Dollar General: The Checkout That Moved the Cost Instead of Cutting It

What happened

Dollar General began rolling out self-checkout under an initiative meant to improve in-store labour productivity, and by March 2023 it was in the majority of its stores. Shrink, meaning merchandise that leaves without being paid for, then cost $910.7 million in fiscal 2023, about 2.35% of $38.7 billion of sales and nearly double the dollars of the year before. The same filing announced the retreat: self-checkout limited to five items or fewer, and registers in roughly 9,000 stores converted back to assisted checkout. By that May the number had risen to about 12,000 stores, three in five of the chain.

The case, start to finish

The saving came out of a line measured every week. The cost landed in a line measured once a year.

Thin staffing was never a flaw in the model

Dollar General runs about 20,000 small stores, mostly in towns too small to interest a supermarket, stocked heavily with consumables and staffed thinly: often two or three people on site, sometimes one. That is not a weakness in the model, it is the model, and it is what made a machine that removes the cashier look like pure profit.

In March 2022 the annual report described an initiative called Fast Track, designed to enhance in-store labor productivity, whose second phase was self-checkout, planned for up to 11,000 stores by the end of that fiscal year. A year later the next annual report said self-checkout was in the majority of stores. Shrink, meaning merchandise that leaves without being paid for, cost $481.0 million that year, 1.27% of $37.8 billion of sales.

That line matters more than it looks. Consumables were $33.4 billion of $40.6 billion of net sales in fiscal 2024 and gross margin runs just under 30%, so a dollar lost to shrink needs more than three dollars of new sales to replace it.

Two cost lines on two different clocks

The mechanism is about where costs live on the income statement, and it is worth slowing down for.

Store labor sits in selling, general and administrative expense: visible, budgeted weekly, easy to cut an hour at a time. Shrink sits inside cost of goods sold, and it is invisible until a store is physically counted, usually once a year. Automating the register moves work out of the first line. It does not decide where the work goes.

Self-checkout was sold internally as labor productivity, and on that measure it worked: customers did scan their own goods. But the cashier had never only been scanning. That person was also the reason a shopper walked past a register instead of straight through it. Remove the post and the store keeps its labor saving on a weekly clock and acquires a loss on an annual one.

The bill arrived in the March 2024 filing. Shrink for fiscal 2023 came in at $910.7 million, 2.35% of $38.7 billion of sales, nearly double the dollars of a year earlier. Gross margin fell 94 basis points to 30.3% and operating profit dropped 26.5% to $2.45 billion.

Naming it, then undoing it

In that same filing Dollar General named self-checkout as one of the operational challenges behind the shrink, rather than attributing the whole increase to theft in the wider economy. Naming it obliged action.

The action was a retreat: self-checkout limited to transactions of five items or fewer, registers in roughly 9,000 stores converted to assisted checkout, and self-checkout removed outright from about 300 stores. By the quarterly report filed in May 2024 the figure was approximately 12,000 stores, about three in five of the chain, roughly fifteen months after the machines reached most of them. For a chain that size, that is fast.

It is worth being precise about what the company did and did not claim. Dollar General never said self-checkout caused all of the increase, and the filing lists higher inventory levels, store standards, manager turnover and the economy alongside it. What can be said is that between fiscal 2022 and fiscal 2023 the shrink line rose $429.7 million, about $21,500 per store across 20,022 stores, while the company put roughly $150 million of retail labor back in, about $7,500 a store. The two lines moved in opposite directions by very different amounts, and the company acted on the cause it could switch off.

Automation relocates work

The last number should change how you plan. Shrink for fiscal 2024 came in at $928.9 million, still higher in dollars than the year the alarm was raised, even after roughly 12,000 stores were converted back. Store habits outlive store equipment: the behavior a store teaches takes longer to unteach than to teach. And the word self-checkout does not appear anywhere in that year's annual report. The strategy did not shrink, it was deleted.

