NRF 2023: How AI Can Help Retailers Avoid Losses

“Sleeve atrophy” in its various forms

Inventory loss or retail shrinkage can occur in the form of shoplifting, supply chain and shipping theft, fraud, and even organized crime. Products can be stolen in seconds, but AI works faster to prevent loss.


According to Forbes, 37% of retail store shrinkage comes from outside theft, where items are stolen from shelves. “We have sophisticated security systems in place, but we still see a lot of robberies. If you have a product of value, people will want it,” said Antoine Tessier, CTO of Louis Vuitton Moët Hennessy Americas. David Shoop, Senior Vice President of Technology, Stores, Corporate Services, Professionals and Services at Lowe’s Home Improvement, said shoplifters are targeting “products with high market value, such as power tools.” While theft has increased during the pandemic and difficult economic times, “some products are more susceptible to theft. It is a hot item,” he added.

employee dishonesty

NRF’s experts noted that employees are stealing cash more frequently, such as making fake return calls, improperly using employee discounts, and stealing cash from point-of-sale systems. There’s also a new trend called “sweethearting,” in which employees shoplift as a favor to a repeat customer or crush. The NRF survey explains that this usually happens via ticket or product conversion. The cheaper items are scanned while the staff presents the more expensive items without scanning.

Supply chain and delivery theft

On any given day, products move through a long and elaborate supply chain reaching between 3 and 10 distribution centers, depending on the retailer’s size and number of stores. Employees and third-party couriers often steal products while they are in transit. And Tessier pointed out that shipping theft is another form of inventory loss. “Despite tracking, many deliveries are currently being stolen,” he said.

Dig deeper: Learn how retailers are using AI video to prevent loss at checkout.

Returns and Seller Fraud

Return scams are often overlooked, and occur when stolen goods are purchased with counterfeit money or receipts and then returned. Experts said vendor fraud isn’t common, but it still happens, with employees creating false vendors and invoicing them to pay themselves directly.

organized crime

“Most thefts are not theft of ordinary things. It’s organized crime,” said Mark Mathews, NRF’s vice president of research and development and industry analysis. Shoop of Lowe’s concurred: “There is no brick-and-mortar retailer that has not faced organized crime.”

The NRF’s latest survey figures reflect this assessment, with 52.9% of retailers reporting an increase in organized crime. NRF’s speaker recommended that retailers build organized retail crime teams that can leverage AI tools and study criminal behavior. So far, the NRF reports, about one-third of retailers have dedicated teams.

$94.5 billion

Amount of retail inventory lost to theft in 2021

Source: National Retail Federation, 2022 Retail Security Survey, September 2022

AI technology solutions to fight loss

AI-powered video analytics at POS and self-checkout terminals, sensory heat maps, cash automation technology, and autonomous security robots are just a few ways retailers are addressing these threats. Fast Retailing CIO Takahiro Tambara said, “This is a classification game and needs to be safeguarded.”

But Andy Szanger, CDW’s Director of Strategic Industries, hopes that advances in AI will help retailers get defensive and proactive. “AI helps us make better and faster decisions,” he said. “It also allows retailers to take things like cameras that have always been in retail to the next level.”

Here are a few areas experts have identified to help retailers step up their loss prevention efforts:

  • cash automation technology. Retailers can use smart vaults and cash recyclers with personalized employee PIN access to monitor cash movements in near real time with advanced reporting capabilities. Close-date sales reports are more accurate when machines do the math.
  • AI video at the point of sale. Strategically placed AI at checkout counters can capture the weight and size of items and instead detect whether cheaper items are being scanned. Retailers can also use enhanced video surveillance cameras that combine AI and data analytics to monitor behavior and in-store movement. “By linking video data to POS transactions, we can prevent theft and leverage more insights,” said Szanger.
  • RFID system. Radio frequency identification tags with built-in sensors can alert retailers to theft.
  • In-store heat map. Retailers are testing new heat map systems powered by thermal imaging technology, which uses thermal technology to map emotions onto the body with color. Red, for example, indicates that you are angry or anxious. Retailers can also identify the busiest areas of a store to count customers, identify popular products, and track patterns.
  • Autonomous Security Robot (ASR). Some retailers are testing automated guards for surveillance and security work. Combining autonomous driving technology, robotics, and AI, ASR can patrol an area, report, monitor, investigate, and detect intruders.
  • license plate reader. A license plate reader can scan, track, and identify whether a car has repeatedly visited the store, and can record whether others have gotten out of the car and stolen something. This is especially useful for detecting organized crime and indicates when certain people can be linked.

Discover: Discover the hottest retail tech trends for 2023.

Embrace intelligence-driven loss prevention systems

Intelligence-driven loss prevention systems are helping retailers prevent theft, and many retailers are increasing their budgets to invest in this technology. For Tessier, this investment is critical because it’s about protecting customers as much as the product. “It is important to maintain a sense of security and safety in the store,” he said.

For these and other reasons, experts at NRF have urged retailers to adopt intelligence-driven loss prevention systems, and this trend is expected to continue. “We cannot stop innovating in retail. These prevention systems can be considered as another kind of innovation or progress,” said Tambara.

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