Preventing loss, without preventing sales

Shrinkage remains a significant concern for retailers.

For a long time, retailers have accepted a reasonable ‘loss’ below 1% of sales inherent to the industry and the cost of doing business. Over the last couple of years, however, the loss as percentage of sales has been increasing steadily, by the introduction of self-check-out and staff constraints, to a point where it significantly affect the overall financial performance of retailers.

Many retailers have intensified their traditional measures of theft control and loss prevention. This includes the use of surveillance, security checks and introducing physical measures. Of course, certain retailer formats, certain locations and certain product categories are affected more than others. For instance, with ‘high value, high-risk’ categories, like cosmetics, personal care, alcohol/pre-mix drinks, infant care, meat, the shrinkage or loss has become so high that retailers have resorted to very crude measures.

The cure is worse than the disease

We see almost desperate attempts to curb loss, significantly sacrificing the overall shopper experience and creating a substantial additional cost in terms for staff or technology. The most egregious examples are probably the major drugstores locking up products behind plastic transparent slides in the front of the shelves, that can only be unlocked by store personnel or a loyalty app. This obviously creates a significant hurdle in the shopper experience.

While lockup product clearly prevents theft, it also hinders the overall shopping experience. Similarly, other ways of loss prevention are also intrusive:

• Increase of camera’s, creating a big-brother shopping experience. We’ve seen isle-facing camera’s being sabotaged in an attempt of shoppers showing their discontent with these type of solutions

• Security checks at check-out, which not only adds costs, but also adding shopper annoyances

Less intrusive measures still add costs. Just consider the cost of tagging products or the operations costs of using dummies of empty packages that need to be claimed at a counter.

Overall, the impact adds up. Several of clients have shared their financial impact of introduction loss prevention measures, showing a drop of category sales of 6 to10%. This reaches a point where the net benefit of loss prevention is completely off by the loss prevention cost.

A better solution is clearly needed.

The need to target theft in progress, rather than after the fact

MOOS can help. Before we explain how, we first need to take a side step to break-down the various types of loss. We broadly distinguish three categories:

• Individual item theft, where a product is not paid for during the shopping trip. Think of kids slipping candy into their pockets.

• Sweet hearting, where some product are paid for, but others are not, with the collaboration of store personnel. Think of conveniently forgetting an expensive product upon at the self check-out and the staff conveniently looking the other way.

• Sweep theft, where multiple items are stolen at once. This can be a quick ‘sweep’, hence the name, of the full shelf inventory. Think of organized crime coming in to take targeted categories and quickly leaving the store, sometimes even without attempts to hide the products.

The value of the loss is very skewed. The majority of loss in terms of value by far is sweep theft, followed by the sweet hearting of expensive products. In addition, the distribution across products is extremely skewed. Only a handful of high-value articles account for the far majority of loss.

With this breakdown, we can return to the ways to prevent loss and the unique role that MOOS can play.

MOOS provides retail operators with the ability to flag risky shelf transactions. This means that MOOS can pick-up a shelf-transactions, picking up a single product or picking up multiple-items at once. This is a crucial piece of information in the whole loss prevention agenda.

With the ability pick-up real-time ‘risky transactions’, retailer get the ability to organize a real-time response. When a risky transaction is flagged, a message can be sent to the appropriate store personnel to conduct a check. In practice, we have found that sending a message to someone at the check-out area or door wearing an ear pieces is the most effective way to prevent or catch theft events as they occur.

Other alternatives are also possible, for instance feeding a handheld or sending a text message. It becomes even more effective when combined with camera images. Determining who the ‘first responder’ should be, when to flag a risky transaction - balancing catch-rate versus false positives and getting right coverage of products / shelves requires some dialing in and iteration over time. Even before optimizing the system, the ability to see and respond to theft events as they occur is a super power for retailers. We see many providers providing point solutions or diagnostic solutions for theft.

We provide the only way to create a live detection and response system – without hindering the shopper experience. This enables retailers to address theft as it occurs, rather than signaling it too late. This creates a way to truly reduce your loss, instead of analyzing it after-the-fact.

If you’d like to learn more about ways in which MOOS can address shrinking, then simply get in touch.