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By: BRANDON RAEL

The Concerning Impacts of the Rise of Retail Theft

Let’s begin with some eye-opening facts behind the concerning developments with retail theft, the impacts on the retail pharmacy industry, and the unfortunate fact that retailers are starting to abandon major US cities:

The Rise of Retail Theft

  • The increasing threat of retail theft cost the retail industry $112.1 billion in losses last year, a 19% increase over 2021 levels, according to a new study by the National Retail Federation
  • Retail Pharmacy operations responded quickly by putting those items behind glass, only to find that what was intended as a theft-prevention measure, ironically, has turned into a sales-prevention one
  • An executive for a firm that supplies anti-theft devices to Walgreens said locked cases can result in a 15% to 25% loss in sales
  • Fundamentally, there is a loss of psychological safety and security and also raises concerns with customers that shopping there may be a dangerous experience
 

The Acceleration of Retail Pharmacy Store Closures

  • CVS, Walgreens, and Rite Aid are forecasted to close nearly 1,500 Stores in the next few years
  • CVS says it will close 900 stores by the end of 2024 – 10% of all its shops – as it moves to an online strategy amid a rampant increase in shoplifting
  • This realignment is based on an evaluation of changes in population, consumer buying patterns, and future health needs, according to CVS

The Mass Retail Store Closures in Downtown San Francisco

It’s very distressing to see such prominent cities such as Chicago and San Francisco experiencing with retailers and grocers having to close locations due to mass theft, a lack of safety, and the infrastructure required to run a safe retail operation.

  • Big brand names have been frequently leaving the city due to a drop in traffic and widespread crime
  • Out of 203 retailers open in 2019 in the city’s Union Square area, just 107 are still operating, a drop of 47 percent in just a few pandemic-ravaged years
  • An employee at a Target location said earlier this year it was being robbed as often as ‘every ten minutes.’
  • This will perpetuate the challenges we are experiencing with underserved communities and now with major cities
     

“Plexiglass as a Strategy” at Retail Pharmacies

This is shocking and essentially a bandaid on a much more significant retail crime challenge.

 

As long as shoplifting and retail crime continue to be considered a misdemeanor, misguided strategies such as putting every item behind locked plexiglass is essentially a race to the bottom.

The retail pharmacy sector, in particular, was already challenged with a lack of positive customer experiences, and it’s full of tons of the wrong kind of friction. It’s already almost impossible to find any customer support in a typical CVS and Walgreens, as most associates are filling prescriptions, administrating vaccines, or there is a single cashier checking people out.

Now, we will have to find someone to open the shelving units and entirely depend on a skeleton staff throughout the process. This is a disaster waiting to happen.

This is not the way and will only perpetuate the problem.


The Virtual Arms Race Against Retail Theft

Costco WholesaleLowe’s Companies, Inc.Best Buy, and Tractor Supply Company Supply are winning the battle against retail theft in a strikingly similar way.

In recent months, dozens of retailers have warned investors that an increase in inventory shrink, driven primarily by retail theft, is taking a bigger bite out of profits this year. Taking a deeper dive, it’s clear that these four companies have several striking similarities and qualities that are helping them win the war on retail theft.

Store location and layout

  • Both Lowe’s Marvin Ellison and Tractor Supply’s Hal Lawton said a lower population density contributes to lower incidents of theft compared with busier locations
  • With the exception of Lowe’s, three of the four companies use a similar entrance and exit strategy that funnels every shopper past employees at cash registers or security checkpoints

Big, heavy merchandise

  • Many of the merchandise these four retailers sell is too unwieldy to be conveniently stolen
  • Whether it’s a 96-pack of toilet paper from Costco, a flat-screen TV from Best Buy, a lawn mower from Lowe’s, or a gun safe from Tractor Supply, it’s often hard to be discreet (or quick) in leaving the store with merchandise

Secure displays

  • For smaller or more expensive items, all four retailers aren’t afraid of requiring customers to get help
  • Electronics are often sold at Costco with a pay-and-collect feature before they’re ever placed in a cart, much like Best Buy keeps specific inventory off the sales floor until a customer requests it

Less self-checkouts

  • Another big theme is the way each retailer handles self-checkout, which has been blamed for spikes in theft rates when it is introduced at stores
  • Self-checkout is minimal to nonexistent at Best Buy and Tractor Supply, while Lowe’s has invested big bucks in its asset-protection technology to keep a sharp digital eye on the store

More staff per square foot

  • Meanwhile, a typical Tractor Supply location may have as many as eight people working in a relatively small, 20,000-square-foot store
  • For Marvin Ellison at Lowe’s, the best investment was simple: “Having spent my entire adult life in retail at every level, the one thing I understand clearly is that the greatest deterrent for any theft activity is effective customer service.”

AI to the rescue? Will AI and facial recognition solutions help to mitigate the levels of retail theft?

Considering the increased rates of organized retail crime, preventive measures such as facial recognition capabilities are one of the levers that could be leveraged. Unfortunately, despite the recent news reports and viral social media posts, retail crime is not widely considered a serious enough offense for law enforcement to provide more of a presence in areas that recent thefts have impacted. The last thing we want to do is to put the accountability on store associates, as it leaves them in situations where they could be injured and their livelihoods impacted.

Between all of the capabilities available to mitigate organized retail crime and the level of theft, including cameras, RFID solutions, security tags, potentially facial recognition, and security guards, the most significant challenge retailers are facing is the loss of a sense of safety, comfort, and community that consumers seek when they go shopping.

Suppose facial recognition and AI solution capabilities are going to be leveraged. In that case, retailers must be very transparent on their data retention policies and provide clear documentation on the safeguards around privacy and potentially the challenges around being misidentified.

However, these solutions are only a deterrent and will not mitigate the retail theft rate plaguing the industry. These mitigating measures do not apply to all retail operations, and execution will remain challenging.

Connect with Brandon Rael on LinkedIn.