TheStreet
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Give someone a chance to steal along with plausible deniability about their actual intentions and many people take that chance.
Self-checkout allows companies to either save on labor or transfer that labor to elsewhere in their stores. Using it, however, puts the onus of scanning items on customers and mistakes can be made either intentionally or by genuine accident.
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The problem is that it’s really hard for retailers to judge intent. Did a consumer attempt to scan an item and it did not go through? Or did they fake scanning it in order to steal the item?
In many cases, the theft is intentional and the shopper will do it again.
“While 95.9% of consumers have used self-checkout machines, statistics show theft increases by up to 65% at self-checkout compared to a traditional checker,” according to statistics shared by Capital One.
Self-checkout makes it easy to steal and get away with it, or at least to not get arrested if you get caught. That has made self-checkout retail theft something that’s too tempting for many American shoppers to pass up.
“15% of consumers admit to using self-checkout to steal; 44% of them plan to re-offend,” according to the Capital One report.
It’s a situation that has caused some large retailers to take clear action.
Five Below executives have called shrink, part of which is shoplifting, a problem.
Image source: Shutterstock
Five Below makes major self-checkout cuts
Some major chains, including Walmart (WMT) and Target (TGT) , have taken a mixed stand on self-checkout. Those two giant retailers have cut back or even eliminated self-checkout in some markets, but they have not given up on the idea.
Five Below (FIVE) , a national discount retailer where most items sold cost less than $5, is the latest large retail chain to make major self-checkout changes. CEO Joel Anderson talked about his company’s shrink-related moves during its fourth-quarter earnings call.
“While we know shrink is industrywide and a societal problem that accelerated over the last year, I want to be specific about what we are doing at Five Below regarding the 2023 shrink results that we observed. We tested many shrink mitigation initiatives late in Q3 into Q4, including product-related tests, front-end initiatives, and guard programs,” he said.
The company landed on one key change.
“The most significant change we made across most of the chain was to limit the number of self-checkout registers that were open while positioning an associate upfront to further assist customers,” he added.
Five Below now has an associate assistant at its remaining self-checkout lanes in all of its stores.
“In addition, in our high-shrink stores, the primary option for checkout is more of the traditional over-the-counter associate checkout. We expect to have 75% of our transactions chainwide assisted by an associate with a goal of 100% in our highest-shrink, highest-risk stores to be fully transacted by an associate,” Anderson shared.
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Dollar General made self-checkout changes
Dollar General (DG) , a discount chain with more than 20,000 locations nationwide, has made large changes to combat its own shrink problems. That’s something CEO Todd Vasos talked about during the retailer’s first-quarter earnings call, where he acknowledged that self-checkout theft was not the only factor in increased theft.
“Shrink continues to be the most significant headwind in our business, and we are deploying an end-to-end approach to shrink reduction across the organization, including efforts in our supply chain, merchandising, and within our stores,” he said.
The chain’s shrink-prevention efforts do include major self-checkout changes.
“To help combat issues around shrink, our supply chain teams are primarily focused on ensuring deliveries are on time and in full and our merchants on reducing the amount of inventory we carry. Within our stores, we are focusing on delivering a more consistent front-end presence, broaden the reach of our high-shrink planograms, which include the removal of high-shrink SKUs and the elimination of self-checkout in the vast majority of stores,” he added.
Dollar General has removed self-checkout in about 12,000 locations and plans to continue the effort to remove them.
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The chain’s stock has dropped by about 6% so far in 2024. While shrink may play a role in that, higher costs and customers opting for cheaper items likely played a larger role. Dollar General’s same-store sales increased by 2.4% in the first quarter.
Five Below’s stock has been hit much harder, dropping just over 50% year-to-date. That drop may be impacted by shrink, but the company forecasts a 3-5% drop in same-store sales for its fiscal 2024. Same-store sales dropped by 2.4% in the first quarter.
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