feeling resentful over doing a retailer’s work for them.

As I said — a terrible idea.

Bob Amster
Trusted Member
Reply to  Paula Rosenblum
2 years ago

Paula, could you please tell us how your really feel about this? 🙂

Paula Rosenblum
Noble Member
Reply to  Bob Amster
2 years ago

I am truly just repeating what I have heard shoppers say. My own opinions are well-known and didn’t have to be said here.

Cathy Hotka
Trusted Member
Reply to  Paula Rosenblum
2 years ago

Self-checkout at a company that didn’t have it pre-pandemic would scream “people don’t want to work here.” Huge mistake.

Venky Ramesh
2 years ago

Increasingly larger retailers are adopting self-checkout and as a consumer, the biggest benefit I see is that of shorter waiting time. E.g., Walmart has some 10 self-checkout terminals with a single line rather than people waiting in multiple lines for each manned terminal. Based on Queuing Theory 101, mathematically, we know waiting time goes down in a single waiting line system compared to a multiple waiting line system. Now one can argue about if there is even a need for a waiting line, which is fair. Amazon Go, Hudson Non Stop, Amazon Fresh cart check out and even Walmart+’s benefit of scanning using their app is testimony to the fact that newer line-busting technologies are on the rise.

Suresh Chaganti
Suresh Chaganti
Member
2 years ago

Self checkout has been operational in big box stores and large regional grocery stores for a while now. The uptake is slow in low foot traffic stores like specialty ones, or even department stores like Macy’s.

This is yet another miss by retail stores. By lagging on tech investments, they have backed themselves into this position, where it is impacting sales and customer service because of labor shortages.

Ananda Chakravarty
Active Member
2 years ago

Self-checkout (SCO) will continue to grow rapidly, labor shortage or not. Economically, the cost savings from SCO are tremendous and become a key part of the mix of checkout services for most retailers. For companies like DSW, associates are needed to engage customers for the right experience in the store. And for relatively small basket quantities, SCO is a perfect solution. Retail labor remains the key SG&A cost for most retailers. Reducing these costs with longer term, longer lasting investments will enable retailers to establish the right mix of associates and manned registers to SCO for a profitable balance. Expect to see rapid growth in this space, not just for labor availability but for labor costs.

Bob Amster
Trusted Member
2 years ago

Typically, retailers will implement self-checkout in order to reduce labor costs over the medium to long term and to expedite the checkout process. Labor shortage is a present problem and not something that can be fixed overnight with self-checkout. If the trend is expected to become a matter of fact long term, then self-checkout will mitigate the problem.

Liza Amlani
Active Member
2 years ago

Self-checkout could be an option in a few stores to test the market but it is not a long-term solution. Humans crave interaction, especially when buying apparel and footwear. There is still that customer that would prefer to get in, get what they need, and get out. But a retailer has such a huge selection that a sales person can only help the customer buy more.

Self-checkout is not the answer to solve the workforce shortage. You may need fewer associates but you need the right brand ambassadors on the shop floor who have tremendous product knowledge and customer service skillsets.

Nikki Baird
Active Member
2 years ago

Look to Japan, which has turned to automation in response to labor shortages and I think you will find the answer is YES. However DSW has some particular challenges that I will be interested to see how they work around. The cashier checks every box to make sure that the shoes match the box (and the barcode/price). They also check to make sure both shoes are the same size. DSW is either giving up on these practices, or I have no idea how you don’t still end up with associates doing most of the heavy lifting on the transaction – computer vision is good, but I don’t think it’s quite that good yet!

Mohamed Amer
Mohamed Amer
Active Member
2 years ago

Forward-thinking companies are rethinking the value creation levers in their business models. Retailers realize that in the main, checkout is a low value add and, at times, a high friction point in their models. Helping customers find the right product, solve a problem, and counter purchase doubts are a better use of people in a process that can be automated. There are always exceptions, as in the Trader Joe’s model, where the checkouts are fast, friendly, and used to reinforce the brand’s values. For the rest, automate what you can and leverage your trained people in the sales conversion process.

Jeff Weidauer
Jeff Weidauer
Member
2 years ago

Self-checkout has never been a solution – only a stop-gap. Retailers like to believe it is a solution, even though it’s expensive, increases shrink, and creates a different set of problems. Retail has a reputation for low-paying, high-turnover jobs. Changing that reputation will take time and a massive investment in employees.

DeAnn Campbell
Active Member
2 years ago

Self-checkout is all fun and games until something doesn’t work properly, then you’ve lost that customer for good. DSW might be able to succeed at adding this as a supplementary checkout lane to stretch existing staff because their customers are typically buying less than three items at one time. But retailers with higher purchase quantities are only adding to their customers’ frustration by adding complexity and time to the customer’s purchase experience. I for one don’t appreciate having to give free labor to a retailer and still paying full price for my purchase. I feel for retailers right now as they struggle to hire sufficient staff, but technology is an assist, not a replacement if you want to maintain customer loyalty. Shoppers don’t want an online purchase experience inside a physical store and if this is the only option available they might as well stay home and shop online – increasing the likelihood they end up at a competitor.

Neil Saunders
Famed Member
2 years ago

Self-checkout is a partial answer and should be an option for consumers who wish to use it. However retailers – especially in non-food – will still need manned registers simply because some consumers expect and want them. The bottom line is that stores are about experience and a big part of the experience is interacting with other people. Take that away and you dehumanize part of the experience.

