Tag: theft

OM in the News: Self-Checkout Era May Be Ending As Major Retailers Shut It Down

 

 

For over a decade, self-checkout was the retail future, speed, convenience, and cost savings. However nine of the largest retailers in the world are kicking these systems to the curb in an unbelievable reversal, reports MSM.com (June 30, 2025).

The numbers are brutal. Theft at self-checkout can be up to 65% higher than at regular lanes, with shrinkage hitting 3.5% of sales compared to just 0.21% with human cashiers. One study found 15% of users admit to stealing at kiosks, and 44% say they’d do it again. That adds up to over $10 billion in losses for food retailers each year. It’s not just career criminals. With no one watching, people blur the lines, blaming tech errors or telling themselves it doesn’t hurt anyone. With self-checkout transactions 16 times more likely to involve theft, stores are realizing the convenience comes at a staggering cost

As retailers like Dollar General and Walmart scale back self-checkout, the industry seeks a new approach balancing efficiency with personalized service. Self-checkout may save on payroll, but it comes with theft, tech breakdowns, customer frustration, and weakened brand loyalty.

Dollar General has taken one of the boldest steps away from self-checkout. Last year, the chain yanked self-checkout from 12,000 of its 20,000+ stores, dropping its earlier push toward 100% self-service locations. Its CEO  blamed “shrink,” or inventory loss, calling self-checkout the company’s biggest obstacle. Remaining kiosks now cap purchases at five items.

Five Below quietly pulled self-checkout from its highest-risk stores, revealing a tough truth, automation doesn’t work everywhere. Returning to staffed lanes did more to curb theft than adding extra security. The data showed that some neighborhoods saw massive spikes in shoplifting when kiosks went unmanned. So the company tailored its checkout systems based on local risk.

Walmart is testing a new tactic: limiting self-checkout access to Walmart+ members in select stores. It’s a bold shift that makes automation feel more like a premium perk than a standard option. The move helps reduce theft by tying kiosk use to verified customer accounts.

Amazon’s grand vision for cashierless shopping hit a wall last year when it dropped “Just Walk Out” from its Fresh grocery stores. The tech, which was supposed to track purchases automatically, relied heavily on human reviewers, over 1,000 people in India checking transactions manually. Some 70% of purchases needing intervention.

Classroom discussion questions:

  1.  Do you think self-checkout is going to fade away?
  2. What technology is needed to improve the system of self-checkout?

 

Video Tip: Self-Checkout Lines–Growing or Shrinking?

Is the honeymoon period with the self-checkout register officially over? What once was a convenient alternative, quickly became the only option in many retail stores, as it was sold as an efficient, cost cutting solution meant to move customers in and out of stores quickly.

No doubt the age of the self-checkout register, which began in the 1980’s but exploded in the 2000’s in supermarkets and convenience stores is here to stay. But now even some of the largest retailers are re-evaluating the actual use of them. This includes chains like Booths supermarkets in the United Kingdom as well as Walmart, Wegman’s, Five Below, and Costco in the U.S.

Coping with criticisms from annoyed customers is one key reason. Another one is theft by way of checking oneself out of the store. This is occurring, either directly or indirectly, as thieves know exactly how to use checkouts. For example, Costco had discovered that customers who were not members of the club were using membership cards that were not theirs to ring up their own purchases.

Costing large retailers and small retailers their profits is typically the trigger for stores to change their ways. In the case of the big box stores like Costco, they can absorb the “shrink,” known as the loss of inventory. They still have the bandwidth to figure out a better approach to utilizing self-checkout registers.

A study of stores in the U.S., Britain, and some other European countries, discovered that shops that offered self-checkout suffered a 4% loss, which is more than twice the rate in the retail industry. This type of loss is the reason Booth supermarkets announced “that it is going back to old-fashioned human beings to check people out,” according to CNN Business in this 2.5 minute video. It is also the reason Walmart removed these registers from some stores in New Mexico as well as modified the self-checkout lanes in other stores to accommodate more employee attendees.

Classroom discussion questions:

  1. What are the advantages and disadvantages of retail self-checkout?
  2. How does this differ from self-checkout in restaurants and hotels?

