1. AUTOMATION IN THE SUPERMARKET INDUSTRY 1
Will the development of technology, specifically regarding automation in the supermarket
industry, positively or negatively affect the business?
Keith Bennett, James Flanigan, Bruno Garcia, Kiarra Weaver
George Mason University

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Abstract
The main idea of this paper is to inform Retail Supermarkets to reassess their implementation of self-
checkout devices. While they have flaws, such as items not saleable at self-checkout lanes, loss of sales
and public confusion, those issues have readily available solutions. Furthermore, the positive outcomes
for self-checkout devices include reduction of labor cost, and investing in the new tech savvy generation
. Costco has done just that very thing, experimenting with a new self-checkout system. To abandon the
devices altogether will be suboptimal..

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Will the development of technology, specifically regarding automation in the supermarket
industry, positively or negatively affect the business?
In 2011, Albertson’s LLC, a grocery chain of 217 stores, announced it would be removing self-
checkout devices from all of their locations (Fierce Retail, 2007). Greg Buzek, an analyst of those self-
checkout systems,has posited a set of reasons,including the increasing numbers of items not saleable at
self-checkout, and general public confusion when using the devices (Fierce Retail, 2007). In addition,
Supermarkets that adopted the self-checkout devices are also facing loss of sales. Such reasons have made
Supermarket chains like Albertson’s LLC remove self-checkout devices from their locations. Retail
Supermarkets should reassess their implementation of self-checkout devices. While they have flaws, those
issues have readily available solutions and positive outcomes for the supermarket industry. To abandon
the devices altogether is suboptimal.
There are numerous drawbacks to the inclusion of self-checkout devices in a retail environment.
Exploring those will help understand why supermarket chains like Alberston’s are looking to remove self-
checkout devices from their locations. One of these drawbacks is the increasing numbers of items not
saleable at self-checkout lanes. California has recently passed a law preventing the sale of alcoholic
beverages at self-checkout lanes to address the perceived ease of underage purchases (Egelko, 2013). This
is more damaging to retailers that it initially appears. To bar specific items from sale at self-checkout does
not simply push these sales to standard lanes. Rather, when a customer chooses self-checkout only to
discover he cannot purchase his wine, he may well simply discard the wine and purchase his other
products.
Loss of sales is another drawback that supermarkets are facing due to shoplifting and the
regression impact that it has with the so-called “impulse purchases”. Costco,a retail warehouse chain,
encountered the increase in shoplifting: one warehouse in Idaho suffered $60,000 in loss over six months,
entirely attributable to self-checkout theft (Hayes,2013). According to a British survey, 19% of

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consumers admitted to stealing from self-service checkouts, with 57% of those saying they first began
stealing when they couldn’t get the machine to work correctly (Ryan, 2014). 41% of shoplifters said the
reason they stole was because “the machine is easy to fool” (Ryan, 2014). To make matters worse,
products aren’t the only thing being stolen. According to Todd Toral, “a leading trial litigator and
investigations counsel” (DLA Piper, n.d.), “criminals have been known to attach devices to computers in
department stores to stealcustomer credit card data or install "skimmers" in card readers at grocery store
self-checkout stations” (Toral, 2014). This alone is a strong reason consumers would be hesitant to readily
use self-checkout. Furthermore, some of the highest profit margins in retail are in the sales of so-called
“impulse purchases”,higher priced, smaller sized items presented for customers while they wait in line at
traditional checkout lanes (Varley, 2014). A 2007 study found that impulse purchases plummet 32.1
percent in men and 16.7 percent in women when using self-checkout as opposed to traditional methods
(Ryan, 2007).
Costco recently abandoned their self-checkout systems. More blunt than Albertson’s LLC, they
admitted simply that the devices are “great for low-volume warehouses,but we don’t want to be in the
low-volume warehouse business” (Lutz, 2013). Customer confusion regarding how to work the devices
also played a role (Hayes,2013). That same Idaho location that was mentioned earlier discovered that the
number of customers processed per hour increased 20% when they removed their machines (Hayes,
2013).
However,self-checkout is not a method deserving of abandonment. Their development and
adoption are driven by one core factor: they reduce the cost of labor. Labor costs in retail are usually
between 8-10% of sales (Jones, 2012). In a market with the slimmest of profit margins, with self-scanning
systems in 66% of stores (Jones,2012), the adoption of automation is absolutely necessary to remain
competitive. While they come with their own set of costs,they offset wages and will never recover
worker’s compensation. In addition, self-checkout devices can help firms from being understaffed when
employees called in sick. According to an Academy of Management (AOM) research about market

