As the retail rollercoaster rolls on—and with little evidence that the whiplash will subside in 2022—it’s incumbent upon loss prevention teams to do more than hang on and go along for the ride. Leaders must somehow find ways to get ahead of problems, even as they rush toward them at dizzying speed.
Multitasking on a rollercoaster paints a good picture of the evolving role of today’s LP professionals, but even that is incomplete. A rollercoaster is constrained to a single fixed track, while LP’s wild ride careens in multiple directions simultaneously.
So, when you think about what it will take for LP to “succeed” in the year ahead, the list is long. Agility? Yes. Cooperation? Of course. Leadership? Without question. Competence, creativity, and persistence? Yes, yes, and yes.
Store theft is a good proxy for the LP challenge. Success here, as in numerous other fights LP engages in, requires an attack on multiple fronts with a variety of tactics. It demands industrywide coordination and store-level solutions, high-tech investment, and basic protection. It demands triaging crises of the day while addressing conditions that breed future problems.
It’s said that small manipulations of a chaotic system can control chaos. As retail roils, organizations will need to lean heavily on their leaders to be that force of stabilization.
One Problem, Many Solutions
Carmel by the Sea is an adorable high-end community on a particularly spectacular stretch of the California coast—the kind of place where the weekly police blotter, printed in the local Carmel Pine Cone newspaper, can elicit a chuckle for items that rise to police attention (squirrels might be involved). Ocean Avenue, the main commercial street, is ridiculously cute. Yet, on December 7, 2021, in the late afternoon, three masked men jumped out of a car, ran inside a jewelry store, and smashed display cases with hammers to grab merchandise.
By whatever clever moniker is used to describe it—”flash rob,” “swarm-and-loot”—brazen criminal attacks on retailers were a routine occurrence during the holiday shopping season in San Francisco, Chicago, New York, Oakland, and Los Angeles. However, when a sleepy tourist town is targeted, that reflects an escalation in the war on retailers. There is nowhere you can hide, the attack seemed to say.
“Flash mob robberies are not new, but recent robberies have shown a scale, boldness, and aggressiveness that was not generally evident in the pre‑COVID era,” said Brian Neimeyer, head of retail at Allied Universal. He told LP Magazine that it’s a disturbing trend and noted that while pandemic restrictions reduced overall traffic at shopping malls in 2021, criminal incidents nonetheless surpassed recent years.
Neimeyer cited multiple contributing factors:
- Social media facilitating coordination among thieves, Lack of enforcement surrounding these types of crimes,
- Masks and hoods complicating suspect identification, Fewer consequences for offenders who are caught, and
- An accessible online marketplace to sell stolen goods.
“Organized crime rings are often behind these smash-and‑grab operations and pay low-level criminals to steal for them,” he added.
Corie Barry, CEO of Best Buy, said in a quarterly conference call that criminal attacks hurt the corporation’s profits. “You can see [the] pressure in our financials—and more importantly, frankly, you can see that pressure on our associates,” he was quoted as saying. “This is traumatizing for our associates, and it is unacceptable. We are doing everything we can to try to create as safe as possible environments.”
Already facing labor shortages, Neimeyer said thefts can compound the problem and cause employee turnover to increase sharply. “It can be frightening when you’re working at a retail location that is assaulted by a smash-and-grab mob.”
Even if monetary losses or insurance increases don’t move the needle on retailers’ protection calculus—and remain a tiny percentage of overall sales—attacks and negative publicity can dampen enthusiasm for the in-store retail experience. With brick‑and-mortar retail already losing a sizable chunk of sales to online merchants, it’s not a perception that retailers can allow to grow.
A promising path forward is a strengthening in partnerships between retail and law enforcement to more effectively fight the gangs that drive much of the crime. Dismantling sophisticated crime groups must be a law enforcement priority, according to industry stakeholders, and Neimeyer says there are optimistic signs in this direction. “Some metropolitan areas are creating or reactivating organized retail task forces to address the problem.” He said arrests are being made because of retail security working in concert with law enforcement to review video footage, identify suspects, and obtain license plate numbers of fleeing criminals using high-resolution video from cameras in stores, mall common areas, and parking areas.
