How to Reduce Retail Shrinkage by Two Thirds? Concentrate on Shoplifters and Staff

15 minute read

Shrink, shrinkage – a situation in retail where the shop actually has fewer goods than recorded in the inventory. Shrinkage can be attributed to shoplifting, employee theft, destruction of goods, vendor fraud or incorrectly entered data.

Shrinkage has always been a headache for merchants. The story that follows describes how to achieve the most noticeable result with the least effort. Let’s just start by saying that if you can concentrate equally on shoplifting and your staff, you’d probably still have those two-thirds of your stock.

Standard Market opened in San Francisco in September 2018 looks like shoplifter paradise. There are no shopping carts. You can place the items you buy directly in your bag and leave the shop unobstructed. And it really means unobstructed – the only thing separating the stacked shelves from the street is just a door. The store doesn’t have a single cashier-staffed checkout or self-checkout machines. In fact, there isn’t anything reminiscent of a checkout. There’s also no standard security system that would start blaring when someone tries to leave without paying.

But San Francisco isn’t handing out free stuff. The concept for the new store was developed by Standard Cognition. The system that relies on twenty-seven cameras and AI has to understand whether a person is just looking at an item, will put it back on the shelf or in their bag. The cameras record and the software analyses the movements, movement speed and stride length of the customers and how they look at the items. The price of the goods the customer takes along will merely be added to their phone bill. Granted, the system isn’t perfect. Several items picked up by the first few customers weren’t registered, but the system is continually improving. If everything goes according to plan, then the first announced customer, Japanese Paltac Corporation, should implement Standard Cognition’s system in the local 3000 drugstores by the Tokyo Olympics in 2020.

However, the innovative Standard Market isn’t only an added comfort for shoppers – its AI also looks out for potential shoplifters. And that is a far greater innovation than keeping track of purchases.

A person’s body language will almost always betray the intention to shoplift. Among else, a person’s walking speed and stride length will change and they will start looking more towards the exit. Other signs may also betray ill plans, e.g. monitoring the behavior of staff instead of looking at the goods, repeatedly entering the shop without buying anything, etc.

The system’s AI will inform the security guards whenever it notices someone behaving suspiciously. As such, Standard Cognition can expect their software to become a worldwide sensation in retail. The shopping comfort and anti-shoplifting qualities offered by the tech have the potential to become something truly sought after.

According to research, shoplifting is the primary cause of retail shrink.

 

A New Level in Shoplifting
– Who Should You Fear?

About six billion shoplifters are arrested globally every year. And these guys work fast! Only in the UK, shoplifters (along with the staff) will cause twelve million (!) pounds worth of damage to shop owners every day. The shop owners have included these losses in the prices, which means that this costs the average consumer $180 a year.

Trend 1: Following the Example of Celebrities
Shoplifting statistics reveal two troubling trends. Very few people shoplift because they’re going hungry. Increasingly more well off and generally honest people shoplift. Celebrities who can’t even reasonably explain why they shoplift are only the cherry on top. Winona Ryder, who played the lead in Edward Scissorhands, was convicted of stealing $5,000 worth of designer clothes in 2002 while Lindsay Lohan was caught stealing a $2,500 necklace. The reasons behind their behavior may be a lot of things but not a lack of money.
British celebrity chef Antony Worrall Thompson paid £180 for champagne but stole £4 worth of coleslaw. “How ridiculous and how stupid,” apologized Thompson later.

Trend 2: Gangs
A significantly bigger problem is the increased activity of professional and gang-affiliated shoplifters. A typical example of organized shoplifting is Kelsey, 22 (name changed for anonymity). She was fourteen when she became a drug addict and a professional shoplifter, just to get by. The woman, jailed for multiple thefts confessed to BBC, “Nine out of ten times, you won’t get caught. And you don’t have to worry about the consequences. Even if you do get caught, you’ll be locked up for four months but released after two.”
Theft in the truest sense of the word (you stuff the item in a bag or hide it under your clothes) is only one way to shoplift. The methods are numerous. A widespread one is swapping price tags.

Retail economics professor Joshua Bamfield write in Shopping and Crime that increasingly often, shop owners come face to face with well-organized gangs. The members of such gangs steal to fund their lavish lifestyle. They’re fast and furious and equipped with knowledge and tech that helps them bypass contemporary security systems. They are bolstered by the fact that most shoplifters go unpunished. This is verified by statistics from a couple years ago from the UK, where only 300,000 of the 800,000 caught shoplifters were handed over to the police; out of those, only a minority were prosecuted.

The Centre for Retail Research’s Global Retail Theft Barometer survey indicates the vast damage caused by shoplifters. The survey is based on data from 800 trade companies from 32 countries. It indicates that shoplifting results in 98 billion euros worth of annual damages; factor in risk management and this amounts to $108 billion.

The table indicates the items stolen most frequently.
Stolen most frequently:

Source: Survey via Cision Canada 
  North America Europe Asia-Pacific
1 Makeup, skincare Alcohol Alcohol
2 Women’s clothes Makeup Makeup
3 Perfumes Women’s clothes Women’s clothes
4 Alcohol Perfumes Perfumes
5 Designer clothes Razor blades  More expensive food (cheese, meat, etc.) 

 

How to Effectively Combat Shoplifting?

If you think that experience and a gut instinct developed over time help you combat shoplifters, you are correct! But believe us, it’s best to stick to the tried and true.

  • The easiest method – greet the customer at the door. This simple method shows the customer that he is not anonymous and has been noticed. But don’t let yourself be guided by ethnic, age or other stereotypes related to shoplifting.
  • Signs that warn against shoplifting. While these don’t avoid theft, they do indicate that the problem is being dealt with. However, keep the signs minimal lest you want to scare off the honest customers. It’s wise to place the signs high up below the ceiling – the thieves will notice them because they’re going to be checking for security cameras. Don’t forget to draw eyes on the sign (see chapter 3, “How to Deter a Thief”).
  • Carefully plan the layout of the store and maintain order. It’s more difficult to steal neatly and logically displayed goods. Display smaller items near the checkout and more expensive ones in a display case.
    Get rid of blind spots that are out of the view of staff and cameras.
    Use mirrors to get rid of blind spots cheaply and easily. Don’t spare any expense on lighting. The dimmer the lighting, the easier you’re making it for the thief.
    Security cameras – the more cutting edge, the better (see chapter 3, “How to Deter a Thief”).
  • Don’t allow your staff to congregate around the checkout, leaving customers in some parts of the shop feeling unsupervised.
  • Talk to the owners of nearby shops. They might have good pointers for dealing with thieves.
  • Implement strict rules – e.g. customers must inform a member of staff before heading to the changing rooms and are only allowed to bring a certain amount of items at a time.
  • Use high-quality software. For example, Erply provides seamless checkout and inventory integration, giving the staff an immediate overview of how many items are in stock and how many have been sold.

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