Sweethearting: A Sour Pill To Swallow For Retailers

Leverage RFID for Loss Prevention

Sweethearting: A Sour Pill To Swallow For Retailers

By Hilbert Dijkstra

The 2020 National Retail Security Survey shows that shrink cost the retail industry $61.7 billion in 2019, an extremely high amount. This is in contrast with stores and brands stating they focused more on fighting shrink that year. The majority of respondents indicated that different forms of theft and fraud are priorities.

A focus area for fashion and lifestyle retailers is internal theft (also known as employee theft), 20.3% of the respondents indicated that reducing employee theft is a very big priority. The most common type of employee theft is a practice commonly known as “sweethearting” – which refers to an employee giving a customer unauthorized discounts or free merchandise or services. For instance, an employee scans only three out of five items, but removes the security tags from all five items. This way, the customer can walk out without activating any alarms.

But how big of a problem is sweethearting really?

Sweethearting Is Very Common

According to a study by Brady, Voorhees, & Brusco, 67% of respondents admitted that they had participated in sweethearting in the past two months.

67% of respondents admitted that they had participated in sweethearting in the past two months

Brady, Voorhees, & Brusco

This practice is common in all kinds of service industries, such as restaurants, hotels, and car washes as well as retail stores. As their motivation for giving away free or discounted products or services, employees often cite the hope for receiving better tips or gaining some other benefits from their customers.

Employee Theft Poses A Unique Loss Prevention Challenge

Sweethearting poses numerous, difficult challenges to any retailer.

On one hand, it is a loss prevention problem. The customers and employees are aware of that fact and will keep quiet about it. That makes it very complicated for loss prevention professionals to find the cause of the shrinkage and eliminate it.

On the other hand, it has consequences on customer satisfaction, loyalty, and positive word-of-mouth as it inflates these scores by as much as 9%. The client satisfaction and loyalty with this store are now tied to an employee the retailer would rather not employ.

What Can You Do To Discourage Sweethearting

Surveillance cameras and security guards checking receipts are no longer sufficient to prevent employee theft effectively. Since this problem creates a ripple effect through all areas of your organization, you can best tackle it on different fronts:

Sweethearting Conclusion

Sweethearting is a problem that cannot be ignored by any retailer or business owner. Modern loss prevention solutions, like RFID, allows you to focus on the events that matter most.

Starting with RFID in your Loss Prevention strategy is easier than you think. Within only three months, you will be able to identify, quantify and ultimately prevent losses within your stores. Want to know how?  Schedule a demo here.

Originally published on July 8th, 2015, updated on July 15th 2021.

Hilbert Dijkstra - Head of Product Management
Head of Product Management
Hilbert Dijkstra

How Retailers Can Reduce Waste and Become More Sustainable with RFID

Whitepaper

How Retailers Can Reduce Waste and Become More Sustainable with RFID

While the fashion industry does immeasurable good employing many people and clothing the world’s population, it is also responsible for approximately 10% of global carbon emissions, making it the 2nd most polluting industry.

Retailers are focusing more and more on sustainability by setting ambitious goals to improve their environmental and social impact.

This whitepaper describes how retailers can reduce waste and become more sustainable with RFID.

Topics

In this whitepaper we will deep dive into:

  • The rise of Conscious Consumerism
  • Turning to Sustainability in the Wake of COVID-19
  • Excess Inventory Leads to Environmental and Financial Waste
  • RFID Helps Retailers Prevent Overbuying and Overproduction
  • The Impact of RFID on Sustainability Objectives

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Calculator: The True Cost of Security Hard Tags in Fashion Retail

Security hard tags are costing fashion and apparel retailers a lot of money every year. Of course, there are the direct costs: the annual depreciation of the tens of thousands hard tags used by retailers every year. But there are also hidden costs, most notably the costs of attachment and detachment of the EAS hard tags. Fashion hard tags need to be placed on items carefully, and the security tag also needs to be removed when an item is sold. These are manual processes, the costs of which can’t be underestimated.

To give retailers an idea of how much their hard tags are costing them, we’ve created this hard tag cost calculator. In six simple steps, we calculate how much hard tags actually cost. Happy calculating!

