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Reducing Retail Loss through Customer Service—and Other Strategies

At the Goldman Sachs Thirtieth Annual Global Retailing Conference last September, Lowe’s CEO Marvin Ellison made headlines when he said hiring and training more employees to deliver excellent customer service is the solution to rising theft.

“Having spent my entire adult life in retail at every level, the one thing that I understand clearly is that the greatest deterrent for any type of theft activity is effective customer service,” said Ellison.

Marvin Ellison

Retail shrink includes several types of loss, but the primary driver is theft, including organized retail crime (ORC). The National Retail Federation’s (NRF) 2023 Retail Security Survey, conducted in partnership with the Loss Prevention Research Council, (LPRC) found that internal and external theft make up 65 percent of retailers’ shrink; this can climb to 70 percent in specific sectors. The report also noted that the average shrink rate increased to 1.6 percent in FY 2022—accounting for $112.1 billion in losses—from 1.4 percent in FY 2021. This percentage is on par with shrink rates seen in 2019 and 2020. However, Lowe’s inventory shrink as a percentage of sales hit just over 1 percent in 2022.

Is Ellison truly onto something with his claim that customer service is the main way to prevent theft? Or is this just one piece of a larger puzzle retailers must fit together—especially in a much-changed post-pandemic landscape?

- Digital Partner -

How Great Customer Service Can Help Deter Theft

As a 2019 Loss Prevention Magazine article explained, “. . .strong customer service is one of our most effective tools and most proactive means to control theft and other losses on the retail selling floor.” This makes sense given the goal of a shoplifter is to get in, get their loot, and get out without being caught. When employees are immediately friendly and engaged with customers, conversely, it can become the first step to preventing theft—and there’s research to back this up.

Cory Lowe, PhD, a senior research scientist at the LPRC said the organization has done qualitative research on customer service being used to deter known offenders.

One example is the report Aggressive and Brazen Liquor Store Theft and Robbery: Findings and Considerations, for which the LPRC collaborated with a beer, wine, and spirits retailer to investigate aggressive and brazen theft and robbery incidents within their stores and come up with solutions. Lowe suggests that retailers might consider increasing staffing during peak times to reduce theft. Unfortunately, according to Lowe, there is very little research on the relationship between customer service and loss.

Nevertheless, the narratives in the liquor store report included several instances in which offenders “distracted the sales associate or took advantage of opportunities that were presented such as when a single associate must assist customers or is busy in a single aisle and whose view is obstructed in a multiple aisle store,” wrote the report authors. “More sales associates increase capable guardianship. This also increases the risk to potential offenders.”

LP Solutions
Joe Coll

Joe Coll, vice president of asset protection operations and strategy at Macy’s, said his company has also seen evidence that great customer service is important in thwarting theft.

“When store colleagues provide attentive and friendly service, thieves are hesitant about engaging in this type of activity,” he said. “Customer service helps build a personal connection between the retail establishment and the consumer and deters theft and violence. At Macy’s, we have conducted internal analyses comparing many key performance indicators, including customer experience with shortage results. There has consistently been a strong correlation between a better customer experience and improved shortage across our stores’ organization.”

As part of the company’s onboarding, associates are taught the importance of customer service and its role in reducing theft. An annual review and acknowledgment of the company’s shortage prevention policy also educates employees on common theft techniques, including shoplifting, employee theft, and fraud. They also learn to identify suspicious behaviors and effectively communicate with the asset protection and store leadership teams to support customer experience and prevent shortage.

Carmen DuBose, LPC, CFI

Carmen DuBose, LPC, CFI, senior director of asset protection at Hibbett / City Gear which operates sporting goods stores in small to mid-sized markets, said that simply greeting and acknowledging a potential shoplifter makes their job harder because the associate “has planted the seed that there is the risk that that shoplifter could be caught and identified if they choose to commit their crime,” she said.

- Digital Partner -

She added that the next step is eliminating the opportunity to conceal merchandise by continually conversing with that customer and staying within ten to fifteen feet of them while they are in the store. Shoplifters look for easy targets that are low-risk to hit continuously. Consistently excellent customer service can drive them away from a store.

“The good customers won’t care,” said DuBose. “The potential shoplifters will get aggravated and leave. Mission accomplished.”

