Organized retail crime, employee theft, and shoplifting are on the rise. Together, they are what retailers call “shrinkage.” A 2022 report found that shrink has grown into an almost $100 billion problem.
To stop merchandise from disappearing and prevent crimes from happening, brands need a new retail loss prevention strategy and the technology to support it.
Growth in Retail Theft
As the fashion retail landscape changes, so do retail risks. But the issue goes beyond e-commerce and omnichannel choices to encompass growth in in-store theft and retail losses. Security executives report a rise in shoplifting, employee theft and organized retail crime, both online and in stores, reaching unprecedented numbers.
The annual National Retail Security Survey demonstrates the size of the problem. In 2018 it was estimated at $50.6 billion, 2019 totaled $61.7 billion, and the number went up to $100 billion in 2022.
Fashion Retail Threats
A. Organized Retail Crime
While retail shrink encompasses many types of loss, it is primarily driven by external theft.
When we talk about Organized Retail Crime (ORC), the proposed definition is “any organized criminal, conspiratorial attack on the retail establishment. ORC involves the association of two or more persons engaged in illegally or fraudulently obtaining retail merchandise…for the sole purpose of converting it into criminal financial gain.”
Organized retail crime has become increasingly organized and sophisticated, and it ranges from local and regional gangs to national and even international rings that employ various methods for in-store theft.
Recently, CNN reported on the escalation in organized group robberies across the U.S. In these cases, violent organized criminals target a fashion store, such as luxury handbags, rob it, and resell the stolen merchandise on online marketplaces or selling apps as legitimate goods.
B. Shoplifting and Employees Stealing
Retailers attribute inventory shrink mainly to theft, both internal and external, as found in the 2022 National Retail Security Survey. Internal and external theft includes organized retail crime and shoplifting by customers and employees, as well as employee dishonesty.
Employees at point-of-sale, either working alone or for organized crime groups, can intentionally not ring an item, ring up a lower-priced product, give others their employee discount, etc. They can also overlook theft or even take part in it, making it even harder for stores to combat.
The same survey found fraud to be a major source of loss, including in-store fraud, e-commerce fraud, and omnichannel fraud.
A common tactic involves criminals stealing items from stores and returning the stolen merchandise for a refund. Since they have no receipt, they usually return the items for store credit. They then cash these on secondary markets, mainly online.
Another common tactic is ticket-switching or product-switching. Here, criminals use the tag from a less expensive item in place of the one for the more expensive item.
D. Cargo and Supply Chain
Retailers indicate they experience cargo theft across the supply chain: in stores, en route from manufacturers to distribution centers and from distribution centers to stores, at distribution centers, third-party centers, and even en route between stores.
E. Omnichannel Retail
New services such as buy online, pick up in-store (BOPIS), buy online, return in-store (BORIS), buy online, pick up at curbside (BOPAC), in-store self-checkout, and others help retailers adapt to an omnichannel retail landscape and increase sales. They also introduce new risks and threats as offenders find new ways to steal or defraud retailers.
In a BOPIS scam, for example, scammers can purchase their item online, go to the store to pick it up, and cancel their order immediately after pick-up.
Online vs. In-store Threats
To mitigate the growing shrink problem, fashion brands must combat all challenges, digital and physical.
To proactively eliminate cybercriminals and e-commerce fraud, brands can adopt online security measures. As for physical merchandise, new technologies can help protect them from theft and loss in the factory, en route, at distribution centers, and perhaps most importantly – inside brick-and-mortar stores, including omnichannel fulfillment options and returns.
Although the issue of in-store retail loss prevention may seem overwhelming and difficult to solve, patented technology by Nexite introduces a new retail anti-theft system based on effective strategy and advanced capabilities that establish a wholesome solution for retail loss prevention. But first, let’s review the current retail anti-theft landscape.
Current Retail Anti-Theft Systems
Theft prevention has not changed in the last 50 years and remains based on detecting theft “at the gate”. The gates are located at the store entrance/exit points, either in plain sight or hidden.
