Inventory shrinkage is a growing issue for retailers across the globe, representing $100 billion in annual losses, according to the Sensormatic Global Shrink Index. Loss prevention technology can help retailers combat shrink from shoplifting and employee theft at their stores more efficiently and effectively. While some technological approaches like RFID tags have been popular among retailers, others like shelf-scanning robots are still in the early stages of use. Here are eight technologies to consider for your loss prevention strategy.
Radio Frequency Identification (RFID) Tags
Radio Frequency Identification (RFID) tags use electromagnetic fields within radio frequencies to uniquely identify products, such as clothing, footwear, or electronic devices. It’s one of the most prominent loss prevention technologies used by retailers today, with 96 percent of retailers, including Macy’s, Lululemon, and Kohl’s, either using or planning to start tagging merchandise with RFID. As a result, the use of RFID tags has been reported to improve inventory accuracy by 32 percent and increase sales by 18 percent, according to Retail Wire.
Shoplifting is the top cause of shrink among retailers, accounting for about 36 percent of annual losses in the U.S. This isn’t surprising considering statistics from the National Association for Shoplifting Prevention show about 27 million people shoplift in the U.S., with most shoplifters only caught an average of once in every 48 times they steal. That makes for a lot of repeat offenders.
While many stores use closed-circuit television (CCTV) cameras, either set up in the store or worn as body cameras, to prevent employee and shopper theft, a new feature has emerged to boost loss prevention for repeat shoplifters. Facial recognition technology can be used to identify known shoplifters as soon as they enter a store. The cameras scan the face of every person that enters the store, and if a previous shoplifter walks in, the system can match their facial image to their database and alert store security to observe the customer and prevent further theft.
Shelves have become more than just a surface for displaying products. Smart shelves use a combination of proximity sensors, weight sensors, microphones, and 3D cameras to detect when products are removed from specific shelves or displays. Although only 3 percent of U.S. retailers use smart shelf sensors, that number is expected to rise. Companies like Pepsi and Hershey are already using the technology on displays for their products in several Walmart stores. While great for loss prevention, Pepsi co-founder and COO Kurtis Van Horn said the smart shelves have also made the company 25 to 30 percent more efficient in its restocking operations.
Internet of Things (IoT) technology like shelf-scanning robots is another way retailers can manage inventory and reduce shrink. These robots scan shelves for inventory, price, and labeling to reduce losses from pricing and labeling mistakes. Walmart, Best Buy, Target, and Lowes are a handful of companies that are currently testing this loss prevention technology in a few of their stores.
Point-of-Sale (POS) Product Activation
As the name implies, point-of-sale (POS) product activation means that products need to be activated in order to function properly. This loss prevention technology is commonly used on electronic devices like laptops and cell phones that are digitally locked at the point of production and activated by a code provided on the customer receipt at the point of sale. To put it simply, these products don’t work until they’re activated, rendering them useless until purchased. As a result, shoplifters are discouraged from stealing these high-cost items.
Non-Scan POS Detection
According to the Centre for Retail Research, retailers lose $40 billion a year through shrinkage at point of sale, meaning that goods pass through checkout lanes without being properly scanned. Improper scanning can be the result of an associate failing to scan an item or manually entering the wrong number of items, or a customer (most often at self-checkouts) failing to ring an item up.
To combat shrink at this stage, non-scan POS detection technology combines artificial intelligence, deep learning, and video analysis to identify and alert store associates when un-scanned merchandise passes through the checkout process. By flagging associates in real time, shrink can be immediately prevented.
GPS Product Tracking
GPS trackers can be used to prevent theft by both employees and shoppers. Trackers can be placed inside the packaging of goods, so the items can be monitored during shipment all the way to when they are stocked on the shelves to prevent loss during transit. If the item is removed from the store without being paid for, the trackers can alert store security and notify them of the shoplifter’s location to quickly recover the merchandise.
GPS trackers have been used in a variety of ways. To combat shoplifting for example, Saks Fifth Avenue used GPS trackers to recover $1,500 worth of stolen clothing at their Tampa, Florida, location. Additionally, Kroger uses GPS trackers on shopping carts to prevent them from leaving their lots.
Loss Prevention Services
While some of these loss prevention technologies like RFID have been around for some time, there has yet to be a high level of adoption across the retail industry. As you consider your loss prevention program, consider leveraging technology along with expert services to best combat shrink at your organization.
At HS Brands, our cost-effective, results-driven loss prevention solutions are designed to take an objective approach to combating shrink for retailers across the globe. We’ll work with you to build a complete loss prevention program—from audits to program and policy development—to meet your goals and protect your brand. In addition to loss prevention, HS Brands offers mystery shopping and royalty assurance services to provide holistic assessment and verification of your expectations.
Contact HS Brands today to see how we can prevent and reduce inventory shrinkage in your organization.
Director of Business Development & Marketing
HS Brands Global
Raymond Esposito has over 28 years of loss prevention experience, working within the department store, specialty, and grocery segments of retail. He has developed loss prevention programs for over 125 retailers in the U.S., Canada, and the United Kingdom. He holds a bachelor’s degree in psychology from the University of Connecticut and is an expert witness.