Latest / The Retail Podcast / Part 1. Unpacking the $100 Billion Shrinkage Challenge

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Part 1. Unpacking the $100 Billion Shrinkage Challenge · The Retail Podcast

• 0:00
  Hello, Welcome to a special three-part episode where we talk
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  about the biggest problem in retail right now, which is
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  theft. With US retailers like Target
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  and Walmart Home Depot grappling the rising inventory shrinkage
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  leading to significant profit losses, this issue has cost the
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  industry over $100 billion, double that of 2015.
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  Increased theft incidents, either violent ones, are
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  prompting measures like surveillance plexiglass.
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  However, balancing security with a seamless shopping experience
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  is an ongoing debate. In the United Kingdom, the Coop
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  reported its highest ever levels of retail crime, with over
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  175,000 incidents in the first half of 2023.
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  Over the next three episodes we'll take a look of the problem
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  of shrink or theft, talk to experts in the field and look at
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  real life solutions on what retailers can do to protect
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  themselves from the etab offices in the UK.
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  I'm joined by Leandro Blank. Who better to talk to about such
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  an important problem in retail than the experts?
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  Leandro, welcome to the podcast. What I'd love to start by doing
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  is getting your view on what is lost.
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  First of all, thank you Annex for having us in the in the
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  podcast. I would say that Nos.
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  It's a very broad concept. That nowadays we are seeing lot
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  of noise and lot of news around fast specifically, but it's
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  actually a bigger challenge for retailers which includes from
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  the loss that happens in during the process supply chain
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  inventory, stock error in the process of accounting and
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  pricing. It also includes product waste
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  and spoilage. So all the product that it goes
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  out of stock because the expire date has reached.
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  And then the third, Peter, is the the theft, which is now the
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  most hot topic in the press and the news and everywhere but we
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  see in theft, we can also split it into two different
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  categories, organized crime and what we call opportunist theft.
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  It's a client that goes to the store, sees an opportunity,
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  doesn't scan, doesn't pay for something.
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  You see that he can he or she can get away with that.
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  And then they repeat that I becomes a behavior.
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  Yeah. So these two aspects are
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  different. Within this theft pillar of
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  loss, is there one that causes more of a headache for
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  retailers? Is there one that's prioritized
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  when you're talking to retailers?
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  I guess all of them are in the agenda.
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  But what we are seeing is that specific specifically theft,
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  it's in the rise, right because of the dynamics that we are
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  seeing now in the in the current economic situation.
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  So rising cost of living, the diminishing margins from the
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  retailers are making this theft the one that it's now becoming
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  the really hot topic because it's in the rise.
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  The other tool, for example the process, the ones related to
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  processes or the one related to product waste are more or less
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  being managed by the retailers. But the one that it's purely
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  related to theft, that's the one that it needs to be put under
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  control at the moment. So can it be put under control
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  in reality? Can you really help retailers or
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  is it just marketing? It can be put under control.
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  There are some initiatives going on as everything in life.
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  With everything that is an upside and then downside, sure.
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  So every initiative, every solution we have a trade off.
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  So I think that the challenge remains how to mitigate the
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  risk, yeah. Theft without stopping trading,
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  yeah, because that's in stores are there to enable trade.
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  So if you put lots of barriers and lots of products behind the
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  cabinet counters when they closed in cabinets, then yeah,
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  you're going to reduce loss where you're impacting sales at
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  the same time. So that's I think for me the
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  main challenge how to put theft under control and mitigate the
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  risk, Yeah, but at the same time I'm what I was going to say
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  improve the customer experience, but at least don't make the
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  customers don't have any work on it, right.
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  I don't make it worse. It's.
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  Not make it worse. Yeah, because it's interesting
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  because again, the NRF report that focuses in and and in the
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  UK, the Federation of Small Businesses has also they
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  launched a report in July about what are for small shopkeepers
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  or small medium enterprises, how much of a problem it is for
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  them. And obviously they're asking for
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  change in the UK law as they are in the US to make any type of
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  shop crime more than petty theft, which is the way they
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  look at it. But this whole thing about
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  friction and having the right amount of friction to prevent
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  theft or the right amount of friction to allow a great
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  customer service. What I found interesting when I
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  was reading the report and some of the solutions had to mitigate
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  was this whole concept of, you know, capturing live video and
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  then using AI or this new world of AI and data to help store
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  staff get themselves out of positions of danger.