Hibbett’s customer service training is individualized to each store and its manager based on that location’s needs and the training system in place. The asset protection team travels to stores to assist. Still, it is ultimately up to that manager or management team to relay best practices to their team and instill confidence in associates’ ability to handle situations correctly. Typically, this involves role‑playing to empower employees to make good decisions when faced with the uncomfortable situation of dealing with a shoplifter.

Often, this comes down to the simple act of treating potential shoplifters with respect, being genuine, and shopping with them—an approach that has removed two locations from Hibbett’s High-Shrink Program, one of them previously known as the “grab and run” store. Kathryn Petersen, an asset protection investigator at Hibbett, shared the following anecdote from a seminar with WZ.

“After five years in stores, I can say I believe great customer service deters theft because I’ve watched it happen,” she said. “I would coach my staff on handling someone they suspected may be stealing the same as they would one of their regular customers: shop with them. The with is key here. If you continue to show interest in the product your customer is picking up and shopping with them, you’re automatically staying with that customer. You’re not only providing attentive, one-on-one interaction with that person, but if their intent was to come in and steal that day, you don’t give that opportunity for them to do it without you seeing.”

Marty Andrews, CFI

VF Corporation, which owns several outdoor, active, and workwear brands, including Vans, The North Face, Timberland, and Dickies, takes a similar approach to deter theft by promoting customer engagement and interactions. Even if the shoplifter gets away with merchandise, they will be reluctant to return due to the excellent service, explained Marty Andrews, CFI, vice president of loss prevention at the company. Often, the same items driving sales are at high risk for theft, so he said focusing on those products presents a significant opportunity to decrease shrink and drive sales.

“We are taking every opportunity to teach, coach, and train on best practices in-person, online, and in the ‘moment,’” he said. “Tracking data and analytics is important to measure the significance of problems and then deploy the best solution.”

Because they are a specialty retailer, VF Corporation doesn’t have the same level of loss prevention staffing as other brands. That means it’s mainly on store associates to manage theft. The retailer also reviews videos of interactions between associates and customers, including potential shoplifters, and gives feedback on what to do differently next time. Andrews stresses that the company doesn’t train its staff to deter criminals, but instead, to offer the best customer service experience possible.

“If we deliver great service, we are going to increase sales, create repeat customers, and deter those would-be criminals that want to get in and out without being identified by the sales team,” said Andrews.

Switching Tactics in the Face of More Aggressive Shoplifters

Based on these accounts, customer service can and does repel theft. However, that’s just one part of the story.

Jennie Anderson

In the 2023 NRF Retail Security Survey, 88 percent of retail brands reported shoplifters have grown more aggressive and violent than a year earlier. When it comes to ORC, 67 percent of respondents say they’re growing even more violent and aggressive, compounding increased violence from prior years. This increased violence has caused retailer AutoZone to rethink its approach to dealing with would-be shoplifters, said Jennie Anderson, a 30-year employee who now serves as vice president of loss prevention, safety, and security.

Like Hibbett and VF Corporation, AutoZone greatly emphasizes excellent customer service. In fact, AutoZone was founded on the tenet of putting customers first. The brand’s founder, Pitt Hyde, saw a niche in the automotive industry in that existing stores didn’t make for an attractive retail environment at the time. Hyde came up with an idea to pivot the concept of his store to a more DIY environment where associates could offer trustworthy advice and help customers choose the products they needed to complete an automotive repair in a bright, well-lit store.

In addition to creating a more appealing physical store environment for customers, AutoZone developed a main cultural anchor called WOW! Customer Service. One of its tenets is “Drop, Stop, 30, 30.” This means if an AutoZoner is at the register and hears someone open the front door, the employee stops what they’re doing and greets the customer within thirty seconds or thirty feet of coming into the store. This approach has reduced shrink across stores in the past, according to Anderson, because associates are there to help customers with what they need.

“It has played historically well for us from a loss prevention standpoint because, back then, those individuals who may have been thinking about an opportunistic shoplifting event most often would be dissuaded when they knew that they were going to get that great customer service and someone was going to be interacting with them,” said Anderson. “As loss prevention professionals, we would amplify this message.”

