RFID has proven its value in apparel and sports fashion retail. Stock accuracy, omnichannel enablement and better replenishment are common drivers for RFID adoption. But the business case of RFID in retail keeps expanding, most notably to loss prevention. In this series, we’ll dive deeper in the nuts and bolts of fighting and preventing theft in retail with the help of RFID.
There has been a lot of research on the reason why people steal. It’s been accepted that there are four key factors at play here:
For a long time, the balance of these four forces was being controlled by all sorts of measures, such as electronic article surveillance (EAS) and security tags. The reasoning is simple: the perceived risk is high enough (alarms will go off) and the ease of offending is reduced (these security tags won’t get off easy), people are much less likely to be tempted to shoplift.
But that delicate balance is about to be heavily disrupted by customer expectations.
Nowadays, customers expect to shop seamlessly between different channels: buying online and picking up in store or reserving products to try on in-store. And when people shop in a store, they expect a smooth shopping experience that mirrors the online world. And in the online world, there are no waiting lines and queues to stand in. There are just fingertips pressing on a smartphone, a full basket and a payment screen.
The current way of protecting merchandise from getting stolen inherently causes friction. For example, detaching security tags from items will cause shoppers to wait in line. And that friction will reach a point where consumers won’t accept such barriers anymore and decide they will be shopping somewhere else.
There are checkout solutions in retail that mimic the online world, such as fixed self-checkout areas or having customers scan items themselves with their own phones. Indeed, these checkout solutions do enhance the shopping experience. But remember the four forces at play when it comes to stealing? Self-checkout solutions take away the perceived risk of getting caught, while at the same time they increase the ease of doing it. Opportunity makes the thief, indeed.
Retailers increasingly introduce Self-Checkout (SCO) environments around the world. Looking at other retail industries where SCO has been around for a while, such as supermarkets, it is clear that SCO causes high shrinkage. In an ECR paper on SCO solutions and shrink titled ‘Self-checkout in Retail: Measuring the Loss’, it was determined that in stores where 55-60% of transactions went through a fixed SCO, LP (Loss Prevention) managers can expect their shrinkage losses to be 31% (!) higher.
Otherwise, honest shoppers may be tempted to take advantage of the opportunities presented to them by SCO systems. SCO abusers feel it is a low-risk opportunity, which is easy to take advantage of and brings in a nice reward. Shoppers can even feel a sense of entitlement to justify their stealing. A store employee commented that their best paying customers were also the ones that would steal the most. They would spend substantial amounts and at the same time steal a few items because they felt that since they had spent so much money, they were entitled to freebies.
Even if a shoplifter gets caught, it leads to little or no sanctions. SCO gives offenders ‘ready-made excuses’ for not scanning items: the self-scan defense. Giving customers the freedom to self-scan gives them also the opportunity to blame faulty technology, problems with the product barcodes or claim that they are not technically proficient as reasons for non-scanning.
Retailers are now beginning to understand the often delicate balance between sales and losses – that seemingly positive sales trends can easily be undone by high levels of shrinkage. Armed with these insights, LP managers can position themselves as not only being there to prevent losses (or for ‘sales prevention’, as sometimes blustered by colleagues in customer facing roles) but as the ones saving the sale.
With the help of RFID, there are numerous of ways LP managers can grow in this new role of saving the sale. When retailers start their RFID journey, it is common to tag a hundred percent of the items in a store. Those RFID labels can also be used for security purposes.
This is how it works. Let’s say a customer walks out of your store with three pairs of jeans. As she passes through your EAS system at the exit, the RFID readers inside your EAS system detect those labels. One of the unique capabilities of RFID is that it can store unique item-level data, which means your EAS knows exactly which items are passing through. In this case it knows which jeans are passing through. That’s not all - it also knows if an item was paid for or not. In the case that one of the items wasn’t paid for, the EAS system will set off the alarm.
Of course, for the shopper that took advantage of the SCO situation, setting off an alarm is embarrassing and reason enough to stop. But since the EAS system knows which item triggered the alarm, you can do lot more with that information than just setting off an alarm. For example, you can notify your store employees on their handheld devices if there is an alarm. They'll get an overview of the product that is generating the alarm, after which the store staff can go to the customer that set off the alarm.
We call this “turning a loss into a sale”: the store staff checks with the customer and asks if something might have gone wrong when paying for their items.
In addition to an immediate action on theft events, with alarms and notifications, there is also a longer-term benefit to using RFID technology to fight shoplifting. All these theft events from different stores combined, will generate a lot of data. Data regarding which items are getting stolen the most, during which times and in which stores. These are highly actionable insights that will make your LP programs more data driven and more effective. It will help you allocate time and resources better: which alarms do we need to check on CCTV? How can we optimize our staff planning? And which stores need an extra set of eyes?
Using RFID for loss prevention alleviates the tension between seamless checkouts and the risk of theft. With a proven technology that brings actionable insights, you can act on theft events right away as well as spot trends for future strategies.