9 Cost and Benefits

Automation in services is all around us.  We can visit the ATM and complete our transactions much faster than speaking to the bank teller.  Same thing at the airport where we can get our boarding pass and check our bags at a friendly kiosk without ever speaking to a human.  No where is service automation more obvious than the self-checkout lanes of our grocery store.  Self-checkout provides an efficient way to scan your goods, pay for them, bag them yourself, and exit the store without much hassle.

The benefit to the retailer is the ability to process customer transactions efficiently with speed.  Faster sales mean more sales in a time period resulting in increased revenue.  The self-checkout automation releases employees to do other value added tasks.  Decreased overhead is also a benefit as you can have one employee serve multiple lanes.  Thus, retailers with higher volume sales can receive greater return on investment with the increased efficiency.

There are of course cost to using self-checkouts.  A self-checkout Kiosk averages around $30,000(Dworski).  They also can increase customer frustration.   A 2021 survey from Raydiant Management found that 67% of consumers stated they had an autonomous checkout machine fail on them.  However, the biggest drawback of self-checkouts is theft.  A study found that self-checkout lanes had a 4% loss rate, double the industry average, due to customer error and outright shoplifting theft (Meyersohn).

Intentional shoplifting and customer errors, known as “shrink”, has increased since the pandemic.  Many are starting to agree that self-checkout processes are a contributor to shrink.  Costco management in 2023 stated their end of year shrink increased “in part we believe due to the rollout of self-checkout.”.   Stores can try to remedy this, however increased security procedures such as adding weight scales and other anti-theft measures can decrease the customer experience.   Some businesses have simply decided it may be better to return to humans ringing up customers as the cost simply outweigh the benefits.

Questions:

1. What has been your experience with self-checkout kiosks? Do you choose the self-checkouts or the regular human checkout? Why?
2. Describe two times where/when you encountered a self-check out kiosks transaction that would have been more effective if a human was there instead.  Explain your reasoning.
3. Do some research.  What are the costs and benefits of pursuing shoplifters for prosecution?  Should business owners account for this in the cost/benefit decision as to whether to install self-checkout kiosks?  Explain your answers.
4. Describe a situation where you used cost benefit analysis to make a decision.

Sources:

A Grocery Chain Just Fired Its Self-Checkouts – The New York Times (nytimes.com)   https://www.nytimes.com/2023/11/10/business/self-checkouts-vs-humans.html

Dworski, Brett. “Is self checkout worth the investment?  C-Store Dive Dec 2022  https://www.cstoredive.com/news/is-self-checkout-worth-investment/638812/

Meyersohn, Nathaniel. “Walmart, Costco, and other companies rethink self-checkout” CNN.com Nov. 13, 2023  https://www.cnn.com/2023/11/13/business/self-checkout-stores-shopping/index.html