Today’s retail anti-theft devices are usually based on an EAS System (Electronic Article Surveillance) or RFID technology, yet the idea is the same.
The highly popular EAS systems generally work by attaching an EAS tag to each item and placing antennas at the entry and exit points. When an item with a tag that has not been removed or deactivated passes a surveillance area, it triggers an alarm. Active RFID systems rely on a power source that enables the tag to transmit radio signals and identify each item, yet it still activates at the gate.
This strategy has a crucial flaw of having no real-time eyes in-store (or en route for that matter). The security-at-the-gates approach is also becoming less effective as criminals have learned how to overcome it. Moreover, with the increase in aggressive retail crimes, it’s increasingly difficult to stop people at the gate when the alarm goes off.
The more productive course of action should aim to prevent crimes from happening through employing in-store technologies.
Stop theft, reduce shrinkage
To face the growing challenge of loss prevention, retailers are looking into incorporating technology- and intelligence-based retail loss prevention systems that can help them detect, investigate, and mitigate losses.
A new patented solution is a game changer in merchandise loss prevention.
Uniquely fit for fashion retailers, Nexite has incorporated EAS security into a Nano Bluetooth tag with an advanced chip that turns connected merchandise into live communicators, with real-time data flowing at all times, directly to headquarters and staff devices, and the Nexite cloud platform.
NanoBT tags have higher accuracy and longer range when compared to RFID, supporting crime prevention, investigation and diagnosis capabilities. They are also battery-free, less expensive and longer-lasting than existing RFID tags.
Disruptive Anti-Theft Technology
Nexite changes the game in three ways:
1. Real-time alerts
The NanoBT tag delivers anti-tamper capabilities, so you can identify in real-time if somebody interferes with the security tag while pinpointing the item’s exact location.
Let’s say someone takes clothes into the dressing room and pulls the tag off. Although not visible, a store associate is immediately notified that a tag has been removed in the fitting room. Now the store can decide how to address the issue. A store associate can stand outside the fitting room and talk to the person, or call security.
While regular security tags can be removed and you just don’t know, Nexite nano tags enable retailers to identify theft and prevent it before the gate.
An even more preventative approach to higher-risk items can be for associates to get real-time alerts when someone engages with the item so they know when to pay more attention and prevent theft.
2. Real-time Prevention
Applying real-time in-store data, brands can use machine learning to identify more complex patterns of merchandise behavior that may be associated with theft events and instruct store staff on how to act in these cases. It can be as simple as engaging with the customer (“can I help you?”) or having an employee or security hovering nearby.
On top of minimizing loss, crime prevention means customers are less exposed to in-store theft. It creates a safer retail environment for customers and promotes brand trust. Another benefit of the Nexite system is the elimination of false alarms, contributing to a better shopping environment.
3. Accurate Investigation and Diagnosis
External theft and fraud by organized retail crime offenders are a growing concern among retailers. To face such crimes, retailers can investigate and prosecute, but these are not easy to do.
Nexite aids in the investigation of theft events by pinpointing when and where in the store the theft happened. This information can then be used to cross-reference security cameras and create a database of offenders.
Nexite’s System can also be used to identify products, locations, and times when the store is most at risk, so it can take adequate preventative measures.
On top of the above, the Nexite anti-theft system is automatic, intuitive, and seamless, requiring no manual labor and almost no training.
The Nexite Edge
The move from gates-only to store-floor is highly effective. Having item-level visibility in stores creates a better retail anti-theft system, stopping theft before it happens, all thanks to the Nexite tech.
Automatically communicating their real-time location, the patented long-range and battery-free nanoBT tags are embedded in each clothing item, providing anti-tamper and anti-theft protection and a frictionless customer experience. The comprehensive Nexite retail anti-theft system is easy to incorporate and does not require significant investments, efforts, or training.
On top of being a game-changer in minimizing theft, the Nexite solution has a host of disruptive benefits, from real-time inventory to real-time retail analytics, consumer behavior insights and seamless checkout and returns. It’s retail at its best: robust merchandise protection paired with an all-around better customer experience.
Further reading: Connected merchandise case study