With retail shrink resonating as one of the biggest concerns these days for convenience and grocery stores, a new report suggests that the growth of self-checkout is making matters worse.
While acknowledging the role of organized crime, recent research from checkout-technology company Grabango shows that self-checkout machines are a significant driver of shrink, with losses amounting to 3.5% of sales, or more than 16 times more loss than traditional cashiers.
Retail shrink costs U.S. retailers $100 billion a year. Shoplifting and employee theft account for two-thirds of this amount, the report states, while internal process/control errors account for most of the rest.
At self-checkout units, partial shrink is the most common and costly form of shoplifting, where a shopper pays for some of their purchase, but not the full amount. For example, a shopper might have three cans of soda but only scan two of them, or might type in a code for a lower-priced item.
To evaluate shrink rates for self-checkout systems, Grabango used computer vision to analyze nearly 5,000 retail transactions, comparing items the shoppers picked up during their shopping trip with transaction data to see what was actually purchased.
This analysis revealed self-checkout led to a shrink rate more than 16 times higher than traditional cashier lines. Nearly 7% of self-checkout transactions (6.7% ) had at least some amount of partial shrink compared to 0.32% with cashiers. On a revenue basis, the analysis suggested a shrink rate of 3.5% for self-checkout machines versus only 0.21% for conventional cashiers, according to the results of the analysis.
According to FMI, self-checkout accounted for just under 30% of total transactions in 2022. Based on a market size of nearly $1 trillion and a partial shrink rate of 3.5%, self-checkout machines cost food retailers more than $10 billion in lost profits annually, Grabango said.
Berkeley, California-based Grabango, of course, uses the results as a pitch to invest in its checkout-free, computer vision technology, which it says "eliminates self-checkout shrink by accurately tracking what shoppers pick up and charging them the exact amount they owe."
“Grabango’s checkout-free technology uses computer vision to eliminate shrink," said Grabango Founder and CEO Will Glaser. "Automated systems don't lie, don't steal and don't discriminate.”
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