OM in the News: Inventory “Shrinkage” on the Rise

Retailers regularly conduct a physical count of their inventory and compare it to what is recorded on their books. The difference is known as shrinkage, a broad term that encompasses not just internal and external theft but also process failures that could lead to inventory being lost or recorded inaccurately.

Shoppers now face items locked in glass cabinets in NYC and other cities

Target just announced that it expected the shrinkage problem to reduce gross margins for the year by over $600 million. TJX and Macy’s also reported higher shrink rates. The shift in shoppers returning to stores after a surge in online buying during the pandemic is partly responsible, writes The Wall Street Journal (March 13, 2023). More theft happens in stores, as opposed to warehouses that fulfill online orders. But a never-seen-before jump in organized retail crime in certain U.S. cities is also a factor.

External theft, which includes organized retail crime in addition to regular shoplifting, has become a bigger piece of the pie. Organized retail crime, involving rings that steal from stores in bulk and then peddle the goods online, cost retailers $720,000 for every $1 billion in sales. Seven years ago, theft by employees was the largest category of loss by retailers. Now, it’s external theft.

Retailers are combating the problem by adding security guards and cameras to stores, locking up goods and making use of facial recognition software to help identify repeat offenders. Macy’s is using radio frequency identification (RFID) tags to better track inventory, adding more security personnel to stores and securing high-end brands with locked cables and sensors.

Retailers and shoppers say there is a fine line between deterring criminals and annoying honest customers. “Retailers are locking up everything from shaving cream to soap,” said one customer. “These should be things that are quick and easy to grab and go. But now I’ve got to find an employee to unlock them for me.”  Some retailers agree they may have gone too far in their theft-prevention measures. Macy’s used to keep German shepherds in its Manhattan flagship for security sweeps, but discontinued the practice in 2015.  NYC police now ask shoppers to take off their face masks before entering stores, a measure intended to help them better identify criminals. The plea came after four men stole  $1.1 million of goods from a jewelry store.

Classroom discussion questions:

  1. What tools does Chapter 12 suggest stores use to control shrinkage?
  2. What is causing the theft increase?

OM in the News: The Impact of Inventory “Shrinkage”

A massive rise in theft is chipping away at an advantage brick-and-mortar retailers have over e-commerce companies: the ability to touch the merchandise, reports The Wall Street Journal (Dec. 24-25, 2022). Brick-and-mortar retail’s indisputable edge over e-commerce is that consumers can get what they want immediately, and can touch and feel the product before buying it. Rising theft—and stores’ measures to prevent it—could dull that edge.

Products displayed in locked security cabinets at a Walgreens in San Francisco

Shrink—an industry term for loss in inventory—amounted to 1.4% of retail revenue in 2021, or $94.5 billion. Most of that shrink is caused by theft. Walmart’s CEO said that if the retail theft issue is not addressed over time, “prices will be higher and/or stores will have to close.”

Covid-19 has worsened the risk of crime, partly because labor shortages have made it difficult to fully staff stores. Moreover, supply-chain shortages made certain products more susceptible to theft because they fetched high value in secondary markets. Supply-chain delays during the pandemic also meant more cargo was sitting around, leaving it more vulnerable to theft.

Shrink can have a substantial impact on already thin retail margins. At Dollar Tree, shrink shaved 1.7% off operating margins this quarter–substantial for a firm whose operating margin was 5.5% that same period. Drugstores are especially susceptible because they are located and designed for convenience. It’s a quick in, quick out layout with valuable electronics, over-the-counter drugs, cosmetics and beauty care, which are desirable and mobile items. Walgreens estimates that shrink amounts to 3.25% of the company’s revenue.

Mitigation measures can range from the most basic physical ones—such as locking up items—to more technologically sophisticated ones, such as video surveillance with facial recognition. Some measures are designed to make the product less valuable for theft. These include ink tags, which stain clothes when removed, and products that must be activated by the cashier in order to be used. Some cordless power tools will only start functioning if the firmware is activated at the point of sale. More subtle measures include placing high-value items further away from the entrance or having employees stand close to those products.

Classroom discussion questions:

  1. What do some retailers (like Costco and Sam’s Club) do to reduce shrinkage?
  2. Discuss some techniques to deal with this issue? (Hint: see “Control of Service Inventories” in Chapter 12 of your Heizer/Render/Munson text)