Curbing retail theft
Retail theft is on the rise and The Home Depot and Lowe's are fighting back with technology and product cages
Tue Jun 20 2023
The US-based National Retail Federation (NRF) estimates that inventory shrink - the industry phrase for missing inventory - accounted for nearly USD95 billion in losses in 2021, up from USD90.8 billion in 2020.
While shrink encompasses a variety of inventory loss - including customer and employee theft, administrative errors, and damage - theft by organised retail crime drove 2021's increase, the NRF said. The groups behind this type of crime consist of professional shoplifters who resell stolen merchandise at cheaper prices, often on third-party marketplaces, which became more prevalent following the pandemic-era e-commerce boom.
With theft eating into margins and affecting employees and customers, retailers are now looking for ways to tackle the problem.
Some companies are attempting to avoid the issue by closing stores in places with higher shrink levels. Those that stay are investing in new loss prevention strategies. Close to half of retailers said their loss prevention budgets expanded in 2022 compared with the previous year, according to a recent survey conducted by the NRF.
Retailers have also been bulking up their security teams and hiring private security companies or off-duty police officers. Nearly 40% of retailers said they hired more people to their loss prevention teams in 2022, the NRF found. Some companies are also doubling down on policies that prevent store employees from engaging with shoplifters to reduce instances of potentially violent encounters.
Others are investing in theft detection technology. The Home Depot, for instance, is spending more on machine learning and data analytics tools to identify which regions or product categories are most at risk, said CEO Ted Decker at the company's annual shareholder meeting in May.
At the same time, the home improvement retailer has resorted to locking items away in cages in an effort to combat theft. It started locking more expensive items like power tools behind cages in January, according to news reports. Locked up products now include less expensive things like phone chargers, work gloves, and shower drain covers.
Shoppers have to request the assistance of a worker, who will then open the cabinet. Customers have complained about the length of time it can take to retrieve items.
The anti-theft policy has been rolled out across all Home Depot stores in California. It comes after Scott Glenn, vice president for asset protection at The Home Depot, issued a warning about shoplifting and theft. He has said:
Organised retail crime is what I call theft for greed, not theft for need. [But] they don't just come to a Home Depot and then decide to go home ... they go to Target, they go to Lowe's, they go to CVS, they go anywhere.
Home Depot has investigated roughly 400 cases of suspected organised retail theft in the past year alone - which is more than one shoplifting scenario at its stores every single day, Mr Glenn said. As a result, the home improvement retailer loses "billions of dollars a year".
The retailer is locking up more products to prevent this from happening.
RelatedHome Depot testing technology to combat organised retail theft - HNN Flash, April 2021
One of the most popular loss prevention technologies is RFID (Radio Frequency Identity), which uses radio waves to identify objects that have been tagged with special readers. This is especially useful to track high-value items, said Matthew Guiste, Global Retail Technology strategist at Zebra Technologies.
AI-based video analytics software is another popular tool, as it helps retailers recognise repeat offenders or potential threats at checkout counters or in parking lots.
Major Australian retailers like Woolworths and Bunnings are using AI, in the form of software called Auror. Auror chief executive Phil Thomson says the software is used to catch shoplifters. He told ABC News:
There are different tools that a retailer can choose to use. So, with an image, once that's uploaded into the platform, that can then be referenced across crimes reported today, to see if it's the same person who's committed those other offences.
Mr Thomson said the AI is powerful enough to spot crime and send alerts to security staff in real-time - but only if it detects wrongdoing.
For a general customer, they would have no interaction with Auror at all, so they wouldn't be impacted by it.
Lowe's Innovation Labs and Asset Protection teams have been collaborating on Project Unlock.
Project Unlock is designed to tackle the theft of powered products - in Lowe's case, power tools - in a way that is virtually invisible to retail customers. Products are embedded with an RFID chip and are set to inoperable. When the item is purchased at a store register with a point-of-sale RFID scanner, the item is unlocked and ready to use, ensuring that only legitimately purchased products are activated. If it's stolen or not unlocked, the product won't work.
To work, manufacturers would first have to embed a wireless RFID chip into a power tool product. The chip is already preloaded with the item's serial number. It is also embedded in the box's barcode. Lowe's chief digital and information officer Seemantini Godbole told FOX Business earlier this year:
Customers don't do anything different. If the tool was legitimately purchased, it will be ready for use the moment you walk out of the store.
The process is essentially "invisible for the customer," she said.
They should not even know that there's anything extra happening.
Once a customer purchases the product, the transaction will also be recorded on the blockchain. This record, which doesn't involve any personal data, can then be used by retailers and law enforcement officials to validate an authentic purchase.
Ms Godbole said this system isn't meant to necessarily replace asset protection teams but rather help them "combat this [organised retail crime] more effectively" without putting associates in harm's way, she added.
Lowe's has seen a 180% increase in acts of violence against staff and customers in stores since 2020 and a 77% increase in weapons-related incidents over the last year.
In response, Lowe's has put in place several security solutions to keep people and products safe from criminals, creating an organisation-wide, collaborative ecosystem to detect, deter and respond to thefts and violence. Luke Moeller, senior director of asset protection (AP) operations said:
We need to have a multi-faceted approach to make an impact on Lowe's. There's not one solution that will solve all the problems.
The outside of each store has robot parking lot patrols, security towers, integrated CCTV and camera platforms that use analytics to identify vehicles, not just plates. Vehicle analytics has been particularly useful, Mr Moeller said. Within the first 60 days of deploying the technology, the AP team was able to close 478 active cases.
Post-incident prosecution is also a major strategy for Lowe's, Mr Moeller explains.
If we can't deter and we can't respond, we let it go. This is part of our strategy. We want to make sure we keep associates safe first.
Collaboration with the IT department and CCTV helps identify criminals for post-incident prosecution. Mr Moeller said:
When we first started this project, we got 50 of our 1,700 stores done, and wired up with cameras. When we started working with our IT partners and truly allowing them to take the reins, we had 650 stores done in one year.