3 Reasons Why Apparel and Fashion Retailers Should Replace Their Security Hard Tags with Data

Leverage RFID for Loss Prevention

3 Reasons Why Apparel and Fashion Retailers Should Replace Their Security Hard Tags with Data

The security hard tag has been a helpful ally to apparel and fashion retailers in deterring theft. The mere fact that a hard, plastic tag was attached to an item, made stealing merchandise not quite worth it. After all, even if you managed to get away with a stolen item through blaring security gates, the item was pretty much useless as you couldn’t detach the security tag without damaging the item.

But just as most of the items that the hard tag gets attached to, the hard tag is slowly going out of fashion as well.  

What has caused us to say goodbye to our little plastic ally? And what will protect your merchandise going forward instead?

Let’s dive in to the three main reasons that are causing retailers to reconsider the need for hard tags.  

1. Offering seamless checkouts

Nowadays, shoppers expect more when it comes to visiting a physical store. Especially the people born between the late 90s and early 2000s (‘generation Z’), are looking for more physical ways to engage with people and brands. So far that is good news for retailers, but there’s one catch: having grown up in the era of ‘instant gratification’, these shoppers are also the most impatient when it comes to the in-store experience. That means retailers not only need to have the right merchandise available, but also need to offer seamless ways to checkout.

This is why retailers are coming up with new ways to mirror their in-store experience with their digital one. Instead of losing customers when there’s a long queue, retailers introduce new forms of check-out, such as fixed self-checkout stations, mobile self-checkouts or store associates armed with mobile checkout devices.

Security hard tags are a physical barrier that potentially could ruin a seamless checkout. Having shoppers detach an EAS hard tag themselves at the checkout creates dangerous situations, as the sharp needle of the security tag is a high risk when it comes to injuries. That is a risk that retailers are not willing to take. But abandoning the security hard tag altogether in order to offer self-checkouts: that’s not a trade-off retailers want to make either, as they don’t know the impact this decision will have on their shrinkage.

2. Enhancing omnichannel processes

As more and more retailers embrace an omnichannel sales strategy, they realize that hard tags create quite some hiccups in their retail processes. Think about all the steps involved in an omnichannel operation: shipping items from store to customers, shipping items in between stores for curbside pick-ups or allowing items to be reserved for customers, just to name a few.

The attachment and detachment of a hard tag is a bottleneck in all these retail workflows. This goes against the whole principle of an omnichannel strategy: having a solid process in place to offer a seamless shopping experience across every channel.

3. The True Cost of Hard Tags

Without accurate inventory and shrinkage data, it’s hard to decide which items are popular amongst dishonest shoppers or which are just inventory management discrepancies.   

This leads to some retailers thinking ‘better safe, than sorry’ and tagging the bulk of their inventory.

But the actual investment in the hard tags is just one piece of the true cost of hard tags. As we discussed before, hard tags need to be placed on an item, and the security tag also needs to be removed when an item is sold. These are manual processes, the costs of which can’t be underestimated. For a retailer that sells a 100 million items a year and tags 80% of it, the time spent on attaching hard tags alone amounts up to more than 300,000 manhours a year!

Learn how To Replace Hard Tags with Data

In the back of their mind, many retailers know that they should proactively deal with the impact that the hard tag is having on their business. Besides the (hidden) cost of the security hard tag and the manual labor, it also prevents retailers from creating new and better shopping experiences.

But understandably, any conversation about decreasing the number of hard tags is met with hesitancy: retailers just don’t know what the impact will be on their shrinkage levels.

Of course, ruthlessly ditching hard tags is ill-advised. But there is a way to handle the hard tag dilemma.

The technological foundation of a seamless, omnichannel shopping experience is RFID technology. And luckily, that’s the same technology that allows for a data-driven loss prevention strategy. When retailers choose to implement RFID, it is common that they tag their whole inventory with RFID labels. This means that your whole inventory is trackable, and thus protected. 

Retailers who know which items are leaving their stores unpaid  – thanks to RFID –  can find theft patterns and detect items that get stolen in a way that they would otherwise have never known.

This data leads to a smarter hard tag decision: protecting the items that need it the most. Retailers can even go so far as to decide that they abandon the hard tag completely; as the pros (seamless checkouts, more productive manhours) greatly compensate the cons (risks of higher shrinkage).