Passing the INFORM Act, which requires online marketplaces to gather basic information about sellers, would be a simple but critical move in the right direction. And while flexing legislative muscle on an industry level is part of a solution, so are extremely localized measures, such as store risk assessments that keep pace with changes in risk, associate training, and building hardening.
Technology approaches are part of it, including social media monitoring and predictive analytics, but so are building security measures like exterior protective glass solutions, upgraded display cases with shatter-resistant glass and good locking hardware, as well as design considerations, like compartmentalized store interiors and door interlocks.
Carlos Castelán, managing director of the Navio Group, a retail management consulting firm, said some retailers have been forced to lock away more product in stores and increase the security presence and are reassessing shopping cart usage in areas with high theft. More broadly, events have shifted what it means for a store to be secure, according to Rob Reiter, cofounder of the Storefront Safety Council. “Organized looting has showed some of the shortcomings of unprotected stores but also some of the shortcomings of what normally would be regarded as well-protected stores,” he warned in an ISC webinar on physical retail trends.
But even as retailers work to meet today’s threat environment by hardening stores, conducting major investigations, partnering with law enforcement, and lobbying legislators, it’s necessary to address the conditions that create it, according to Barbara Staib at the National Association for Shoplifting Prevention (NASP). “How is it that young people get a message on social media to participate in a flash mob theft and think this is a good idea? How did we come to this?”
Staib reiterates the usual causes—reduced felony thresholds, less police interdiction—but said the problem stems from nothing being put in their place to dissuade people from perceiving store theft as anything but a good opportunity. “We took away traditional guardrails without putting up new guardrails or educating people,” she said.
Retailers should address low-level store theft through the lens of corporate social responsibility and strive to change perceptions through education to stem the future flow of empowered offenders, Staib suggested. “We’re letting people grow into organized retail crime (ORC) and flash mob offenders,” she said, suggesting that leaving the past behind is the best way forward. “We’re all at this point together. We need to stop finger pointing and band together and work in concert against a common enemy.”
The issue—as well as LP leaders—may be in the spotlight as 2022 gets underway. “With theft at an all-time high, loss prevention is a large topic of conversation for retailers,” Castelán said. He expects retailers to work more closely together by sharing information and coordinating with local and national law enforcement agencies to address it.
“All in all, this will remain a large issue for retailers going into 2022, which we expect them to tackle and may accelerate initiatives that are customer‑friendly and reduce theft such as expanded buy‑online, pickup-in-store (BOPIS) or store showroom models where product is housed in the back,” he said.
Visions of Success in 2022
We interviewed stakeholders to get their perspectives on the challenges that are poised to be critical in determining LP success in the year ahead, as store theft is just one of many issues that today’s LP teams will need to confront in 2022. As the LP role has morphed, so has the scope of what “LP success” entails.
Effectively Leverage the Power of Advanced Technology. With technology assuming a greater role across the retail enterprise, consuming a greater share of budget and offering unprecedented functionality, LP teams need to identify tools that are the best fit for their operations and configure and utilize them to full effect.
The centrality of technology to LP success was identified by multiple stakeholders, including Scott Pethuyne, senior analytics solution consultant at Zebra Technologies. “Moving into 2022, the name of the game for loss prevention teams will be technology. Specifically, loss prevention leaders need versatile, AI-powered analytics tools that guide their teams to data-driven decision-making,” he told LP Magazine. “Teams are small, resources are stretched thin, and properly leveraging technology is a force multiplier that unlocks agility, smarter decision-making, and scalability.”
