Self-checkout has become a polarizing part of retail. Retailers want to use it because it allows them to cut down on labor costs, but that also comes with higher levels of theft.
Consumers are mixed on the concept as well. Some people like the self-service option while others miss having an employee scan their items. In addition, some shoppers are happy to not have to talk to a checkout clerk while others miss the interaction.
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A number of retail chains have made the decision to cut back on self-checkout. Target (TGT) , for example, has limited self-checkout to 10 items or less and has cut the hours it's available in some stores while removing it from others.
Self-checkout presents a challenging dilemma for retailers. It's easy to see why they would want it as labor costs have increased and companies are looking for ways to cut costs. But it's also easy to see the downside as shrink — losses from theft and more — increases when customers use self-checkout.
Consumers ideally want the option to use self-checkout or choose a traditional checkout. More companies, however, are pulling back on self-checkout, and one of the biggest retail chains has made the decision to mostly eliminate self-checkout.
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Dollar General makes big self-checkout changes
Dollar General CEO Todd Vasos shared that his company plans to make three major changes to its self-checkout at over 14,000 stores during its fourth-quarter earnings call.
"Although adoption rates for self-checkout have been high, we believe there is truly no substitute for an employee presence at the front end of the store to greet customers and provide excellent customer service, including at checkout. Importantly, when choosing our self-checkout solution, we implemented a product that is convertible from self-checkout to associate-assisted checkout," he said.
That's a change the company has begun to make.
"To that end, we have begun immediately converting some or all self-checkout registers to assisted-checkout options in approximately 9,000 stores. This is intended to drive traffic first to our staffed registers, with assisted-checkout options available as second or third options to reduce lines during high-volume times," he added.
Dollar General limits self-checkout transactions
Vasos detailed the other changes the company made during the call.
"Our second course of action will apply to all remaining stores with self-checkout, where we have begun limiting self-checkout to transactions consisting of five items or less," he said.
Some stores, however, will also be losing self-checkout as an option entirely.
"And finally, over the first half of the year, we plan to completely remove self-checkout from more than 300 of our highest shrink stores. Collectively, we believe these steps are in line with where the customer wants us to be, which includes increasing personal engagement with them at the store," Vasos shared.
The CEO believes that self-checkout changes, along with other moves, will help the discount chain limit its shrink.
"Beyond our changes to self-checkout, we are also executing on a variety of other actions to reduce shrink this year, including inventory reduction efforts, where we see additional opportunity in 2024," he said. "SKU rationalization, additional shrink incentive programs for our store managers to encourage and foster a greater sense of ownership; and the utilization of high-shrink planograms, whereby we will remove certain high-shrink items from high-shrink stores to target the greatest opportunity for improvement."
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Vasos does acknowledge that the changes will take time to implement.
"While we anticipate a continuing headwind from shrink early this year, we believe our actions will have a significant mitigation impact in the back half of the year and into 2025. Overall, we believe these actions in our stores will drive improvements in customer satisfaction, including customer service and on-shelf availability and convenience; enhance the associate experience in our stores, including improved employee engagement and retention; and drive improvements in financial results, including sales and shrink," he added.
Dollar General shares closed at $136.91, up 7% on the day. The jump trimmed the stock's loss for May to 1.6%. For the year, the shares are up 0.7%.
The stock was a high-flyer during the pandemic and the inflation surge afterward. It reached as high as $260 in October 2022.