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impact when employees calls in sick, it states that “the time lost because of sick leave is the same as
having 155,000 people out of the labor force for a year in a country the size of Spain.” (Do Labor Markets
Impact Whether Sick Employees Call In Sick, 2013). Based on Associations unlimited; The Academy of
Management (AOM), a National association of 17,942 professors of Colleges and Universities, aims the
improvement of organizations by exploring new insights of management applications (“Academy of
Management”,n.d.).
Supermarkets can also tweak and revised self-checkout devices to deal with their drawbacks.
Costco has done just that very thing, experimenting with a new system. The primary issue identified with
self-checkouts was the lower customer processing rate. As a bulk warehouse,Costco has built business on
getting as many customers in and out of Costco facilities. The primary cause of slower processing in self-
checkout is customer unfamiliarity with the devices. How did Costco address this? In one act, they struck
at every flaw found in traditional self-checkout devices. Costco went back to the drawing board and
implemented a system in which customers check in at entry and receive barcode scanners were they can
scanned products that will be deposited into a check out unit where they can pay what is owed. In the
check-out unit, the employee can glance and count the number of items. The payment is processed by the
employee, and the customer is on their way out. This addresses a surprising number of issues at once. The
entire transaction is technically done face-to-face,meaning it would not be illegal to sell alcohol by this
method in states where it otherwise would be. Also, the inherent issue of user training is off-loaded to the
employee, who actually works the machine. The act of scanning the cart,regardless of how effective it
actually is at detecting theft, is likely a deterrent to those 41% of shoplifters who said they do so because
“the machine is easy to fool” (Ryan, 2014).
Kroger has also been testing a system known as “Advantage Checkout”, which uses technology
from MRI machines to feed items through a tunnel built around a traditional conveyor belt, while several
competing mobile phone apps use the phones’ cameras as scanners,possibly eliminating the handheld
scanners used in Costco’s new method altogether (Jones, 2012). Another similar solution has been used

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by both Stop & Shop and Walmart. These retailers have decided to implement mobile scanning.
“Allowing people to scan and tally their totals as they shop promises reduced checkout times and staffing
needs, more space for products and the chance to differentiate the shopping experience. It also generates
lots of real-time data that can be used to target offers as customers wander the aisles” (Heun, 2013). This
method takes Costco’s idea a step further and tries to fix the issue of less impulse buys. It does this by
offering deals based on the purchases being made by the consumer.
Self-checkout has an element of learning necessary for the consumer. A recent survey found that
86% of shoppers have a positive view of self-checkout—when they’ve used the devices at least 6 times
(Mahoney, 2007). To abandon self-checkout at a time of adoption is to ignore this development. It’s not
just the customers that require training. Cashiers and employees need it as well. Analyst Greg Buzek
claims that Kmart’s ceasing of self-checkout (as early as 2002) was because they “never trained or
motivated their cashiers” (Fierce Retail, 2007).
General public acceptance of self-checkout is certain to grow as the population ages. Dechert-
Hampe’s report showed that those who prefer self-checkout are younger and more “tech-savvy” than
those who do not (Jones, 2012). It urges flexibility and a willingness to adapt the technology as
drawbacks become known (Jones, 2012).
To abandon self-checkout now would be folly. 25-30% of all supermarket transactions today are
self-scanning (Jones, 2012). According to the Dechert-Hampe consulting firm, “Retailers should be
seeking new and innovative merchandising solutions for Self-Checkouts”. Those solutions, they argue,
“should be designed specifically to capture impulse purchases from the self-checkout shopper and fit the
unique properties of the Self-Checkout transaction” (Jones, 2012). Supermarkets have tiny sales margins
and net profits of about 1% (Jones, 2012), and thus are reliant on every possible edge to remain
competitive. They simply cannot afford to outright abandon the self-checkout when their competitors do
not. While it may have some initial, realized troubles, to simply remove the self-scan option for

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consumers is a significant error in judgment. Rather,supermarket chains like Albertson’s LLC having
difficulty in implementing self-checkout should look at the long term picture. With the proper training
and implementation of new self-checkout methods, Supermarkets can reduce labor costs, and invest in the
younger generation that are more prone to use the self-checkout devices in the future.

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