Tackling retail crime has become a whole lot more sophisticated in recent years, as Stephen Wynne-Jones reports. This article first appeared in ESM’s January/February 2025 edition.
Within any retailer’s network, you’ll find both standout performers and underperformers – stores that exceed sales expectations, week in and week out, and those that barely turn a profit, if at all.
In many instances, shrinkage plays a key role in store performance, and with incidences of shoplifting and retail crime on the increase, the industry is having to rethink its approach, in order to ensure that operators can trade safely and profitably.
The ECR Retail Loss group, which works with retailers across Europe, has proven an effective ally in areas such as food waste monetisation and expiry date visibility, as well as tackling retail crime.
The group recently outlined a number of risk mitigation principles, to underpin retailer loss prevention, and asset protection strategies, backed by a benchmarking tool organised into seven key strategic principles – data, people, control, offenders, guarding, monitoring, and joining forces – to evaluate progress in this area.
This followed on from the publication of a report, Fortress Stores: Keeping the most at-risk stores trading, published in 2023, which focused on the ‘most at-risk’ stores, i.e. locations that are of the most concern to retailers.
In some US retail outlets, for example, shrink rates can run as high as 8% – as much as four times a store’s gross profit.
Understanding Risk
“What we know is that risk doesn’t spread evenly,” Colin Peacock, group strategic coordinator, ECR Retail Loss, tells ESM. “When you have a group of 500 stores, some will have high levels of shrinkage, high levels of staff turnover, be in a difficult area, or might be in a format that is inherently riskier – perhaps due to its design or its vulnerability to crime.
“Retailers tend to categorise their stores into high risk and low risk, with many also having a middle tier, but they also have stores right at the top of that list, where the levels of loss, risk, and safety issues are so significant that it puts them on the edge of not trading.”
In such situations, the options for retailers are generally reactive, investing significantly in security systems, for example, or just cutting their losses and closing down altogether.
“Let’s throw everything we’ve got at it – all the cameras, all the security guards – and just hope that some of it works,” as Peacock describes it.
A Holistic View
ECR Retail Loss argues for an alternative, whole-of-business approach, based on cross-functional collaboration between store personnel, HR, security, merchandising and store design teams – in other words, bringing everybody around the table and devising solutions that can have an impact.
“What we’ve been promoting – and what we’ve evidenced – is that taking a more holistic view, involving more functions of the business, is going to be a more productive approach,” says Peacock.
Based on the learnings generated from such an approach, a variety of solutions can be implemented, based on the store type and location.
Personnel-focused solutions could include hiring staff with specific skill sets, such as those trained in customer service in high-stress sectors, taking into account store-specific challenges.
“If you are aware that a particular store is difficult, you should recruit with the context in mind, not just through a generic recruitment process,” says Peacock.
“Look for people who have experience in customer service where safety issues are regular occurrences, such as in hospitality and other sectors.”
Operational adjustments may need to be made, such as altering the trading hours or amending the inventory to reduce the number of high-ticket items on offer – “Or, when you’re thinking about the design of the store entrance, do you go for sliding doors, or doors that you need to push open?” says Peacock.
“Thieves are always going to go for the ones with sliding doors because they’re the easiest to get through.”
In terms of security personnel, this also could involve better integration of security officers into store teams, so that they better understand the workings of a specific outlet.
“For the thief, or the offender, the thing they fear most is the security officer,” says Peacock, “but that security officer needs to be engaged, not just sitting there on their mobile phone.
“What happens with many retailers is that there’s a procurement person in head office working out contracts with third-party security providers, and probably not taking into account that they may need a different provision with certain stores, and more continuity, in order to deliver.”
Choose Your Outcome
This disconnect with head office is another reason why some stores are more susceptible to theft or other forms of shrinkage.
Peacock talks of a major retailer that sat its board of directors down to discuss some problem stores in its portfolio. “The question was asked, ‘Would we have our sons and daughters working in some of these stores?’” he explains.
“The answer was no. So, then the question became ‘Are we happy for other people to work there?’ “Yes, retailers are victims, but they can also choose their outcomes. They have a certain amount of choice: trading hours, store design, barriers, staff training, the people they put in frontline positions, the choices made in their assortment, and the complexity of the proposition they put out there.”