However, things have changed post-pandemic, with an uptick in violent theft, according to Anderson. In recent years, AutoZoners have experienced interactions involving weapons like guns, knives, and screwdrivers being pulled on them. Some individuals have even walked in and carried car batteries—which typically weigh between 25 and 50 pounds—out of the store. Considering these increased aggressive incidents, AutoZone dissuades its associates from trying to stop a shoplifter.

“This is a vastly different environment today, and definitely over the last two years post-pandemic, than I’ve ever seen in my career,” said Anderson. “We do not want our teams to approach a shoplifter with the intent of stopping the theft. We want our AutoZoners to always provide WOW Customer Service to all individuals entering our stores; however, we have to ensure our teams are able to read situations and know when to disengage.”

AutoZone regularly trains and communicates with associates on topics like theft and shrink. Every Monday, they send the top ten things for managers to know or take advantage of that week. Once a month, they include a loss prevention or safety-related topic. This information is reinforced quarterly with large shrink awareness posters displayed in employee break areas. The retailer also offers video-based micro training on topics such as de-escalation and when to engage a customer or individual vs. when to stop a theft. They ramp up their training around the holidays, so associates know the latest scams, robbery prevention tactics, and best practices for entering and exiting stores in the darker winter months.

Hibbett takes a slightly different approach than AutoZone in encouraging associates to use customer service skills by verbally engaging with the shoplifter. This includes asking the customer to take their specific concealed merchandise to the register or seeing if they need help finding any additional items to go with their concealed product.

“You should bring awareness to the shoplifter that you know what they are up to,” said DuBose. “If you say nothing, you declare to them that you are an easy target.”

However, DuBose stresses that “The safety of our employees is paramount. They are our number one asset. We emphasize to them that no merchandise in our stores is greater than their safety. We never want them to engage physically in attempting to stop a shoplifting situation by putting themselves in harm’s way by blocking a shoplifter from exiting or chasing them in any way.”

Andrews of VF Corporation agreed.

“Every situation isn’t the same. Just because you had an extreme one, per se, that doesn’t mean that the next one is,” he said.” There still are opportunistic shoplifters coming into the store, for sure, that want to be sneaky, and don’t want to get detected. . . just because customer service didn’t work this time, we can’t get frustrated and just throw it off the table and say that it doesn’t work. Because it is going to work in certain situations.”

Coll said Macy’s continuously looks at ways to reduce theft and violence at its stores by taking a holistic approach to its asset protection program. Their efforts have centered on several mitigation strategies, which include the investment in advanced technology, reporting, and tools, as well as a strong emphasis on optimizing asset protection staffing to target high-risk areas. The retailer does offer de-escalation training that equips colleagues with the necessary skills and strategies to effectively manage volatile situations.

“We believe that equipping our colleagues with the knowledge and skills to effectively handle conflict helps reduce the likelihood of violence and complaints while promoting a culture of empathy, understanding, and experience for our customers,” said Coll.

Macy’s is also part of the Vibrant Communities Initiative, a joint effort between the National District Attorneys Association (NDAA) and the Retail Industry Leaders Association (RILA) to bring together district attorneys, police departments, social service organizations, and other stakeholders to identify effective approaches for dealing with ORC, habitual theft, violence, vagrancy, and blight in and around retail stores.

The Use of Tech and Merchandising to Combat Theft

When human intervention isn’t safe, retailers increasingly use technology to provide extra eyes in their stores.

The latest NRF Retail Security Survey found that the top ten reported security measures and solutions retailers perceive to be “most successful in mitigating external losses over the past twelve months” included:

  • CCTV and video systems
  • Locking cases, lock boxes, and cages
  • Exception-based reporting systems/programs
  • Enhanced, upgraded, or integrated CCTV
  • Automatic pushout prevention systems

Coll said Macy’s has implemented technology that enables associates to communicate with each other and access information in real-time. Some of these features include the ability to share shortage awareness topics, provide task management tools, and visibility to real-time inventory ownership. A key component of the program is the utilization of Radio Frequency Identification (RFID), which allows Macy’s to easily track and manage its inventory levels daily.

“This supports our overall business model by driving faster replenishment and providing information on current shortage trends,” Coll said.

