California businesses could take a profits hit with self-checkout elimination

California lawmakers proposed a law that would eliminate self-checkout lanes at certain grocers and retailers to combat theft. Retail experts say this will only drive up costs.

California businesses are at risk of taking another financial hit, according to industry experts. This time, it's because of a proposed bill that's aimed at eliminating self-checkout. 

The goal of Senate Bill 1446 is to eliminate theft, which has been tied in part to self-checkout stations, but industry experts argue this bill could pile on significant costs for business owners. 

According to a summary of the proposed legislation, if passed, grocery or retail drug establishments would be prohibited from providing a self-service checkout option for customers unless specified conditions are met.

Some of these conditions are that no more than two self-service checkout stations can be monitored by any one employee and the employee has to be relieved of all other duties, 

CVS ENGAGING WITH AGS ON RETAIL THEFT; WORKING TO 'DISMANTLE THESE CRIMINAL OPERATIONS'

NCR Voyix CEO and member of the National Retail Federation board of directors, David Wilkinson, says the bill will not only frustrate customers because it reduces choice, but it will "lead to higher operational costs that will be passed to consumers." 

NCR Voyix is a leading global provider of digital commerce solutions for the retail, restaurant and digital banking industries.

According to an economic analysis of SB 1446, conducted by Encina Advisors, LLC on behalf of the California Foundation for Commerce and Education, businesses would need approximately 10,200 additional cashiers under the mandate. That would result in at least $497.1 million in additional costs falling upon grocery retailers annually, according to the findings, obtained by Fox Business. 

"While tackling retail theft is crucial, there are unintended consequences," Wilkinson said. 

DOLLAR GENERAL DROPS SELF-CHECKOUT AT HUNDREDS OF STORES TO REDUCE THEFT

Given that it insists on one employee for every two self-checkout stations, those employees are stuck at the machines instead of helping customers, he added.

He is also "concerned with the undertones of this bill that could potentially ask store associates to act as security guards," Wilkson said. 

Instead, Wilkson said stores need to "embrace tech to help solve the problem."

GROCERY STORE CHAIN DITCHES SELF-CHECKOUT AFTER SHOPPER BACKLASH

"Fighting theft is a multi-faceted societal issue. It takes partnership with policy makers, businesses, and tech working together to curb crime which will ultimately help businesses," he said. 

Ryan Young, senior economist at the Competitive Enterprise Institute, told FOX Business, that the best way to tackle the issue is through enforcing shoplifting laws. 

"Self-checkout lanes can save on labor costs, but increased theft is one of the tradeoffs," Young said. "Companies can decide for themselves whether that tradeoff is worth it. The answer will vary from business to business. They do not need California's state Senate deciding for them."

Steven Greenhut, western region director of R Street Institute, doesn't believe removing self checkout helps stores prevent theft at all. He argued that the "state and local governments could help by actually prosecuting people who steal stuff, but stores are perfectly capable of reducing their own shrinkage problem." 

However, a growing number of companies have been removing self-checkout aisles in recent months as a means to thwart theft.  

Earlier this year, Dollar General began employing new measures to crack down on rampant retail theft that it says has been the most problematic problem for the business. Some of its measures included converting 12,000 stores away from self-checkout since the beginning of the fiscal year.

GET FOX BUSINESS ON THE GO BY CLICKING HERE

In March, Target announced that it was limiting self-checkout to 10 items across stores nationwide. 

That same month, Five Below announced it was reducing self-checkout at stores in an effort to prevent theft from cutting further into its bottom line.

The company has "now evolved" to associate-assisted checkout across its over 1,500 locations, CEO Joel Anderson said during the company’s fourth-quarter earnings call.

The California legislature is slated to reconvene on Aug. 5. The last day for each house to pass a bill is Aug. 31.