by Preventing retail theft before it happens – it sounds like a fairy tale, but artificial intelligence could make it a reality.
Videos and images of organized “smash-and-grabs”. at stores and malls across the country have gone viral online, and some of the nation’s largest retailers are turning to technology to stop billions in losses and keep employees and customers safe.
And they are doing it together.
Companies from Target ( TGT ), Walmart ( WMT ), and Home Depot ( HD ) to Walgreens ( WBA ) and TJ Maxx ( TJX ) are collectively investing big bucks in AI, real-time heat maps, and other advances in an unprecedented effort. to fight the issue of organized retail theft.
“We’re seeing this basis of cooperation,” Mike Lamb, a former Kroger ( KR ) loss prevention executive, told Yahoo Finance for Next. “I’ve seen more of this collaboration than perhaps ever in my four decades as well as being in this space.”
Reduce the word
Beyond the gruesome images seen in news reports and social media, the number of organized retail crimes mentioned during retailer earnings calls between January and August 2023 increased by 43%, according to Yahoo Finance reporting.
The industry uses the term “Reduce” to describe any hit to inventory, including from retail theft, employee theft, vendor fraud, damage, administrative errors, and other causes. And it’s a big problem — in 2022, losses from the overall contraction will exceed a staggering $112 billion, according to the National Retail Federation, a leading lobbying group.
However, flawed data makes it difficult to quantify how much organized retail theft contributes to shrinkage. Last year, the National Retail Federation retracted a false claim it made in a 2021 report that attributed nearly half of the retail decline to organized retail crime.
Accounts of retail crime were also complicated when Walgreens Chief Financial Officer James Kehoe backtracked on his assessment of retail theft, saying the retailer “cries too much” about organized retail crime.
In light of the 2023 conference, Trevor Wagener, chief economist at the Computer & Communications Industry Association, gave a more muted assessment, noting that organized retail crime is responsible for about 5% of total retail inventory losses, although that adds still up to billions. in loss.
Still, contraction was the earnings watchword for retailers last year, and that has continued to some degree through the latest earnings season, with Target CEO Brian Cornell noting on the company’s latest call that “ shrinking growth is still a significant financial one. “
Download heat maps
As a result, Target and other companies did what would have been once unthinkable: partner with their direct competitors on high-tech solutions.
For example, an AI-powered heat map allows retailers to share real-time data with each other, hoping to stop large-scale grab-and-go rushes before they happen and protect consumers and employees in the process.
The heatmap uses AI to predict future crime incidents by pulling in data from as many sources as possible, from law enforcement to the retailers themselves. That data creates hot spots for potential criminal activity that participating companies can see on the map panel.
The longer-term goal is to give participants two-way radios and an app that will sound if a crime happens nearby so stores can be prepared.
Finding the balance between preventing theft, limiting losses, and keeping employees and customers safe is why retailers are working to find solutions. More than 50% of retailers said they are spending more on theft prevention, according to a recent NRF report.
More than 90% of retailers plan to increase AI investments this year, according to software company Lucid.
“We’re figuring out, how can we work together better for everyone’s safety?” said Dr. Read Hayes, principal researcher with the University of Florida’s loss prevention laboratory, which is leading the effort to develop new types of technology to prevent retail theft.
The lab, which is funded by the university and the Loss Prevention Research Council, features more than 400 anti-theft technologies and evaluates how effective the technology might be in the real world. One of the country’s best-known retailers pays a $6,500 membership fee to gain access to the council’s research.
To improve the shopping experience, retailers are exploring customer-focused solutions such as using FaceID or biometric technology to open locked cases that would normally require an employee to open.
“We’re looking at a lot of other AI plays here,” Hayes said. “And what people are saying, like threatening words or victim words, things like that, we think we can map more in real time as well.”
Declining privacy
However, the preventive technologies worry privacy advocates, who argue that it is illegal to obtain that level of data without the knowledge of those being watched.
In late 2023, the Federal Trade Commission banned Rite Aid from using AI facial recognition technology in its stores, saying Rite Aid’s practices increased the risk of consumer discrimination.
The FTC and Rite Aid reached a settlement on the matter, with Rite Aid agreeing to “improve and formalize the practices and policies of our comprehensive information security program.”
At the same time, using technology like listening devices or facial recognition that come with privacy restrictions makes it harder for retailers to parse the data.
Mike Krol, special agent in charge of the Department of Homeland Security’s Operation Boiling Point, a unit created to address organized retail theft, told Yahoo Finance that fighting organized retail crime is always a struggle and respecting personal privacy, especially with challenges regarding how and where information can be collected.
“Law enforcement has to be smart about where it’s gathering information from,” Krol said.
To help track the severity of retail theft, Krol’s team created an AI-powered analytics tool called RAVEN that uses machine learning to consolidate crime data across multiple jurisdictions. The tool helps to find links between individual crimes and disrupts the crime rings and affiliates that support them.
Krol, who recently testified to Congress about the exponential rise in organized retail crime, said that Operation Boiling Point saw a 200% increase in investigations in 2023, and that his unit received leads from retailers “every day.”
“No one wants to shop in a store where they feel unsafe,” Krol said. “Our main ambition is to provide that safe environment for both customers and partners, and technology – AI in particular – is there to help us on that journey.”
Madison Mills is a host and reporter at Yahoo Finance.
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