Whats the Real ROI of Self-Checkout?

Most analysts agree that getting a return on investment from pricey self-checkout technologies will come from reducing cashier labor. But many retailers offer other motives for their investments.

A recent study by IHL Consulting Group indicates that self-checkout and other self-service systems generated almost $128 billion in sales last year, up about 80 percent over a year before. Projections are that these sales figures will continue to grow exponentially–up 73 percent this year and then a projected 88 percent next year.

Although the numbers are clearly rising quickly, self-checkout programs are by no means universally successful. Some retailers are enjoying huge success while others question whether it will ever work for them.

From a retail business perspective, the most complicated issue is ROI (return on investment). The initial move into self-service is not particularly low-cost. Not only must stores purchase the unit, they must also pay for integration into their existing POS and payment systems. IHL estimates that it can cost about $92,000 upfront and about $15,000 more per year.

But what is the return, and what form will it take? In todays retail environment, thats a very sensitive and delicate question.

Vendors of self-service software and devices, analysts and even some of the retailers who have made it work for them agree that self-service programs have been sold to retailers as being a lot more plug-and-play-like than reality would support. Technology hiccups aside, what seems to have derailed a lot of the self-checkout programs is a lack of commitment—at all levels—for the program, including marketing and staffing support.

/zimages/3/28571.gifClick here to read about security problems that self-checkout could bring.

Norman McLeod is an associate director in the market research department at InfoTrends Cap Venture, a job that has him overseeing retail technology research trends. He remembers speaking at a kiosk conference in Las Vegas two years ago where a fellow speaker said that 90 percent of self-service kiosks were typically removed within three years.

Although McLeod pointed out that the speaker was talking about all kinds of kiosks, he added that the self-service success rate is not nearly as rosy as many advocates claim.

"On the positive side, I think there have been several technical developments that have improved the reliability, but I do anecdotally note that I see lots of stores putting these [self-service] things in. But a year later, I notice they are no longer there. In some cases, I think that a lot of these kiosks are being put in without a clear goal in mind."

Greg Buzek is president of the IHL Consulting Group. "Some retailers are definitely putting it in unwisely. They just put it in, and its going to fail if you just do that," he said. "Self-checkout has a number of intricacies that pay-at-the-pump and a [bank] ATM do not."

What most agree on is that the true ROI is reducing the number of people needed to handle the cashier lanes, but some retailers are hesitant to tout that ROI as it falsely suggests layoff or attrition intent. As a practical matter, those workers have nothing to fear.

Supermarkets are competing with fast-food and other jobs that are paying better, said Frank Riso, director of retail vertical marketing for Symbol Technologies, a major self-service technology vendor. Riso said that labor unions—fearful of the loss of jobs from self-checkout—have been resistant, which is ironic because the retailers would actually prefer to hire more union labor if they could.

"The unions would be beating us up and wed say to them, Look, if you just bring me 30 or 40 more cashiers," we wont implement self-service. But the unions cant find enough members willing to do cashier duty either, Riso said.

Next Page: A dwindling number of workers willing to work as cashiers.