How Nedap helps retailers progress towards data driven loss prevention

As the business case around RFID progresses towards loss prevention, retailers are more and more able to make data driven decisions in their loss prevention operations. Luckily, retailers are not alone when it comes to expanding their RFID usage to loss prevention. At Nedap, we’ve helped global retailers progress to make the most out of RFID for their loss prevention. Always taking into account their current investment, we combine current RF technologies with RFID in our EAS solutions and hard tags. This enables retailers to upgrade their estate towards RFID in a controllable way.

RFID benefits for sports fashion retailers and brands

Whitepaper

How Retailers Can Reduce Waste and Become More Sustainable with RFID

This e-book explains how both sports fashion and apparel brands and retailers can optimize their omnichannel services using RFID.

Topics

In this e-book we will deep dive into:
1. Adapting to the new normal
2. Unlocking omnichannel with RFID
3. A win-win situation: collaborating on stock
4. Getting started with RFID
5. Success stories

Gartner names RFID key technology in retail digital transformation for 2021

Research firm Gartner recommends Retail CIOs to take action and improve management of on-hand inventory, avoid “dead” inventory and reduce waste by leveraging RFID technology

Gartner names RFID key technology in retail digital transformation for 2021

The COVID-19 pandemic has accelerated the digital transformation of retail with an unparalleled speed. Retailers are now facing new challenges that include how to bring back the workforce and protect the health and safety of its employees and consumers. Having to respond to a change in consumer behavior also created a new opportunity to reassess how retailers do business. In addition, physical locations will be critical to building and maintaining the flexibility that is demanded of retail supply chains as stores now serve as fulfillment centers or distribution points enabling the delivery of excellent shopping experiences. 

Top Trends in Retail Digital Transformation and Innovation for 2021 

This year, with this rapid digital transformation in mind – especially when it comes to physical locations – Gartner has identified seven key trends that retail CIO’s must recognize and understand when advising the business on technology investments. According to Gartner, the pandemic has dramatically increased these technologies’ importance to retailers’ efforts to meet and exceed customer expectations. 

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 In this blog, we take a deep dive into the Fulfillment Execution trend. Download the complete research by Gartner to learn about all seven emerging trends, expected challenges and next steps for retail CIOs in 2021 

Fulfillment Execution 

The significant rise in e-commerce during the past year as well as increasing consumer demand have made excelling in fulfillment execution a top priority for retailers. According to Gartner’s ‘’final mile’’ survey, just 18% of the surveyed retailers reported fulfillment accuracy rates of 95% or better. Gartner also reports that half of online orders are now handled by a store, through either click and collect or store fulfillment (ship-from-store).  

Half of the online orders are now handled by a store, through either click and collect or store fulfillment (shop-from-store).  

-Gartner

Shoppers want to be able to search, transact, acquire, and consume products and services safely and easily across a retailer’s entire ecosystem. This means that retailers need strong store teams and robust technology in place to create a fluid experience for customers while simultaneously managing costs.  

As a result Gartner recommends that Retail CIOs take action and improve management of on-hand inventory, avoid “dead” inventory and reduce waste by leveraging RFID technology and optimizing customer order fulfillment by improving real-time inventory visibility. 

Why Inventory Visibility? 

Whether merchandise is located in a warehouse, a distribution center, a physical store or on a truck, you cannot make fulfilment promises to customers without an accurate inventory picture. Having inventory silos means that you often have items that meet your customer’s needs and timing, but you just can’t see or access them, so you lose the sale.  

What should be a centralized view of all available inventory is instead currently just a keyhole view. This leads to lost sales, customers aggravated by overpromising, giving away margin due to markdowns and expedited shipping charges, carrying excess safety stock and limited ability to enter new sales channels.  

Create a Complete and Transparent View of Your Entire Supply Chain  

What is the answer to all these challenges: Break down inventory silos by creating a single view of stock across your entire supply chain. No longer have your stores, distribution centers and e-commerce channels own their own stock pools. Create a single point of truth in order to view your inventory across the entire network of your supply chain and have items move between your stores, distribution centers and e-commerce without losing sight of any single item. Perfectly match demand and supply anywhere, at any time. 

