Up until recently, there has been little or no published research on the scale of losses associated with SCO systems. However, the 2018 ECR Report, available elsewhere on this website, is the first time estimates of losses were surmised. The study looked at losses for Fixed SCO and for Scan and Go systems:
Fixed SCO: data comparing stores with and without Fixed SCO found that levels of loss were higher in the former than the latter, with some Grocery case studies recording losses in the region of 90% to 100% higher. One case study, focused on the difference between stores using SCO with and without a weight checking system, found that losses where there was no weight system were 147% higher than stores not using any SCO technology.
Utilisation data (number of transactions processed through SCO) showed that stores with higher rates had higher levels of shrinkage. Stores where 55-60% of transactions went through Fixed SCO can expect their shrinkage losses to be 31% higher. Similarly, data looking at rates of loss and the number of SCO machines in use found that stores with higher numbers of machine also had higher rates of loss. Stores with the average number of SCO machines (for the case-study retailer), could expect to see shrinkage losses 31% higher than an estimated industry average, while those utilising an above average number of machines could expect the rate of loss to be at least 60% higher or more.
Technology monitoring and video analysis data looking at €72 billion of transactions found that non-scanning at Fixed SCO machines accounted for 0.44% of SCO sales, amounting to 9.5% of all store-recorded shrinkage. The data suggested that non-scanning behaviours alone (not including mis-scanning, walk-aways etc) are likely to add 0.5 Basis points of loss per 1% of Fixed SCO utilisation.
Together the various data sets strongly indicate that previous assumptions that Fixed SCO do not generate additional losses for retailers are incorrect – the losses are real and, in some cases, significant. Based upon the available evidence it is estimated that for each 1% of Fixed SCO utilisation, a retail store should expect their shrinkage losses to increase by at least 1 Basis point. This estimate does not consider other forms of loss that SCO systems are likely to be generating, such as lost margin and lost profits due to out of stocks caused by increased errors in stock inventory records. At this time, it is not possible to put a concrete figure on these losses.
Given this, for a store with 50% of transactions being processed through Fixed SCO, it can expect its shrinkage losses to be 77% higher than the average rate found in Grocery retailing. None of this data takes into account the likely productivity savings retailers can accrue from using this technology.
Scan and Go Systems: analysis of 140 million transactions, found that the average utilisation rate of this technology was still relatively low – 2.43% of all transactions. Of this total, 12% or 17 million were subject to a Partial Re-scan Audit (only a small proportion of items are checked). Of those, 2.87% were found to contain at least one error, generating an overall inventory error rate of 0.52% of Scan and Go sales. When over-scans were taken into account, the net loss was calculated as 0.31% of Scan and Go SCO Sales, equivalent to a 2 Basis point increase in losses for every 1% of utilisation.
However, analysis of 20,000 random Full Re-scan Audits (every item is checked) showed an overall error rate of 43.4% – 1,412% higher than the Partial Re-scan Audit data. When this error rate is used to calculate net losses, it shows that the rate is as much as 3.88% of all Scan and Go SCO sales, generating a Loss to Utilisation Ratio of 11 Basis points per 1%. Taken together, stores using this technology (at current utilisation rates) could see overall losses in the region of 3.3% of all sales, undoubtedly raising questions about the overall viability of this approach.
Further analysis of Full Re-scan Audit data, using probability statistics, showed that as the size of shoppers’ baskets increased then the likelihood of an error occurring also increased. When a shopper has 50 items in their basket, then there is a 60% chance they will make at least one error, while for those with 100 items there is almost a 9 in 10 chance they will make an error.
The ECR study also shared data from one retailer comparing stores with and without Scan and Go SCO, which showed that those with the technology had a rate of shrinkage 18% higher than those that did not, suggesting a Utilisation to Loss Ratio of 6 Basis points.