Part 1. Unpacking the $100 Billion Shrinkage Challenge

🎙️ Special 3-Part Episode Alert! 🎙️

The evolving landscape of retail is facing one of its most significant challenges yet! U.S. giants like Target, Wal-Mart, and Home Depot grapple with the ever-growing issue of inventory shrinkage - costing the industry a staggering $100 billion, a number that has doubled since 2015.

But the dilemma doesn't stop there! Balancing increased security measures with a seamless shopping experience is the topic of heated debate. Over in the UK, we've seen unprecedented levels of retail crime, with a reported 175,000+ incidents in just the first half of 2023.

Tune in as we dive deep into: ✨ The complexities of 'loss' in the retail sector ✨ The alarming rise in theft incidents ✨ Solutions retailers can employ to safeguard their businesses

I'm excited to be joined by Leandro Blank, straight from the ITAB offices in the UK, as we discuss, debate and dissect this pressing issue.

Ready to untangle the web of challenges in the modern retail world? Listen now!

Episode Transcript

(00:00):
Hello, Welcome to a special three-part episode where we talk
about the biggest problem in retail right now, which is
theft. With US retailers like Target
and Walmart Home Depot grapplingthe rising inventory shrinkage
leading to significant profit losses, this issue has cost the
industry over $100 billion, double that of 2015.

(00:22):
Increased theft incidents, either violent ones, are
prompting measures like surveillance plexiglass.
However, balancing security witha seamless shopping experience
is an ongoing debate. In the United Kingdom, the Coop
reported its highest ever levelsof retail crime, with over
175,000 incidents in the first half of 2023.

(00:43):
Over the next three episodes we'll take a look of the problem
of shrink or theft, talk to experts in the field and look at
real life solutions on what retailers can do to protect
themselves from the etab officesin the UK.
I'm joined by Leandro Blank. Who better to talk to about such

(01:04):
an important problem in retail than the experts?
Leandro, welcome to the podcast.What I'd love to start by doing
is getting your view on what is lost.
First of all, thank you Annex for having us in the in the
podcast. I would say that Nos.
It's a very broad concept. That nowadays we are seeing lot

(01:27):
of noise and lot of news around fast specifically, but it's
actually a bigger challenge for retailers which includes from
the loss that happens in during the process supply chain
inventory, stock error in the process of accounting and
pricing. It also includes product waste
and spoilage. So all the product that it goes

(01:49):
out of stock because the expire date has reached.
And then the third, Peter, is the the theft, which is now the
most hot topic in the press and the news and everywhere but we
see in theft, we can also split it into two different
categories, organized crime and what we call opportunist theft.

(02:10):
It's a client that goes to the store, sees an opportunity,
doesn't scan, doesn't pay for something.
You see that he can he or she can get away with that.
And then they repeat that I becomes a behavior.
Yeah. So these two aspects are
different. Within this theft pillar of
loss, is there one that causes more of a headache for
retailers? Is there one that's prioritized

(02:33):
when you're talking to retailers?
I guess all of them are in the agenda.
But what we are seeing is that specific specifically theft,
it's in the rise, right because of the dynamics that we are
seeing now in the in the currenteconomic situation.
So rising cost of living, the diminishing margins from the

(02:54):
retailers are making this theft the one that it's now becoming
the really hot topic because it's in the rise.
The other tool, for example the process, the ones related to
processes or the one related to product waste are more or less
being managed by the retailers. But the one that it's purely
related to theft, that's the onethat it needs to be put under
control at the moment. So can it be put under control

(03:16):
in reality? Can you really help retailers or
is it just marketing? It can be put under control.
There are some initiatives goingon as everything in life.
With everything that is an upside and then downside, sure.
So every initiative, every solution we have a trade off.
So I think that the challenge remains how to mitigate the
risk, yeah. Theft without stopping trading,

(03:38):
yeah, because that's in stores are there to enable trade.
So if you put lots of barriers and lots of products behind the
cabinet counters when they closed in cabinets, then yeah,
you're going to reduce loss where you're impacting sales at
the same time. So that's I think for me the
main challenge how to put theft under control and mitigate the

(04:00):
risk, Yeah, but at the same timeI'm what I was going to say
improve the customer experience,but at least don't make the
customers don't have any work onit, right.
I don't make it worse. It's.
Not make it worse. Yeah, because it's interesting
because again, the NRF report that focuses in and and in the
UK, the Federation of Small Businesses has also they
launched a report in July about what are for small shopkeepers

(04:23):
or small medium enterprises, howmuch of a problem it is for
them. And obviously they're asking for
change in the UK law as they arein the US to make any type of
shop crime more than petty theft, which is the way they
look at it. But this whole thing about
friction and having the right amount of friction to prevent
theft or the right amount of friction to allow a great

(04:46):
customer service. What I found interesting when I
was reading the report and some of the solutions had to mitigate
was this whole concept of, you know, capturing live video and
then using AI or this new world of AI and data to help store
staff get themselves out of positions of danger.

