Costco Self-Checkout Trial Setback After Store Losses

Written by Evan Schuman
April 4th, 2012

A two-year-old experiment at Costco to try self-checkout in a handful of stores has not gone well, with at least one Costco in Idaho pulling the systems out after finding—and attributing entirely to self-checkout—a $60,000 inventory loss in six months, said a Costco management source.

One of the problems with the Costco system in various stores was either inadequate or non-existent notification to customers when a purchase was rejected. For example, let’s say the shopper has 38 items in her cart and is placing the items on the self-checkout conveyor belt, which also weighs the items as they move. If the weight was different than expected, the system would void the purchase and not charge the customer. In theory, the customer would ask an associate for help to resolve the problem.

But many customers, according to a Costco source, didn’t notice the item was rejected, so they placed it in their cart, took their payment-card receipt and left the store. If the associate at the door didn’t notice that a voided item was in the cart, it would go down as a loss. If the associate did notice the problem, it would be hard to not sound like the customer was being accused of shoplifting. “Many of them weren’t doing it on purpose,” said the Costco official.

Self-checkout in general has had a rough time recently, with grocery leaders Albertsons and Kroger pulling back from self-checkout for multiple reasons, including perceived customer-service issues and security. Big Y has also pulled back from self-checkout.

The Idaho Costco store that sent self-checkout packing—it’s in Coeur D’Alene—had four self-checkout lanes for two years and found a curious change after its exit. “Our members (processed) per hour went up, from 50 per hour to 60 per hour,” the Costco source said.

But it was the inventory problems that killed the experiment.


4 Comments | Read Costco Self-Checkout Trial Setback After Store Losses

  1. Mark Scherer Says:

    Not all self checkout works this way. One self checkout vendor is designed to work this way and it leaves a gaping security problem that can create this situation. There are 3 predominant providers of self checkout in the U.S. and this represents the lowest installed base provider of the 3 and their market share continues to shrink from reports I have seen.

  2. Evan Schuman Says:

    Editor’s Note; The vendor that Mark was referencing is IBM. His point is that other systems make it easier for any weight mismatches to require associate intervention–just like with alcohol or cigarettes or any other age-restricted item–rather than a more passive flag to the customer that the item was excluded.

  3. Ann Grackin Says:

    Another angle on the challenges with self checkout which may come to the retail scene in the next year is the tap and go/NFC smart phones. Though these are all the rage in Japan, we have yet to adopt them in the U.S.. But that will change as the new phones emerge with the chips embedded this year. And the new demographic want to use this type of technology. A large retailer told us that NFC phone customers are getting their identities stolen, even though the self check-out requires proximity– and they do not want to take responsibility for this occurrence in their stores, on their premises. So although they like the idea self check-out they are still experimenting with various approaches.

  4. ed Says:

    For self checkout, item-level RFID or unique barcodes plus real-time tracking appears to be the missing component. Mail delivery companies use real-time tracking of mail with a barcode and assure delivery at a certain time. The public library embed books with RFID and track them through checkout. Retailers and SCO manufacturers are going to have to accept the fact they cannot rely on UPC and really need an item-level identifier that tract that specific product as a unique item from shelving to checkout.


StorefrontBacktalk delivers the latest retail technology news & analysis. Join more than 60,000 retail IT leaders who subscribe to our free weekly email. Sign up today!

Most Recent Comments

Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

Our apologies. Due to legal and security copyright issues, we can't facilitate the printing of Premium Content. If you absolutely need a hard copy, please contact customer service.