Retail Radar 14-May-2024

?? "Navigating Theft: How Building a Pleasant Labyrinth of Security in Stores Aims to Thwart $112 Billion in Losses! ????"

Retail shrinkage, a perennial challenge for U.S. retailers, has notably intensified, reaching an average rate of 1.6% in FY 2022, equating to about $112.1 billion in losses.

This marks a significant rise from $93.9 billion the previous year. While the U.S. grapples with these substantial figures, other countries also confront retail shrink, albeit with varying intensities and dynamics influenced by regional security measures, employee protocols, and technological implementations.

The Rising Tide of Retail Shrink

Several key factors are driving the surge in retail shrink:

Organized Retail Crime (ORC): Increasingly sophisticated, ORC now spans across states with highly structured networks that capitalize on high-value, easily resellable items.

-?????? Internal Theft: Employee access to products and cash remains a critical vulnerability.

-?????? Administrative Errors: Mismanagement and errors in inventory and pricing contribute significantly.

-?????? Shoplifting and Opportunistic Theft: Although less organized, these acts persist as major contributors.

Economic pressures such as inflation and supply chain disruptions further amplify these challenges, forcing retailers to recalibrate their operational strategies to mitigate losses.

State of Organized Retail Crime

ORC has evolved into a formidable opponent for retailers due to its organized nature and professional execution. These criminals exploit online marketplaces for anonymity, use advanced technology to thwart security measures, and even collude with insiders to orchestrate thefts. The tactics have diversified beyond mere shoplifting, employing methods like "grab-and-run" and increasingly violent confrontations, making ORC not just a financial strain but also a safety concern.

Just as technology has streamlined supply chains and the transaction process, it has reduced the friction of selling off ill-gotten items.

-?????? Exploitation of online marketplaces: ORC groups are taking advantage of the anonymity and reach of online marketplaces to fence stolen goods efficiently. They can easily sell large quantities of high-demand stolen merchandise electronics, designer clothing, cosmetics, and over-the-counter medications on platforms like Amazon, eBay, and Facebook Marketplace, making it challenging for retailers to identify and stop the flow of stolen products.

-?????? Use of technology and counter-surveillance tactics: ORC groups are employing sophisticated technology and counter-surveillance tactics to evade detection and security measures. This includes signal jamming devices to block security tags, booster bags lined with aluminum foil to bypass RF sensors, and drones for surveillance and distraction.

-?????? Increased violence and aggression: As retailers implement tighter security measures, some ORC groups have become more aggressive and violent in their tactics. There have been instances of physical confrontations, assaults on store employees, and the use of weapons or force to carry out thefts. According to an NRF and Loss Prevention Research Council survey, 72.3% of retailers have concerns regarding violence during a theft. Previously, the metric was not tracked.

-?????? Exploitation of supply chain vulnerabilities: ORC groups are also targeting vulnerabilities in the retail supply chain, such as hijacking delivery trucks or cargo theft from distribution centers, to obtain large quantities of merchandise.

Innovative Solutions to Combat Shrink

To counteract these rising threats, retailers are turning to a variety of innovative solutions:

-?????? Technological Enhancements: Implementing RFID tags and EAS (Electronic Article Surveillance), advanced cameras with predictive analytics, and improved inventory management systems helps monitor and manage store inventories better.

-?????? Data Analytics: Utilizing big data to analyze and predict theft patterns and shrinkage trends.

-?????? Employee Training: Enhancing staff training on theft handling and boosting their awareness of potential internal thefts.

-?????? Legislative Collaborations: We work closely with law enforcement and support legislative measures like the INFORM Consumers Act to verify high-volume sellers and impose more severe penalties for offenders.

Moreover, unattended retail solutions like those from Digital Media Vending and those from SNBC are emerging. These platforms are locked kiosks found inside retailers. They are cabinets with sophisticated electronic locks and dispensing mechanisms opened upon receipt of payment or by store associates. I reviewed DMVI in a previous Retail Radars. SNBC provides a range of machines with UV sterilization for contact surfaces within each of its locker-like cubbies.

Is the Cure Worse Than the Disease?

Cameras, locked cabinets, and other visible deterrents create a psychological barrier when moving around the retail location. The customer experience must be stellar to overcome the barriers of being unable to “grab and go.”

While stringent security measures, sophisticated technology, and legislative actions are necessary, they come with challenges.

The financial burden of implementing advanced systems, privacy concerns, and the need for continuous adaptation to outpace criminals pose questions about the sustainability of these solutions. However, the cost of inaction could be much higher, given the direct impact on profitability and safety.

Some thoughts on overcoming them.

Enhancing Customer Service and Staff Training: Improving the quality of customer service can help mitigate the psychological barriers created by visible security measures. Staff should be trained in security protocols customer engagement, and service excellence to ensure a positive shopping experience despite heightened security.

Creating a Welcoming Store Atmosphere: Store design and flow continue to evolve. Over the past ten years, consumers have experienced ever-changing flows in high-traffic sections of stores in an attempt to increase basket size. Measures to maintain a warm and inviting store atmosphere can significantly counteract the negative impact of these measures. This can be achieved through thoughtful store layout, ambient music, and attractive visual merchandising that draw customers' focus away from security devices and towards the products.

Retailers must continuously innovate and adapt to stay ahead in this ongoing battle against retail shrink and ORC. As we navigate these complex challenges, it's clear that collaboration, innovation, and education remain our best tools in ensuring the safety and security of both products and people.

Call to Action

For retailers facing these challenges, the path forward involves adopting new technologies and fostering an environment of continuous learning and vigilance. Engage with industry experts, invest in the latest security technologies, and collaborate with law enforcement to create a robust defense against retail shrink and ORC. Let's strengthen our strategies and ensure that retail environments are safe and profitable, for today and tomorrow.

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#DigitalTransformation , #LawrenceLerner, #CustomerExperience, #BusinessTransformation

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