(05:07):
Exactly, because that's the other big problem is no retailer
wants their associates to be in danger.
I just wondered if you have any thoughts on that in terms of
best ways to help retailers. So we understand the problem,
but what is the solution? That there is no one single
solution for every retailer and there is no one single batch
point that will solve all the problems.

(05:28):
Yeah, So what we see that works.Is that, first of all, each
retailer has a different dynamic, different operating
model and so we need to approachevery retailer as a new
development. So we will end up with a bespoke
solutions for every retailer based on their need, on their
specific dynamics and their specific customer experience

(05:51):
that they want to deliver to theclient.
So just working from your experience, when you're talking
to these people, what is that one thing that they come to you
with? Like, I know everyone's
different, but yeah, are they? Is it theft as a problem in
general that's driving their conversation with you right now?
I think that now the main challenge that we're seeing is

(06:13):
that, but it's not really a measure of loss, right?
Where it's happening in which products when, So there is lack
of information. Got you.
So I think that. 1st, we need tostart there.
We need to understand where is loss happening and once we will
understand that, then we can propose a solution.

(06:35):
It's really hard to measure the absence of something, so losses
something that it's not there. So our approach is probably
measuring the when we can convert a potential loss into a
safe opportunity. Yeah.
So that's something that it can be measured and can be then also
put in the in a in a. Highlight within the

(06:58):
organization because everyone understands the language of
sale. Yeah, in a retail environment
because until now I think loss was more on the on the back end
was a for the loss prevention officer somewhere in the back
and very isolated from the rest of the of the organization.
Yeah. But when you translate that into
a sales discussion, how we can by preventing laws and loss,

(07:21):
actually it transformed that into a sales opportunity.
Then that is that something real?
I mean does that like? Just to give one example, yeah
non scan and attempt and it sayscheckout.
Yeah, if we can convert a non scan attempt into an that's a

(07:41):
sales, right, but you're. Transforming, and in that case,
is that that's an innocent mistake that someone may have
made, but the retailer will loseanyway.
Or or innocent. It only broke.
Yeah. Interesting.
Interesting. Why are they focusing on it now
when it's been around for so long?
Since there is written, there isloss.
So it's been always a problem until now is budgeted and it was

(08:06):
in the P&L, somewhere in the P&L.
But now there are two dynamics as I I I said it beginning that
I'm putting this on the hotspot on one side notice increasing,
yeah, on the other side profits are going down, margins are
going down. Yeah, so now.
Reducing loss has become a pocket loss margin, the pocket

(08:29):
of growth for the retailers. So nowadays actually investment
in loss prevention initiatives is his number one investment.
The other thing I hear and and I'm sure retailers are probably,
you know, when you go to any trade fair, you see loss
prevention through computers, loss prevention through AI, loss
prevention through data, loss prevention through dates, Los

(08:49):
prevention through pause. Where do you start?
How do you how do you tackle this problem?
Every single problem might be tackled with a touch point with
a single touch point. But the the real value to really
address loss in a holistic way and with a multi dimensional
approach because loss is a multidimensional problem is by

(09:10):
connecting all these dots together.
So and not only the touch pointsthat are related to loss
specifically like a vision technology could be, foot fault
could be, transactional data could be.
Time of day, weather. So all the data points that we
have, we have around and writtenstore.
If we connect all those together, we can extract the

(09:31):
patterns on the data that could give us insight and we copilot
to the store manager to know when something could happen.
I think that's where the value lies.
That sounds like science fiction.
I mean like, I mean I love the idea of Copilot and and you know
which business doesn't want to enable their store manager,

(09:51):
their store associates to help them.
I mean NRF for example. Again the the report said one of
the pieces of advice that they give to the executives or the
retailers, do not ask your colleagues to engage, record the
incident, gather the data and inthe US they're trying to share
the data. But I mean how does that?

(10:12):
Is there a way of bringing it all together?
There is. We're working on initiatives.
But rather than me talking aboutit, yeah, don't you come to our
office in the showroom in in Sweden and you can see it for
yourselves. I sound fantastic.