AutoZone has been testing new camera systems to secure better intelligence, such as license plate numbers and more precise images in store to make a police report and build a case in the event of theft. The company participated in the ACCESS Taskforce pilot in Opelika, Alabama, with LVT beginning in the fall of 2022. For the last year, AutoZone has been piloting Interface Systems, which provides virtual remote monitoring via strategically placed cameras and audio systems that do live video sweeps of locations and voice talk downs. AutoZone also has a direct phone line into Interface’s contact center and a panic button if a theft might be in progress to determine whether voice audio is required.

“We began to see that we are able to become more aware of how often shoplifting is happening and exactly what is occurring with much greater certainty than we have in the past,” said Anderson of the Interface pilot.

Hibbett communicates incidents of theft in their stores through a portal. They can also send out microbursts of communication to employees through the enterprise resource planning system Workday. VF Corporation works with several outside vendors and benchmarks the performance of technology solutions with peers.

“Technology is changing quickly, so you must never stop evaluating,” said Andrews.

In addition to customer service and technology, Lowe’s CEO Ellison noted at the Goldman Sachs conference that “the right type of merchandising display” is essential to preventing theft at his stores. One increasingly used merchandising tactic criticized of late is locking up more items behind cases or security counters, which shoppers say interferes with their customer experience. These and other security measures become a balancing act between customer safety and customer experience.

Coll of Macy’s says the retailer takes merchandising display into consideration when they plan new store openings and seasonal merchandising strategy sessions. The company arranges merchandise to maximize visibility and ensure clear sight lines which makes it more challenging for individuals to take items undetected. In addition, Macy’s places highly desirable merchandise closer to checkout counters. Securing merchandise in cases is a tactic used “as a last resort,” said Coll.

“Whether locking up merchandise is effective depends on factors such as a store’s shortage profile, the value and risk associated with the products, and the availability of store colleagues to assist our customers,” he said. “We recognize that having trained staff to service the customer is important because it allows our colleagues to assist customers in accessing the locked merchandise, be able to answer questions, and provide guidance on their purchase. This will help ensure that these more aggressive tactics deliver the expected result and strike the right balance between the customer experience and shortage reduction.”

AutoZone works with merchandising partners to do category reviews and assess if they need protection strategies for a particular product. Certain items they sell are expensive and easy to sweep off peg hooks and shelves; however, in the highest risk locations, the retailer leverages tactics such as decoy packaging and locking devices on peg hooks in place, said Anderson.

“It is very customer unfriendly, and it is very challenging when you only have two or three associates and someone needs to purchase a product,” she said about locking up products. “It can lead to lost sales and create an issue of how to take care of the customer.”

DuBose of Hibbett agreed that adding security equipment such as electronic article surveillance (EAS) and locking up items does not move the shrink needle for their stores and hampers the customer experience. Instead, the retailer limits the amount of merchandise on display. All their footwear is kept in a stockroom, requiring an associate’s help. In recent years, they have also back-stocked more merchandise instead of leaving it in bulk on the sales floor.

“Grab and runs have become a huge issue for us as the criminals are stealing large amounts of product in one event,” she said. “Limiting the amount of merchandise on display can at least mitigate the amount of loss from these incidents.”

VF Corporation has been working to broaden the scope of security they employ. They have uniformed security and off-duty police officers in their worst areas. They’ve deployed EAS but find it less effective than in the past.

“We have a good relationship with our vendor to design a device that mounts onto the fixture so you can still try it on; it’s cable, it’s retractable,” said Andrews. “You want to have a good customer experience, so that’s a balancing act. The first prototype, the cable wasn’t quite long enough to try it on. . .so we extended the cable.”

The Need for a Multi-Pronged Approach to Curbing Theft

No single tactic can curb theft, especially in a dynamic post-pandemic retail landscape in which violence has increased. The brands we spoke with all said they continually reevaluate their customer service strategies, security systems, and store displays to protect employees and shoppers while keeping stores profitable. More than anything, retailers will likely need to continue choosing which tactic is most applicable on a case-by-case basis.

Anderson poses some thoughtful questions all retailers can consider as they plan their loss prevention strategies for 2024.

“How do you approach it the right way? How has the message evolved around customer engagement and shoplifting because it is a different day and a different climate? And you have bad actors out there who are very aggressive and don’t think twice. How we think about customer service in relation to shoplifting has changed.”

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