Eating into the Future
What self-checkouts tell us about the future of retail
By Alvin Yu
Beep-beep-beep. The sound of cashiers ringing up items echoes in Maria Gladkikh’s ears. She waits in line at a self-serve checkout machine, because the lineups for cashiers have snaked into the aisles. With a full shopping cart, she is not particularly fond of using the machines.
“I will avoid self-serve checkouts as much as possible, because I always seem to run into technical problems at the machine,” Gladkikh remarks.
She is not the only one. A survey conducted by British retail technology Tensator found more than 40 per cent of shoppers reported experiencing technical problems at self-serve checkout machines, including the “unexpected item in bagging area” error message.
On the other side, Paul Der is watching shoppers as they move to and from the six self-serve checkout machines in front of him. Having spent seven years as a cashier, Der has witnessed the store undergo major changes including the launch of the machines. While he has grown accustomed to supervising them, the transition from managing one check stand to six was still difficult.
“It was pretty nerve-wracking because it was a brand-new system. Everything is controlled by one monitor and I have never seen that before,” recalls Der.
The major grocery retail players—Walmart, Loblaws, Sobeys, and Save-On-Foods—have been experimenting with technology in recent years, including self-serve checkouts, as a way to entice consumer spending while reducing operational costs—and for good reason: Statistics Canada’s socioeconomic database (CANSIM) reported that the profit rate in the grocery retail industry has dropped dramatically from 4.6 per cent in 2001 to 1.9 per cent a decade later.
Several factors are to blame for these declining profits. Loblaws is expected to see a 0.2 per cent decrease on its profit margin between 2011 and 2016, according to industry research organization IBISWorld. The company sent a letter to its suppliers in July, asking them to justify continued cost increases that have been affecting its bottom-line.
Meanwhile, competitor Sobeys recorded a decrease of 39.9 per cent on its profits for Q1 2017 compared to the same period last year. Analysts forecast the losses to continue as the company absorbs integration costs associated with acquiring Safeway.
Data suggests these declining profits are putting pressure on companies to cut costs. Employee wages are the second-highest cost for grocery retailers, next to the cost of supplying goods. In Statistics Canada’s most recent Survey of Employment, Payrolls and Hours, researchers found that the number of grocery retail employees in Canada declined 2.4 per cent from 2008 to approximately 410,000 employees in 2012. During that period, self-serve checkouts began to pop up in grocery stores across the country.
In its market research report on Canadian grocery retailers released May 2016, IBISWorld predicts that capital expenditures by companies on technologies including self-serve checkouts will continue to grow. In contrast, it was noted that wages’ share of revenue has decreased over the past five years, representing about a 0.2 per cent annual decline in employment levels.
Tom Hesse, Executive Director of Labour Relations with the Union of Food and Commercial Workers (UFCW) 401 in Alberta, is familiar with the impact that technology is having on grocery retail jobs.
“With an increase in self-serve checkouts, automated distribution warehouses, and point-of-sale systems, we are seeing positions eliminated and hours reduced for the remaining employees,” says Hesse. “This directly affects their income, creating pressure points that make employees feel marginalized and disrespected for their work.”
At Der’s store, there has been a shift in how hours are being distributed between full-time and part-time employees. “Over the past few years, full-time employees have seen their hours cut from at least 30 hours per week to anywhere between 24 and 28 hours,” says Der. “Instead, management has been hiring more part-time staff.”
As a result, part-time employees may find it more difficult to move up into one of the ever shrinking number of full-time positions. Vy Nguyen, an employee at another major Edmonton grocery store, says that all of her co-workers are now considered to be part-time with the exception of the management team.
And with fewer full-time positions, getting a promotion to a management position is becoming more difficult,because “employees who have worked more hours,” Nguyen explains, “will more than likely be promoted over employees who may work more efficiently and productively.”
Julie Dickson, a spokesperson for Save-On-Foods says, “self-serve checkouts were never implemented with the intention of reducing front-line staff.” She claims the technology has not made a significant difference in store employee numbers or the number of hours worked by an employee.
