Why retailers are rethinking self-checkout

The discount retailer Dollar General is planning to spend an extra $50 million to staff up its stores before the end of the year — stores where it had been cutting its labor costs by leaning heavily on self-checkout stations in recent years. 

In an earnings call last week, CEO Todd Vasos told investors the company had started to rely too much on the technology and it “should be using self-checkout as a secondary checkout vehicle, not a primary.” It’s the latest in a growing list of retailers — including Walmart, Target and Costco — that are pulling back on the self-service option.

To be clear, some customers prefer self-checkout. It can be quicker and more convenient, says management professor Rita McGrath at Columbia.

“But the dilemma is, eventually you get to the end of what you can do in an automated way, because that has to be very routine, right?” she said.

But it doesn’t take much to trip up the automation.

“I mean, it’s a robot it doesn’t know what it’s doing,” she said. “Please rescan, the bag isn’t there? Did you put it in your bag? By now I’m frustrated.”

And that frustration is becoming routine, as more parts of the customer experience become automated, says analyst Craig Le Clair at Forrester.

“The pandemic pushed us down a digital transformation path that was so accelerated, that, there will be kind of a tech-lash,” he said.

What started as a necessity due to COVID risk turned into a cost-cutting strategy in the face of rising labor costs.

But before companies substitute human workers with self-service kiosks or chatbot customer service agents, there’s a question they should be asking, says Zeynep Ton, a professor at MIT Sloan School of Management.

“Can this improve value for the customer? And would this improve productivity for employees and make their jobs better so that they can serve the customers much better too,” she said.

Ton says it’s often hard to quantify the true cost of frustrated customers and overburdened staff. But one loss that’s easier to add up is theft. Ton says that’s estimated to be up to five times higher at self-checkout stations.