Before you approve an automation, name two lines: the one the saving comes out of, and the one the new cost will land in. Then check whether the second one is measured as often as the first, because a saving on a weekly clock against a cost on an annual clock will look like a win for four consecutive quarters. The intermediate option is worth pricing honestly too: spending part of the saving on cameras, locking cases and guards converts an unmeasured loss into a measured expense and keeps neither saving. Locking cases suppress sales of the goods being taken, and guards cost more per hour than the cashier removed.

Timeline

• March 2022 The annual report for fiscal 2021 describes an initiative called Fast Track, "designed to enhance our in-store labor productivity." Its second phase is self-checkout, which the company plans to have "in up to 11,000 stores by the end of fiscal 2022."
• March 2023 The next annual report says self-checkout is now in "the majority of our stores." Shrink, meaning merchandise that leaves without being paid for, cost $481.0 million that year, 1.27% of $37.8 billion of sales.
• March 2024 Shrink for fiscal 2023 comes in at $910.7 million: 2.35% of $38.7 billion of sales, nearly double the dollars of a year earlier. The filing names the causes, and one of them is "operational challenges such as self-checkout." Gross margin falls 94 basis points, which is 0.94 of a percentage point, to 30.3%, and operating profit drops 26.5% to $2.45 billion.
• March 2024 The same filing announces the retreat: self-checkout limited to transactions of five items or fewer, registers in roughly 9,000 stores converted to assisted checkout, and self-checkout removed outright from about 300 stores. Dollar General operates 20,022 stores.
• May 2024 The first-quarter report raises the number: registers converted to assisted checkout in "approximately 12,000 stores." That is about three in five of the chain’s stores given a staffed lane back, roughly fifteen months after the machines reached most of them.
• March 2025 Shrink for fiscal 2024: $928.9 million, still higher in dollars than the year the alarm was raised. The phrase "self-checkout" does not appear anywhere in the annual report.

You're in the owner's chair

You run about 20,000 small stores. Self-checkout is in the majority of them, cashier hours are down, and the initiative is reporting a win. Then the annual physical counts come back: shrink has jumped from $481.0 million to $910.7 million in one year. Several causes are plausible and none is proven. What do you do?

• Keep the machines and spend part of the labor saving on loss prevention — cameras, locking cases, guards
• Cap self-checkout at a few items, staff the registers again, and accept the labor cost
• Hold the rollout and wait a year — shrink is running high across retail, and the hardware needs more time to earn out

Shrink inside cost of goods sold, versus the labor put back in

• Fiscal 2022 shrink: 481 $ millions
• Fiscal 2023 shrink: 910.7 $ millions
• Fiscal 2024 shrink — after ~12,000 stores were converted back: 928.9 $ millions
• Retail labor Dollar General added back in fiscal 2023: 150 $ millions

All four figures are Dollar General’s own: the shrink line comes from the segment reconciliation in the fiscal 2024 annual report, the labor investment from the fiscal 2023 annual report. The company never attributed a share of the shrink increase to self-checkout, and this chart does not either. It shows the size of the two lines against each other, and how little the last bar fell.

Business model

About 20,000 small stores, mostly in towns too small to interest a supermarket, stocked heavily with consumables and staffed thinly, often two or three people on site, sometimes one. Thin staffing is not a flaw in the model; it is the model. It is also what made a machine that removes the cashier look like pure profit.

Revenue model

High-frequency, low-ticket trips. Consumables were $33.4 billion of $40.6 billion of net sales in fiscal 2024, and gross margin runs just under 30%, so the chain earns its money on volume and on tight control of everything between the truck and the register. At that margin, a dollar lost to shrink needs more than three dollars of new sales to replace it.

Cost structure

Two big lines matter here and they sit in different places on the income statement. Store labor lives in SG&A, where it is visible, budgeted weekly and easy to cut an hour at a time. Shrink lives inside cost of goods sold, invisible until a store is physically counted, usually once a year. Automating the register moves work out of the first line. It does not decide where the work goes.

Strategic challenge

Self-checkout was sold internally as labor productivity, and on that measure it worked: customers scanned their own goods. But the cashier had never only been scanning. That person was also the reason a shopper walked past a register instead of straight through it. Remove the post and the store keeps its labor saving and acquires a loss that nobody counts until inventory day.