Physical and network security will continue to converge, added analysts at Interface Security Systems. “Security cameras, alarm systems, and access control systems that traditionally secured physical locations in a silo are now expected to serve as intelligent, integrated systems that heavily rely on the underlying network infrastructure. While we expect loss prevention teams to double down on connected security devices, the approach to designing and implementing physical security solutions is now closely tied to network capacity, traffic management capabilities, network security, and the availability of failover systems.”
See Inventory More Clearly. Nearly 70 percent of retailers experience more than 1 percent of inventory shrinkage, according to some estimates, but improvements in RFID chips are making it easier and cheaper for platforms to deliver real-time data about loss events—through tagging, reading, and seeing merchandise—to inform strategies to reduce shrink.
Artificial intelligence (AI) could play a significant role in reducing supply chain and distribution center theft, primarily as a by-product of investment in intelligent distribution centers to track objects in storage facilities, optimize processes, and drive greater accuracy in order fulfillment. More efficient and accurate processes, driven by technology, have the added benefit of reducing theft and loss.
“Many companies are turning to automated inventory management to run distribution centers, thus requiring less human oversight and potentially less theft,” according to Tom Morgan, a professor at Middle Tennessee State University with a PhD in Logistics Systems.
Fewer mistakes would be another benefit. “How do we ensure that all the customized pallets we load are 100 percent accurate? That is a big challenge,” said James Yuan, a data scientist at PepsiCo in a November webinar on AI‑enabled retail distribution centers. “Even one‑tenth of a mistake is huge when you consider the volume we are shipping.”
Handle Unplanned Events Better. Several leaders said they’re focused on improving their ability to quickly identify events that impact people and assets before they happen, and data suggests they have company. Improving the ability to make better and quicker strategic decisions when critical events erupt is both critical and wanting, according to a new study by Forrester Consulting commissioned by OnSolve.
Retailers are more confident in their ability to handle unplanned events than those in education and healthcare, but it remains a typically siloed process with only 48 percent rating their incident response capabilities as “effective” or “optimized” across eight risk vectors, including data privacy, company travel, information security, and geopolitical risk. Between greater reliance on cloud architectures, social unrest, volatile weather, and the pandemic’s stubbornness, it is critical to assess strengths and weaknesses in critical event management to understand how to better prepare for the next unknown but inevitable incident.
Help the Business Meet Rapidly Evolving Customer Expectations. Success for LP teams requires positively influencing the ability of retail organizations to fulfill their omni-channel pursuits. As such, it’s worth focusing on how retailers plan to meet consumers’ any-product, any‑place, at‑any‑time mandate. Daniel Binder, managing partner at Columbus Consulting, advances a LIST approach to guide retailers:
- Logistics and supply chain—Getting the right merchandise to the right locations with speed and transparency.
- Inventory—Having the right products made available wherever and whenever the customer is shopping.
- Structure—Building an agile organizational framework.
- Technology—Integrating new sciences like artificial intelligence and machine learning to be more predictive, more accurate, and to free up human bandwidth.
Continuously Align Fraud and Theft Prevention with Sales Strategies. Be it new self‑checkout systems or payment methods, loss prevention will be challenged in the year ahead to minimize loss as retailers bend to customers’ desire for faster, easier, and more engaging shopping experiences.
“Computer vision and edge AI technologies will define loss prevention success in the new year,” said Rohan Sanil, CEO, cofounder, and head of products at Deep North. “The need of the hour is to make self-checkout more efficient, reduce shrinkage by tracking checkout accuracy, and sending real-time alerts to floor associates to enable them to assist shoppers in a swift manner.”
Uri Arad, cofounder of Identiq said, “Loss prevention success will be defined by expanding beyond the transaction. Promo abuse, refunds, and friendly fraud will be key to success in 2022. With supply chains still struggling and uncertainty persistent, customers are even more focused on deals—and they’re increasingly willing to cheat to get them.” He added, “Businesses need clear policies about what constitutes abuse, need to give their fraud teams license to prevent this form of fraud—and let’s call it what it is, fraud—and need to collaborate with one another to help keep this fast-developing trend under control.” Those that don’t protect themselves from promo abuse will experience serious, meaningful loss, Arad warned.