Jeff Sward
Noble Member
2 years ago

I already helped myself with my selection and fitting. Self-checkout seems like a no-brainer here. It is certainly easier than a shopping cart full of fresh produce.

Bob Phibbs
Trusted Member
2 years ago

Am I on the schedule today? I hate self-service as a way to push off a business’s own shortcomings. Shorten your hours, manage your processes better but don’t expect me to do your work. #customersarenotyouremployees

Natalie Walkley
Reply to  Bob Phibbs
2 years ago

I’m with you. I HATE self checkout.

Ryan Mathews
Trusted Member
2 years ago

Self-checkout technologies are temporary Band-Aids on the hemorrhaging artery of the labor shortage. They will help staunch a little of the bleeding, but they can’t conceal the wound, let alone mend it. The problem is that today people in the typical retail labor pool may be able to make the same – or in some cases more – money not working they could if they returned to work. This is, in a sense, the chickens coming home to roost. Years of underpaying retail staffs, forcing people to work split shifts, and viewing floor-level workers as fungible haven’t built either much trust in employers or much respect for retail jobs. What retailers should be considering is the quality – rather than just quantity (FTEs) – of labor. Fewer, better-trained, more loyal consumers are likely to work for effectively and efficiently reducing the need for technological patches.

Natalie Walkley
2 years ago

Self-checkout is generally not a pleasant experience for consumers, so while it may close the worker shortage gap it won’t delight buyers and will eventually phase out.

Raj B. Shroff
Member
2 years ago

Labor challenges might hasten the expansion of SCO. However it is pretty much the norm now at mass. I do think providing the choice of SCO is necessary for parity of expectation.

As for the most sustainable path, move staff to where they add the most value in terms of creating an experience-oriented environment, which is out on the floor; it’s not at checkout. Or station one employee near SCO to help aid multiple shoppers.

By the time people decide what they want products and are ready to buy, they don’t need to wait in line to be serviced by a human — those days are gone. And if technology can replace a non-value added function, invest, test and learn how viable and scalable it is.

Doug Garnett
Active Member
2 years ago

The pushback retailers are getting in their search for associates is healthy. Unfortunately, the idea of replacing their need for associates with machines is ill founded. It’s not surprising but it’s ill founded.

Retailers have been managing front-line employees from afar for far too long. They have imposed demeaning processes like abusive survey use on those employees for far too long.

Technology is not the answer to competitive strength — it can never be. I discuss management’s preference for tech over humans — and the lost competitive advantage — more in this blog post: “Are Robots a Way to Avoid Critical Business Questions.”

Craig Sundstrom
Craig Sundstrom
Noble Member
2 years ago

It’s probably only a slight exaggeration, if any, to say that every technology developed in the past hundred years has acted to increase automation/self-service; in short, it’s been a very long process, and while labor shortages will certainly not reverse that. I don’t think they’ll accelerate it much either; I see very few businesses anymore where the cashier is a dedicated position — all too often one has to seek them out somewhere in the store performing other tasks — so unless a store is to be 100% unstaffed, I think we’re nearing minimal levels.

David Naumann
Active Member
2 years ago

Consumers are getting more comfortable with self-checkout, especially as many were gravitating to contactless store interactions during the pandemic. DSW and other discount stores are ideal for self-checkout in some respects because consumers don’t expect full-service assistance at discount stores. However, as some panelists pointed out, shoe sales have some complexities that make self-checkout more difficult such as making sure sizes match and the shoes are in the correct box. Without proper controls, orphaned shoes and “theft” could become a big issue with self-checkout at shoe stores.

Rachelle King
Rachelle King
Active Member
2 years ago

Certainly, self-checkout can help bridge some of the current labor shortages. I, for one, would not miss the long checkout lines at DSW and would welcome self-checkout, with or without the labor shortage.

Still, retailers have only addressed surface level issues with labor shortages; more money; more benefits and making part-time workers feel like human beings are right things to do but you can’t put a price on safety. What have retailers done to increase in-store safety and the safety of their employees–particularly, and sadly, from disturbed customers? It wouldn’t be a stretch to say that some bartenders are more protected than retail employees today. If retailers would address this issue vs just throwing money at it, then maybe tides might turn.

Rich Duprey
Rich Duprey
2 years ago

This is the result of a two-fold issue: employees demanding higher wages for low- and no-skill jobs and the government paying people not to work.

We’re already seeing it in the fast-food industry with the rise of automation and robotics replacing the need for expensive, but unskilled labor, and now we’ll see it more often in more retail settings. Self-checkout and just-walk-out technology need only minimal staffing to generate the same, if not greater return.

It also shouldn’t surprise anyone that the government providing “unemployment” benefits that are greater than the wage someone would make at their job is going to result in people not looking for work. You reap what you sow and businesses will turn to technology to replace these workers and it is the workers who will be worse off for it in the long run.

Allison McGuire
Member
2 years ago

Self checkout is a great help to many retailers, especially those faced with staffing issues and at risk of closing their doors. As long as it’s a choice and not the only method, I see no issue with bringing in options. Personally, I prefer self checkout and I certainly don’t think poorly of retailers that use it. I say let’s give retail every opportunity to thrive as we get through this next phase of recovery.