Costco Kills Self-Checkout In The Name Of Efficiency—But That's Not All

Costco (NASDAQ:COST) is in the process of removing its self-checkouts, the warehouse-store giant's CEO has told Bloomberg Businessweek. The official reason: Employees do the work more efficiently. Self-checkouts are "great for low-volume warehouses, but we don't want to be in the low-volume warehouse business," said Costco CEO Craig Jelinek.

All that may be true, and Costco isn't the only chain that has removed self-checkout from U.S. stores in the name of efficiency—Ikea did exactly that last year, although it still uses self-checkout in many European stores.

But employee efficiency isn't the only reason Costco isn't so fond of do-it-yourself checking. The chain first began trialing self-checkout in 2010 in a handful of stores, and at least one Idaho store showed $60,000 in merchandise loss over a six-month period—attributed entirely to the self-checkout system.

The problem then: Costco's system used an item's weight to confirm that the barcode had been correctly scanned. If there was a mismatch between what the weight-sensitive conveyor belt measured and what the item was supposed to weigh, the system rejected the item and didn't charge the customer, who was supposed to contact an associate for assistance.

But if the customer didn't notice the rejection (or "didn't notice" it), the customer would walk away with the item. If the associate at the door didn't notice the failure to charge, it went down as a loss. And that, it seems, was happening regularly.

In fairness, once that Idaho Costco store pulled the self-checkout lanes in 2012 to stem the losses, management noticed another change. "Our members (processed) per hour went up, from 50 per hour to 60 per hour," a Costco source said at the time. It appears that now Costco is applying that lesson to the whole chain.

For more:

- See this Bloomberg Businessweek story

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