Cashierless shopping trials are currently underway with a range of retailers across the US and Europe, but concerns around shop security could hold back the roll-out of the technology.

In the last 12 months, the Co-Operative and Sainsbury’s supermarkets in the UK have run in-store pilot schemes, while Europe’s largest consumer electronics retailer MediaMarktSaturn recently deployed MishiPay’s mobile self-checkout solution in the world’s biggest electronics store in Hamburg.

Speaking at a conference last year, the Co-op’s retail IT solutions specialist Paul Fletcher joked that retailers were trying to “match the experience of a shoplifter, as they probably have the most frictionless journeys in one of our stores – they come in and grab what they want off the shelves and then run out of the door”.

He explained that while testing the new Pay-in-Aisle app in the company headquarters, they noticed that customers were initially uncomfortable when exiting, as they were not sure they had paid properly.

“It was very interesting to watch customer behaviour, the psychology was remarkable, because people literally did not know what to do,” Fletcher said. “There are things we can do to help, one of them was to introduce a big green tick with an e-receipt so if you are challenged you can prove the purchase very quickly.”

In the US, Walmart launched its self-checkout initiative Scan & Go in 2017 and expanded to an additional 100 stores in 2018, but has reportedly cancelled plans due to high rates of theft.

“You think that the theft is bad on self-checkouts? Wait until you try Scan & Go, where nobody is watching the customers out in the aisles,” Joel Larson, a former Walmart executive and now vice president of Innovation at Innowi, told Business Insider.

The retail giant responded: “In our efforts to minimise friction points, we found that the programme created some of its own such as receipt checks, weighted produce, and un-bagged merchandise resulting from using the programme.”

Amazon’s move from online into bricks and mortar has also not been without its teething problems, as its first Amazon Go store within the Seattle headquarters reportedly struggled to track customers at busy times using the installed cameras and sensors.

The checkout-free system uses a smartphone app to track goods picked up and put back on shelves, billing customers after they walk out.

The e-commerce giant is also reportedly closing all 87 of its pop up stores in the US, as part of a shake-up of its physical store strategy. "After much review, we came to the decision to discontinue our pop-up kiosk program, and are instead expanding Amazon Books and Amazon 4-star,” read a statement

Amazon said it spends the vast majority of development time thinking about improving the experience for the 99.9 per cent of well-intentioned customers vs. designing a system that is focused on deterring the few bad actors. “While our highly-accurate Just Walk Out Technology makes it unlikely, as you can imagine we have plenty of security measures in place to deal with shoplifting.”

Also across the pond, several US states have pushed back against cashless stores.

Last week Philadelphia City Council became the first major US city to ban cashless stores, with New York City, Washington and Chicago all rumoured to follow suit, according to the New York Times and Wall Street Journal.

Proponents of the bills argue that cashless stores discriminate against unbanked, poorer members of society that do not have access to cards or banking apps. The US Federal Reserve estimates cash is still the favoured payment method for 26 per cent of Americans.

Earlier this month, Checkpoint Systems, ECR Community Shrinkage and On-Shelf Availability Group analysed data from 13 retail companies in the US and Europe and two tech suppliers, revealing that a greater use of self-scanning technologies resulted in higher rates of retail loss.

The research included three types of systems: fixed - the consumer scans items at a self-service kiosk - Scan and Go - the customer is supplied with a scanning device provided by the retailer - and Mobile Scan and Go - the customer’s own mobile device is used as a device for scanning items.

It found that stores where 55 to 60 per cent of transactions went through the fixed method saw retail losses increase by 31 per cent, while Scan and Go systems were likely to result in increased losses of up to 18 per cent more than those retailers not using the technology.

While the adoption rate for Scan and Go technologies continues to be low, accounting for only 2.82 per cent of all transactions recorded by research participants, the technology resulted in high levels of customer error. The report found that in a shopping cart containing 50 products, there is a 60 per cent chance that there will be at least one error made.

According to the ECR, the most likely causes of losses relating to SCO technologies include failure to scan items, mis-scanning items, walking away before completing the payment process, incorrect scanning of promotional or multi-variety products, barcode switching and coupon fraud.

Hubert Da Costa, senior vice president and general manager at Cybera, explained that these tech solutions fall into a few different categories.

“There are physical monitors like weigh-scales with price look-up files for self-checkout - I’m thinking specifically of solutions from Zebra and Bizerba - then there are digital monitors, like video surveillance with facial recognition and analytics software that is centrally monitored for predictive ‘sweethearting’ as a solution – the InTouch solution is top-of-mind in this area,” he stated.

Sweethearting is theft when employees give away merchandise to customers they like, typically at the cash register. This type of loss has a higher contribution to loss than shrinkage or generic theft, so the self-checkout solution has the potential of seeing a far lower loss rate than the manned service – which makes radio frequency identification (RFID) and video surveillance with predictive analytical software a critical feature.

“The second biggest loss to supermarkets is shrinkage, specifically waste at the fresh produce level,” pointed out Da Costa. “Audit trail, weight monitoring and farm to fork supply solutions offer the best way to mitigate loss in shrinkage.”

Mustafa Khanwala, co-founder of British PayTech startup MishiPay, said that his firm’s Scan, Pay, Leave technology uses RFID to deactivate the security tag on an item that has been purchased, allowing the shopper to walk out without triggering alarms.

“For retailers that do not use RFID, we have built the MishiPay dashboard, which gives sales associates real-time visibility of scanning activity in the store and allows staff to carry out security checks where necessary,” he noted.

“We are even able to integrate our technology with in-store security cameras to provide back-up evidence of a theft taking place – on top of all of this, the solution has been designed to allow staff to be redeployed from the checkouts to the shopfloor, meaning more staff are on hand and available to observe in-store activity, reducing the chance of theft and increasing the chance of any shoplifters being identified.”

Khanwala said that during trials, like the previously mentioned roll-out in MediaMarktSaturn, he saw no increase in theft, but admitted there are a couple of big hurdles: consumers need to become more familiar with the benefits of cashierless technology, and retailers need to change their mind set to facilitate new experiences in stores that improve the customer journey.

Juniper Research analysis in September predicted retail spend at frictionless payment stores will grow from an estimated $253 million in 2018 to over $45 billion by 2023, with most of these transactions to be in convenience stores. Self-scanning apps, an alternative to ‘just walk out’ technologies, will be used by over 32 million shoppers by 2023, driving higher engagement.

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