Significant advancements have been made in terms of digital reporting and improving incident-tracking in recent years, however, data is only effective if it is utilised correctly.
As ECR Retail Loss’s studies have determined, under-reporting remains an issue in the retail sector, due to the workload of the personnel involved and a lack of incentives.
Along with establishing KPIs for incident reporting and data accuracy, could retailers be doing more to incentivise staff to report incidents? “There have been tremendous advancements in terms of digital reporting, but, at the same time, a number of incidents – verbal incidents, abuse incidents, and theft incidents – are dramatically under-reported,” says Peacock.
“That’s partly because you have a staff member thinking, If I phone the police, it’s going to take an hour out of my day, and I still have a store to run. “One retailer we worked with – and this comes back to more holistic thinking – gave the store extra hours and budgets to allow for the reporting, so they could recruit more people to fill the shelves while others were completing incident reports and engaging with the police.”
ECR Retail Loss’s benchmarking tool was trialled by four retailers – two in the UK, one in the Netherlands, and one in the US – and largely garnered positive feedback, helping to foster collaboration among team members and provide better visibility on ongoing internal issues.
As one UK grocer put it, “We’re now having the conversations internally that we didn’t know we needed to have.”
Culture Change
Long-term success, however, lies in whether such tools can instigate a culture change when it comes to loss prevention – an approach that could require a step change in thinking from leadership teams.
“The common theme from all the retailers was that [the benchmarking tool] is good, it’s reassuring,” says Peacock. “Over time, once they have used it, we’re hoping that, once a year – or maybe more often – when they review their operations, they’ll start to unpick the knowledge that comes out of this process, and how it applies to their organisation – and then they’ll be able to come up with new ideas.
“I think we’re going to see different levels of adoption, depending on how broad the leadership of the loss prevention function is and how confident they are in being able to approach others and collaborate. It’s not always the case that every leader sees it as an opportunity.”
Self-Checkout Evolution
Self-checkouts have long been another area of focus when it comes to tackling shrinkage. John Fonteijn, director of group asset protection and business continuity at Ahold Delhaize, remembers visiting the US in the late 1980s to witness the first self-checkout units in action – “They were massive machines ... very simple technology” – and while it took several years for such technology to become commonplace in Europe, retailers initially adopted a cautious approach.
“Retailers were very careful in implementing self-checkouts, conscious of the fact that people might abuse this kind of technology to steal products,” Fonteijn tells ESM. “Not only could they steal, but they could also make mistakes – or pretend to make mistakes – so all the risks associated with selfcheckouts were identified at an early stage and included in the business case.”
Self-checkout technology has evolved in the years since, to include cameras, bar code-enabled exit gates, and so forth, which Fonteijn describes as an “ongoing evolution” for the sector.
With any new technology, retailers need to “make sure that the business case is still positive,” he adds. “Is it still efficient? If not, what do we need to do to make sure it is more efficient?”
In France, retailer Le Groupement Les Mousquetaires – home to the Intermarché, Netto and Bricomarché brands – recently turned to a new AI-powered self-checkout solution from Diebold Nixdorf.
The pilot of Diebold Nixdorf’s Vynamic Smart Vision I Shrink Reduction system was undertaken at an Intermarché store in La Farlède, and its success has prompted the retailer to deploy the solution across its store network.
The solution leverages AI technology to analyse customer activity at self-service checkouts in real time, identifying potential issues such as unscanned items, items stacked together, or customers leaving without completing payment.
When a potential error occurs, an on-screen message notifies the customer, while store staff receive an alert on their mobile devices. The introduction of the technology to the La Farlède store saw transaction errors drop from 3% to less than 1%, while cashier interventions decreased by nearly 15%, resulting in faster transactions and better customer experiences.
“We have seen a significant reduction in errors, which eases the workload for our team and improves the experience for our customers,” according to store owner Laurent Hugou. “Interactions between staff and customers have become smoother and more pleasant. After just six months in use, this technology has already become indispensable to our day-to-day operations.”
Organised Retail Crime
The challenges involved in combatting retail theft aren’t isolated to this side of the Atlantic, either, with the National Retail Federation (NRF) in the US reporting a 93% increase in the average number of shoplifting incidents taking place in retail each year between 2019 and 2023, and a 90% increase in dollar loss associated with shoplifting over the same period.