BOPIS is another area requiring attention—a customer‑friendly option that both local thieves and traveling crime rings utilize to quickly capitalize on stolen credit cards before they are reported stolen, explained Jason Cheung, product manager of fraud at Digital River.
Using the same visibility into store inventory that benefits legitimate customers, thieves use smartphones to quickly shop on a merchant’s site after car break-ins and burglaries and use BOPIS to pick up the goods. He recommends the following practices to address it:
“Minimize any gray areas, so staff can easily follow and enforce the policies,” Cheung advised. “If the policies are consistently challenged and overruled by management within the store, then they should be refined to balance both customer satisfaction and minimize abuse.”
Online fraud tools should have insight into who’s picked up orders and made returns and exchanges, with data shared between the two commerce channels. Cheung said, “If not, gaps between the online purchases and in-store pickup can be taken advantage of.” Policies on whether to require IDs during pickup and record it should be defined and followed. “I’ve seen large merchants enforce this validation method consistently, while others are hit and miss, or don’t require ID at all,” he told LP Magazine.
Enforcing a process where returns must be refunded to the original payment method is the preferred method, Cheung advised. Fraudsters crave cash most, then store cards, as accumulating stolen goods and reselling them is a slower and more cumbersome option.
Effectively Address Varied Personnel Challenges. Human resources will play a significant role in 2022, according to several industry leaders.
Workers are showing a willingness to quit at unprecedented levels, so attracting and retaining talent will be critical, and LP leaders’ ability to inspire and motivate their teams will be tested.
Diversity and inclusion will continue to be key to developing robust AP teams that align with corporate efforts.
With restaurants and retail chains finding it difficult to hire and retain frontline employees, the employee experience becomes a competitive advantage—and ensuring workers feel safe and secure at work is a critical component, according to experts at Interface Security Systems. Better security at the workplace through sophisticated remote video monitoring, video verified alarm services, and connected alarm/access control solutions can offer employees the peace of mind and reassurance they need, they suggested.
The impact of retail’s labor shortage on loss may require mitigation. Risk arises any time there is a tilt in the balance between the need to fill job openings and the desire to find proven, reliable, and honest job candidates. With roughly one million open jobs in retail stores and warehouses, retailers are increasingly desperate to fill positions—and it can have an impact. One loss prevention director told LP Magazine that his increase in employee theft is likely the result of a tight labor market that has forced them to hire less desirable job applicants. Another believed this challenge is being complicated by worsening attitudes. “There is a different morality today. People come in with absolutely no company loyalty, thinking that if it’s not nailed down then it’s mine for the taking.”
Evolve with Cybercriminals. Retailers will need to keep pace with cybercriminals as they shift tactics and targets, experts said.
“Cryptocurrencies will further accelerate e-commerce fraud,” according to Liron Damri, president at Forter. “Crypto makes bad actors more comfortable buying and selling information—it has created a rapidly expanding marketplace for consumer credentials. And wannabe fraudsters can also buy sophisticated tools to help them cheat and steal.” The number of older, less savvy shoppers online has increased, so good fraud targets are multiplying. “Businesses must more actively protect their customers at every critical interaction along the e-commerce funnel, from sign-up to login to checkout and more.”
Links in the supply chain are increasingly digitized and connected, raising the specter that ransomware attacks could create significant disruption in the year ahead, warned several supply chain leaders.
The number of identity thefts of individuals is falling as identity criminals now focus more on attacking businesses using consumer information, especially credentials, according to Eva Velasquez, president and CEO of the Identity Theft Resource Center. “Also, look for cybercriminals to take advantage of the shift to alternative digital payment methods such as payment apps, digital wallets, and peer‑to-peer services.”