“The relationships that our front-end personnel have with our customers are some of the most important relationships within the company,” Dickson notes. “The introduction of self-serve checkouts is more about providing another service convenience for our customers.”
A request was sent to several other Canadian grocery retailers to clarify the impact of self-serve checkouts on store employee numbers. Loblaws declined to comment on the matter, while Walmart and Sobeys were not immediately available to respond.
Dave Wilkes, Senior Vice-President of Government Relations and Grocery Divisions for the Retail Council of Canada, also says that technology does not have a negative impact on grocery retail employees. The not-for-profit, industry-funded association represents more than 45,000 Canadian retailers.
“The use of technology in stores is more about enhancing the way consumers shop as opposed to impacting traditional services,” Wilkes reassures.
Having worked in the grocery retail industry for two decades, Wilkes says, “the employee structure continues to provide great opportunities for growth and promotion in our digital age.”
In Canada, it is unknown exactly how many grocery retail employees have been directly affected by self-serve checkout machines. South of the border, several American retailers including Costco, CVS, and Albertsons LLC, have removed self-serve checkouts from local stores over the past few years.
Christine Wilcox, Director of Communications with Albertsons LLC, explained to Supermarket News that having fewer self-serve checkout machines allowed the company to prioritize customer service by focusing on direct communication between the consumer and cashier.
One way to examine the impact of self-serve checkouts and other technologies on grocery retailers is through labour productivity, a measure of the output produced in dollars per hour of work. Industry Canada’s State of Retail: The Canadian Report 2010 establishes that retail labour productivity increased by over 15 per cent between 2002 and 2008 while retail wages remained unchanged. In fact, Statistics Canada data show that there has been little change to retail wages in over 30 years.
Hesse believes that technology allows for the scrutiny of workers as a way to increase labour productivity. He points out that newer check stands have optical scanners underneath the glass that can generate vast amounts of data, ranging from what items need to be replenished on store shelves to how fast a cashier is scanning items.
The use of optical scanners is a way for employers to pursue lane times, setting a target for the number of items pulled through a check stand in an hour. “There are safety risks to cashiers working under these targets as they may wake up one day with a shoulder injury or a repetitive strain injury that forces them to take time off work,” he worries. “Cashiers will then have to fight the worker compensation system to get their injuries recognized. It is a cascading effect that may cost them their jobs in the end.”
As technology becomes more common inside grocery stores, existing employees may feel that their job security is being threatened. Gwen Bauer, a change management professor at the University of Alberta, advises employees working in industries affected by technological changes to consider individual-driven career planning.
“Employees need to spend time thinking about where they are in their current occupations, and what those changes will mean in terms of job satisfaction,” says Bauer. “If they cannot accept the changes, they must be thinking ahead for the next opportunity.”
There are many occupations in Canada that face the risk of automation, according to a study conducted by The Brookfield Institute for Innovation + Entrepreneurship. 42 per cent of jobs in our country are considered to be at a high risk of being replaced by technology with retail salespersons and cashiers listed among the top five jobs to be automated over the next two decades.
For cashiers, the probability of automation is an overwhelming 97 per cent. With that in mind, Kyle Watson urges grocery retail employees to develop traits that are difficult for technology to replace. Watson is the Director of the School of Retailing at the University of Alberta, with experience ranging from consulting to faculty research.
“Robots can easily take the position of lower-skilled employees who stack shelves or take customer payments,” says Watson. “It is much harder for technology to replicate employees who go the extra step in providing meal recommendations or extensive nutritional knowledge for consumers.”
Watson sees robots contributing to a major shakeup in how grocery retail stores will operate. “In the coming years, more shopping will be done online and less in the store with consumers seeking more convenient options.”
As Der watches shoppers ring their items through the self-serve checkout machines, he pauses for a moment to reflect upon his time as a cashier. He has enjoyed the work environment and the camaraderie shared with his co-workers. Nonetheless, Der understands this may all change as grocery retailers continue to increase the use of technology to operate more efficiently and differentiate their offerings.
“I am surprised I still have a job,” he admits.