In the world of business, change is often heralded as a virtue — an indicator of growth, adaptability and progress. Yet, paradoxically, businesses sometimes become trapped in their own decisions, even when those decisions lead to unintended consequences. Nowhere is this more readily evident than in the rollout of automatic self-checkout systems in retail stores. What was supposed to be a cost-saving measure has turned into an unexpected showcase of inertia in decision-making, as companies double down on flawed strategies instead of pivoting.
The self-checkout system seemed like a simple solution to a costly problem. Top management viewed the cost and administration of entry-level labor as problematic. According to a study by the Loss Prevention Research Council, replacing four traditional checkouts with automated self-checkouts can lead to savings of about $5,000 per week. For a retail chain with about 1,000 stores nationwide, these savings are expected to be about $5 million per week. After all, fewer employees at the registers meant reduced expenses, which, in theory, would boost the bottom line. To achieve this, retailers such as Walmart, Target and Kroger invested heavily in technology: expensive hardware, complex software and artificial intelligence capable of handling various types of purchases. It was an upfront cost that management believed would pay dividends by reducing labor expenses in the long run.
However, things didn’t unfold quite as planned. While the number of human cashiers decreased, another, less visible cost started to rise — theft. It turned out that the automated systems were not as foolproof as anticipated. Shoppers found ways to exploit the technology, either intentionally or unintentionally, leading to an uptick in inventory shrinkage. Reports have indicated that stores with self-checkouts see more than 20% increase in shrinkage. Losses began to erode the expected savings from labor reduction.
Faced with these new challenges, one might think that management would reconsider the viability of the self-checkout systems. But instead of acknowledging that the initial decision might have been flawed, retailers chose to double down on their investments. To combat the rising theft, they poured more resources into improving the technology. Walmart invested in enhanced AI capabilities and added more sophisticated cameras. Target implemented tighter restrictions, such as limiting the use of self-checkouts to transactions involving fewer than 15 items.
These responses, while seemingly proactive, were indicative of a deeper issue: the inability to pivot away from a failing strategy. Instead of acknowledging that self-checkouts might not be the ideal solution, businesses became entrenched in the idea that they could fix the problem by layering on more technology and policies. This behavior is a classic example of the “sunk cost fallacy”: the tendency to continue investing in a decision simply because so much has already been invested, even when it becomes clear that it may not yield the desired results.
This inertia in decision-making often leads businesses down a path of ever-increasing expenses. The cost of adding cameras, developing more sophisticated AI and enforcing stricter policies ends up being higher than the savings originally promised by reducing the number of cashiers. The initial problem of labor costs is simply replaced by another problem — one that is arguably more complex and more difficult to control.
So, what can businesses learn from this? Perhaps the most important takeaway is the need for adaptability and the willingness to acknowledge when a strategy isn’t working. The self-checkout saga is a reminder that no decision should be considered irreversible, especially when it starts leading to unintended consequences. Instead of falling victim to the sunk cost fallacy, businesses must create a culture where course corrections are seen as a strength rather than a weakness. True innovation isn’t just about implementing new ideas; it’s also about having the courage to abandon them when they prove ineffective.
—Piyush Shah, Ph.D., is an assistant professor of supply chain management in the Lutgert School of Business at Florida Gulf Coast University.