“For the last few years here in the States, retailers have been experiencing a high volume of shoplifting and theft, often associated with violence,” David Johnston, vice president of asset protection and retail operations at the NRF, tells ESM.
“So, while the numbers are alarming, it’s an issue that retailers here in the States have been experiencing for some time, and it indicates that there’s something fundamental driving this rise in theft. It’s not just traditional shoplifting or retail theft.”
According to the NRF’s The Impact of Retail Theft & Violence 2024 study, the findings of which were published in December, close to three quarters (73%) of respondents – from 164 retail brands with $1.52 trillion in annual sales between them – said that shoplifters were exhibiting more violence and aggression than they were a year ago, while 91% said that they were seeing more violence, compared to 2019.
Johnston attributes this trend to several factors, including economic hardship, the impact of the COVID-19 pandemic, drug epidemics, and changes to criminal justice policies that have reduced the number of prosecutions linked to certain types of crime.
Worryingly, 76% of respondents to NRF’s survey said that they had seen an uptick in the prevalence of organised retail crime in the past year, while those that boast the capacity to track organised retail crime said that they saw a 57% increase in incidents, on average, between 2022 and 2023.
“What we’re seeing today are open and brazen acts of theft, where an individual or individuals are walking in and sweeping an entire shelf of products,” says Johnston, “and it’s no longer just high-priced electronics or luxury or designer brands. It’s everyday items – Tide detergent, toothpaste, T-shirts.
“That has caused retailers – because of the high level and quantity of theft – to recognise that the existing security measures, the anti-shoplifting tags, the EAS [electronic article surveillance] systems, aren’t going to stop today’s shoplifter. They’re running right through them.”
No Silver Bullet
Johnston references a popular pharmacy chain in the US that has transitioned some of its stores to a counter service, behind glass, due to the prevalence of retail crime in these areas. “That’s not something that a retailer wants to do,” he notes, “but we’re at a point now where there’s no silver bullet for deterrence, prevention or mitigation.
Retailers have to look at the various layers involved and work out how far they can go with keeping product available for the consumer, but also protected against the thief.”
Other stores have opted for discontinuing stocking certain items – baby formula being one that is regularly stolen – which ultimately impacts the shopper experience and the retailer’s reputation, and potentially drives shoppers to the black market.
“Retailers know that some of the security measures they’re forced to put in place distract and deter customers from shopping in their stores,” says Johnston. “It may drive them online. It may drive them to local flea markets, or a secondary retail marketplace, where the product is plentiful and priced much lower than in the traditional store.
“We’ve even seen here in the States that organised crime groups have altered expiration dates or changed products to then resell, such as adding flour to baby formula in order to create and/or extend it – almost like cutting drugs.”
Legislative Changes
The NRF is one of a host of organisations that has announced its backing for the Combating Organized Retail Crime Act, or CORCA for short, a bipartisan piece of legislation that would see the establishment of a national coordination centre in the US, combining resources from federal, state and local law enforcement agencies, along with retail industry representatives.
Simply by travelling from one jurisdiction to another and given limited collaboration between law enforcement bodies in different jurisdictions, organised retail crime gangs have heretofore largely been able to avoid prosecution. CORCA will seek to close that loophole.
“If passed into law, CORCA will help on a number of fronts,” says Johnston. “It will raise the organised-crime aspect of retail theft to a national level, directing federal agencies to provide investigative resources to state and local law enforcement agencies.
“It will build a centre to help with information-sharing. It will enable state and local agencies to go after these larger groups by providing support from the FBI, Homeland Security, Secret Service, or the FDA, in the case of food products, and tackle those that are taking advantage of the cross-jurisdictional nature of many of these crimes.”
As he adds, organised retail crime has been able to proliferate simply due to the fact that there’s a market for it. “Why are these people stealing? Because they know that they have somebody to sell that merchandise to and can re-channel that merchandise back into the marketplace.
We’ve also had some instances where individuals have brought immigrants into the US and are using them to steal goods on their behalf.”
For many retailers, shrinkage may seem like a relatively minor issue, affecting only a small number of stores.
However, on a broader scale, it represents a part of a much larger and more complex global pattern – and staying ahead of these challenges is an ever-changing and often difficult task.