Key decision

In the fiscal 2023 annual report Dollar General chose to name self-checkout in its own filing as one of the operational challenges behind the shrink, rather than attribute the whole increase to theft in the wider economy. Naming it obliged action, and the action was to undo the rollout: five-item cap, assisted checkout, and in a few hundred stores no self-checkout at all.

What worked

The measurement, eventually, and the willingness to reverse. Dollar General publishes shrink as a hard dollar line in its cost of goods sold, which is more than most retailers do, and once the line moved from $481.0 million to $910.7 million, an argument about whether self-checkout "felt" fine was over. Converting registers in about 12,000 stores inside a year is a fast reversal for a chain that size.

What failed

The business case was built on the cost the machine removed and not on the cost it created. Between fiscal 2022 and fiscal 2023 the shrink line rose $429.7 million, about $21,500 per store across 20,022 stores. In the same year the company put roughly $150 million of retail labor back into the stores, about $7,500 a store. Dollar General never said self-checkout caused all of that gap, and neither will we: the filing lists higher inventory levels, store standards, manager turnover and the economy alongside it. But the two lines moved in opposite directions by very different amounts, and the company acted hardest on the one it could switch off.

Risk factors

A saving booked in one cost line and a loss that lands in another, on a different reporting rhythm; annual physical counts that hide a problem for up to twelve months; thin staffing that leaves nobody to supervise the machines you installed to replace staff; and habit: shrink for fiscal 2024 came in at $928.9 million even after roughly 12,000 stores were converted back, because the behavior a store teaches takes longer to unteach than to teach.

Lesson summary

Automation does not delete work; it relocates it. Before you approve one, name the line the saving comes out of and the line the new cost will land in, and check whether the second one is measured as often as the first. Dollar General removed a cashier from a weekly labor budget and met the bill a year later inside cost of goods sold, where it was nearly twice as large. Switching the machines off did not switch the cost back off.

Key data

• 20,022 Stores (March 1, 2024)
• Up to 11,000 stores by end of fiscal 2022 Self-checkout plan, fiscal 2021 report
• $481.0M (FY22) → $910.7M (FY23) → $928.9M (FY24) Shrink in cost of goods sold
• 1.27% → 2.35% → 2.29% Shrink as a share of net sales
• ~$150M Retail labor added back in fiscal 2023
• 30.3%, down 94 basis points Gross margin, fiscal 2023
• $2.45B, down 26.5% Operating profit, fiscal 2023
• ~12,000 Stores converted to assisted checkout by Q1 FY24

Sources & basis

The company here is real and named, and nothing about it was invented to make the story land. The list below is where each fact came from — public filings, court records, published reporting — so you can open a source and check it against the sentence that used it.

1. Dollar General Corporation, Form 10-K for fiscal 2024 (SEC EDGAR, filed March 21, 2025) — segment reconciliation disclosing shrink included in cost of goods sold of $928,896K (2024), $910,674K (2023) and $481,011K (2022) against net sales of $40,612,308K, $38,691,609K and $37,844,863K; no mention of self-checkout View source ↗
2. Dollar General Corporation, Form 10-K for fiscal 2023 (SEC EDGAR, filed March 25, 2024) — shrink attributed in part to "operational challenges such as self-checkout"; the five-item limit, ~9,000 stores converted to assisted checkout and ~300 removals; gross margin down 94 basis points to 30.3%; SG&A up 153 basis points including the ~$150 million retail labor investment; operating profit down 26.5% to $2.45 billion; 20,022 stores as of March 1, 2024 View source ↗
3. Dollar General Corporation, Form 10-Q for the quarter ended May 3, 2024 (SEC EDGAR, filed May 30, 2024) — self-checkout registers converted to assisted checkout options in "approximately 12,000 stores" View source ↗
4. Dollar General Corporation, Form 10-K for fiscal 2021 (SEC EDGAR, filed March 18, 2022) — Fast Track described as designed to enhance in-store labor productivity, with self-checkout planned in up to 11,000 stores by the end of fiscal 2022 View source ↗