Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Monday, December 26, 2005

Self-Serve Check-outs

I had never seen or heard of "self-serve" check-outs until I visited my son in Houston a couple of years ago. To use one, you scan your own merchandise, scan your credit or debit card, bag your own groceries, and away you go.

My first reaction was, "Geez, I wonder what the inventory shrinkage (shop-lifting) is with this system."

Don Boudreaux of Cafe Hayek wondered the same thing. He attributes their success to trust and honesty.
The fact that the number of self-checkout lanes is increasing tells me that these lanes are proving to be successful — proving to be worth their costs. In turn, this fact tells me that the people who shop in these stores are generally honest. The number of cheaters, although surely positive, is not great enough to make the provision of self-checkout lanes a losing proposition for retailers.

Phil Miller has additional intriguing insight: Employee theft is generally a much more serious problem than shop-lifting.

While I was working on my Master's degree, I worked as an assistant manager for a well-known pharmacy chain and in terms of theft prevention, our number one focus was employee theft, not customer theft. My fellow managers and I went to seminars where we watched surveillance camera films showing various employees stealing from their stores. We also heard stories about employee theft. The cameras that were installed to identify theft were installed over the cash registers.

Employee theft takes lots of forms. Employees can steal cash, merchandise, credit card numbers etc. They can also help their friends steal stuff by placing unscanned merchandise into bags with paid-for merchandise.

By substituting capital for labor at the checkout stands, retail stores can help combat employee theft. With the self-service stations, I'd argue that since there are fewer employees handling transactions, many stores are actually preventing theft from occuring.
At least two questions linger for me:
  1. How do the stores deal with merchandise that has the electronic theft protection embedded when it goes through the self-serve checkout?
  2. We don't have them in Canada, yet. Why not? Is the relative price of labour (compared to capital) lower in Canada than in the U.S.? If so, not much. Or is Canadian retailing irrationally and inefficiently behind the times?
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