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  Exactly, because that's the other big problem is no retailer
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  wants their associates to be in danger.
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  I just wondered if you have any thoughts on that in terms of
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  best ways to help retailers. So we understand the problem,
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  but what is the solution? That there is no one single
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  solution for every retailer and there is no one single batch
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  point that will solve all the problems.
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  Yeah, So what we see that works. Is that, first of all, each
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  retailer has a different dynamic, different operating
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  model and so we need to approach every retailer as a new
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  development. So we will end up with a bespoke
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  solutions for every retailer based on their need, on their
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  specific dynamics and their specific customer experience
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  that they want to deliver to the client.
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  So just working from your experience, when you're talking
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  to these people, what is that one thing that they come to you
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  with? Like, I know everyone's
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  different, but yeah, are they? Is it theft as a problem in
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  general that's driving their conversation with you right now?
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  I think that now the main challenge that we're seeing is
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  that, but it's not really a measure of loss, right?
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  Where it's happening in which products when, So there is lack
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  of information. Got you.
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  So I think that. 1st, we need to start there.
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  We need to understand where is loss happening and once we will
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  understand that, then we can propose a solution.
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  It's really hard to measure the absence of something, so losses
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  something that it's not there. So our approach is probably
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  measuring the when we can convert a potential loss into a
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  safe opportunity. Yeah.
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  So that's something that it can be measured and can be then also
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  put in the in a in a. Highlight within the
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  organization because everyone understands the language of
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  sale. Yeah, in a retail environment
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  because until now I think loss was more on the on the back end
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  was a for the loss prevention officer somewhere in the back
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  and very isolated from the rest of the of the organization.
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  Yeah. But when you translate that into
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  a sales discussion, how we can by preventing laws and loss,
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  actually it transformed that into a sales opportunity.
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  Then that is that something real?
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  I mean does that like? Just to give one example, yeah
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  non scan and attempt and it says checkout.
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  Yeah, if we can convert a non scan attempt into an that's a
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  sales, right, but you're. Transforming, and in that case,
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  is that that's an innocent mistake that someone may have
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  made, but the retailer will lose anyway.
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  Or or innocent. It only broke.
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  Yeah. Interesting.
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  Interesting. Why are they focusing on it now
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  when it's been around for so long?
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  Since there is written, there is loss.
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  So it's been always a problem until now is budgeted and it was
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  in the P&L, somewhere in the P&L.
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  But now there are two dynamics as I I I said it beginning that
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  I'm putting this on the hotspot on one side notice increasing,
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  yeah, on the other side profits are going down, margins are
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  going down. Yeah, so now.
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  Reducing loss has become a pocket loss margin, the pocket
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  of growth for the retailers. So nowadays actually investment
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  in loss prevention initiatives is his number one investment.
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  The other thing I hear and and I'm sure retailers are probably,
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  you know, when you go to any trade fair, you see loss
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  prevention through computers, loss prevention through AI, loss
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  prevention through data, loss prevention through dates, Los
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  prevention through pause. Where do you start?
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  How do you how do you tackle this problem?
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  Every single problem might be tackled with a touch point with
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  a single touch point. But the the real value to really
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  address loss in a holistic way and with a multi dimensional
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  approach because loss is a multi dimensional problem is by
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  connecting all these dots together.
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  So and not only the touch points that are related to loss
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  specifically like a vision technology could be, foot fault
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  could be, transactional data could be.
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  Time of day, weather. So all the data points that we
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  have, we have around and written store.
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  If we connect all those together, we can extract the
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  patterns on the data that could give us insight and we copilot
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  to the store manager to know when something could happen.
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  I think that's where the value lies.
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  That sounds like science fiction.
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  I mean like, I mean I love the idea of Copilot and and you know
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  which business doesn't want to enable their store manager,
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  their store associates to help them.
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  I mean NRF for example. Again the the report said one of
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  the pieces of advice that they give to the executives or the
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  retailers, do not ask your colleagues to engage, record the
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  incident, gather the data and in the US they're trying to share
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  the data. But I mean how does that?
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  Is there a way of bringing it all together?
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  There is. We're working on initiatives.
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  But rather than me talking about it, yeah, don't you come to our
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  office in the showroom in in Sweden and you can see it for
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  yourselves. I sound fantastic.