Stock accuracy, product availability, and refill suggestions in one app

iD Cloud Store is a cloud-hosted RFID solution that digitises stock management processes, making them more efficient and more accurate. Implemented within one hour, our multi-user app can provide intelligent stock takes and a smart in-store replenishment process. After deployment, you can simply scale the solution to offer omnichannel services, create supply chain visibility, integrate state-of-the-art loss prevention and effectively manage your entire store operations with real-time, item-level inventory visibility and analytics.

How item statuses can truly enable your omnichannel strategy

How item statuses can truly enable your omnichannel strategy

By Steffie Broere

Following adoption of RFID technology, retailers are able to always trust their inventory levels. RFID allowed retailers to step up their inventory accuracy game, resulting in confidence levels of almost a hundred per cent. Achieving this level of visibility across multiple channels is a prerequisite to true omnichannel processes. According to both Forbes and McKinsey & Company, RFID technology has become key for retailers in reimagining store operations.

But for omnichannel effectiveness, such as in-store fulfillment of e-commerce orders, knowing which items are physically present in a store at all times is not enough.

Inventory accuracy is only the first step in the omnichannel journey

Just because an item is physically located in the store, doesn’t necessarily mean it’s available to be sold, either online or offline. For example, an item that was counted during a cycle count might be on display on a mannequin. It could also be faulty or damaged. Or it could be behind the counter, waiting for customers to pick up.

Surely, around 90% of the items in one’s store don’t have anything ‘special’ going on, and are ready to be sold. But for a seamless omnichannel shopping experience, you need to take into account the other 10% of the items that require more attention.  

Read our whitepaper to learn how you can digitize stock stock in order to boost your e-commerce without the need to overstock

Rigid thresholds

Up until now, retailers had two ways of dealing with this issue of using the store’s inventory for omnichannel purposes:

Although retailers have a much higher inventory accuracy with RFID than without, safety thresholds are still commonly used for e-commerce orders. These threshold work like a buffer: retailers want to make absolutely sure that any item shown through online channels is available. To accomplish this, retailers use thresholds of four, five or even six items: if the stock level is lower than the threshold, the product won’t be fulfilled from that store.

This threshold issue is the result of dependence on other systems (like ERP). If these systems don’t have accurate stock levels available for the e-commerce platform, safety threshold are then applied. For example, if a retailer is only collecting overnight stock levels, the result of a calculation from last night will not represent the actual stock situation the next day – at the moment a customer wants to buy.

The second approach is to do a manual check. This means that a store associate checks the store’s salesfloor and stockroom to see if the product is actually available. When available, it gets picked and the order is accepted. But if it is not, the order gets rerouted to the order management system (OMS) and the store associate wasted time that could have spent on helping customers.

Obviously, both approaches are far from ideal.

For a true omnichannel approach, where retailers have access to a real-time, unified stock pool, there is one more layer needed. This layer is called item statuses.

Giving context to each item

With the help of item statuses, retailers have a granular level of detail on their stock. In addition to knowing which items are present on the store’s sales floor or in the stock room, an item status gives more context to each item.

For example, a typical status might be ‘On display’. These items are counted in an RFID inventory count, but aren’t suitable for selling online. These items are presented on mannequins or in shop windows, making it not worthwhile to use them to fulfill orders.

Another status can be ‘Reserved’, where a store associate reserves an item for a customer. Although the item is still physically there, this particular item obviously shouldn’t be available to be sold through the e-commerce channel.

Item statuses help retailers to exclude certain parts of their inventory that have these ‘special statuses’. This means that they can completely rely on their store’s stock, as they would have insights on which parts of your inventory are sellable through the e-commerce channel and which items aren’t.

Applying rigid thresholds to make sure an order can be fulfilled from store, results in overstocking and lost online sales. Instead, item statuses work the other way around: open up all your inventory, except the ones that have a special status.

Item statuses in iD Cloud Store

Assigning a status to an item is a powerful feature in iD Cloud Store. Statuses enrich real-time inventory data with more context, allowing retailers to unlock the full omnichannel potential. iD Cloud Store offers predefined statuses, giving you all the context you need to open up your whole inventory to e-commerce.   

Status management helps retailers decide what is currently directly for sale (or not) so that (digital) product availability can be optimized and sales maximized. Get in touch with us to find out how you can apply statuses to your items!

Check out the video below to see how status management works in the iD Cloud Store app:

Steffie Broere - Customer Success Manager
Customer Success Manager
Steffie Broere

How RFID Puts a Restraint on Return Fraud

Leverage RFID for loss prevention

How RFID Puts a Restraint on Return Fraud

While return fraud might often be put on the back burner behind more traditional or hawkish forms of theft such as shoplifting or organized retail crime, it can slowly bleed out profits for retailers. As online shopping continues to become more and more popular, return rates are growing because customers aren’t trying out items or seeing them in-person before making a purchase decision. Online sales typically double the number of items returned.  What this means for retailers is that having a convenient, yet secure, return framework in place is going to become increasingly important to driving profit.

Over 70% of Loss Prevention (LP) executives indicate that return fraud is an important issue for their companies.

-Loss Prevention Research Council

Return Fraud is on the Rise

How big is the return fraud problem? In addition to the costs associated with processing returns (such as transportation, storage and order processing), there is potential for increased losses due to abuse of the returns system. According to Appriss and the National Retail Federation, return fraud is a growing problem, costing U.S. retailers an estimated $27 billion a year. And the largest risk for online returns is in-store. BORIS (buy-online-return-in-store) return fraud for instance amounts to $1.6 billion compared to $0.4 billion for non-store locations.

Methods of Return Fraud

Like most types of theft, the specifics of return fraud often vary. Sometimes people will buy items at a discount and then return them elsewhere for full price. Sometimes the items returned have been used – this is known as ‘’free renting’’ or ‘’wardrobing’’. In other cases, thieves will swap the price tags on an item with a more expensive one before making a return. There are also shoplifters who are trying to return merchandise they’ve stolen. This is a common tactic for organized retail crime groups that will steal from one store and return items at another location at retailers that have generous return policies.

Unmasking Thieves

One of the most difficult aspects of fighting return fraud is discerning between customers making a genuine return versus people abusing the return system.  This can be difficult in a market that is becoming more and more focused on frequent and hassle-free returns. Brands like Warby Parker will send you 5 pairs of glasses to try and have you just return the ones you don’t want for free. Amazon has made one click returns with easy pickup and drop off standard practice. 

‘No questions asked’ returns are now the norm for most retailers. Some online disruptors like Casper mattresses are offering 100 day free-return periods. Consumers expect a frictionless return process: according to a consumer sentiment survey from Signifyd nearly 83% of respondents said they would be more likely to buy again from a retailer or brand after having a positive return experience with that retailer or brand. Conversely, 75% said they’d be less likely to buy again after a bad return experience. 

This normalization of frequent returns is great for customer satisfaction but can create a perfect situation for thieves to exploit.  How can we weed out the bad actors, but keep the customer convenience? The answer lies in using the historical tracking data for an item, powered by RFID technology.

Only 30% of retailers currently utilize automation to detect fraudulent returners.”

-Loss Prevention Research Council

How RFID Can Help

Accepting returns can be tricky if the customer doesn’t have the proper proof of purchase.  By placing the burden of proof on the RFID label attached to the item, rather than a receipt or the customer themselves, RFID labels create a secure and convenient alternative to traditional return methods.  With unique RFID code for each specific item, rather than just each type of item you can now tell if a particular item that’s being returned has been stolen from another store or if that item was originally sold at a discount.

Integrating your point-of-sale data with RFID data means you can see the whole history of an item: it was shipped to store, replenished to the sales floor and eventually sold to a customer. Or, in case of returns of stolen merchandise, never sold in the first place. Thus, with the help of RFID technology you can make return fraud a thing of the past.

“Half of all retailers said they considered return fraud to be one of their highest-level priorities overall.

-Loss Prevention Research Council

Acting on Fraudulent Returns

The shift from ‘no questions asked’ to ‘we ask questions when we see a suspicious return event’ has an impact on the way store associates handle returns. If a fraudulent return happens, retailers have two paths for moving forward: acting on the event when it happens or letting these incidents pass by and looking at the broader picture to find patterns.

The best course of action has both a short- and long-term tactics in it. Spotting suspicious return events needs to be dealt with accordingly, which means staff need to be trained properly and the appropriate procedures need to be in place. Examining the data for these fraudulent returns would lead to counter measures in the long term, as you will know which items are likely to be falsely returned.

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