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Preventing retail theft – sounds like a fairy tale, but artificial intelligence could make it a reality.
Organized “smash and grab” videos and images Shopping at stores and malls across the country is rapidly taking off online, and some of the nation’s largest retailers are turning to technology to stem billions of dollars in losses and keep employees and customers safe. are doing.
And they’re doing it together.
Companies from Target (TGT), Walmart (WMT), and Home Depot (HD) to Walgreens (WBA) and TJ Maxx (TJX) are jointly investing millions in AI, real-time heat maps, and other advances in an unprecedented initiative. is investing. To combat the problem of organized retail theft.
“We’re seeing a groundswell of collaboration,” Mike Lamb, former head of loss prevention at Kroger (KR), told Yahoo Finance for NEXT. “In the 40-plus years I’ve been in this field, I’m seeing this collaboration probably more than ever before.”
There is a word called reduction.
In addition to shocking footage seen in news reports and social media, mentions of organized retail crime in retailer earnings calls increased by 43% between January and August 2023, according to a report by Yahoo Finance. It is said that he did.
The term “shrink” is used in the industry to describe the impact on inventory due to retail theft, employee theft, vendor fraud, damage, mismanagement, and other causes. And this is a big problem. According to the National Retail Federation, a prominent lobbying group, losses due to overall contraction in 2022 exceeded a staggering $112 billion.
However, flaws in the data make it difficult to quantify the extent to which organized retail theft is contributing to the decline. The National Retail Federation last year retracted false claims it made in a 2021 report that nearly half of retail contraction was due to organized retail crime.
Walgreens Chief Financial Officer James Kehoe retracts his assessment of retail theft, saying the retailer has “cried too much” about organized retail crime. The explanation for the crime also became more complex.
Trevor Wagner, chief economist for the Computer and Telecommunications Industry Association, gave a more modest assessment in 2023 Congressional testimony, noting that organized retail crime accounts for about 5% of total retail inventory losses, but that still adds up. He pointed out that it would amount to billions of dollars. At a loss.
Still, shrink was the buzzword in retailer earnings calls last year, and it has continued to some degree throughout the most recent earnings season, with Target CEO Brian Cornell saying on the company’s most recent earnings call, “Shrink growth remains a significant financial headwind.” ”
Packing heatmaps
That has led Target and other companies to do the once unthinkable: partner with direct competitors on high-tech solutions.
For example, AI-powered heat maps allow retailers to share real-time data with each other, helping to proactively prevent large-scale push-pull behavior and protect consumers and employees in the process. It will be.
Heat Maps uses AI to predict future crime incidents by pulling data from as many sources as possible, from law enforcement to the retailers themselves. This data creates hotspots of potential criminal activity that participating businesses can see on their Maps dashboard.
The long-term goal is to equip participants with two-way radios and an app that will alert them if a crime occurs nearby, so stores can be prepared.
Finding the balance between preventing theft, controlling losses, and ensuring the safety of employees and customers is exactly why retailers are working to find solutions. According to a recent NRF report, more than 50% of retailers say they are spending more on theft prevention.
More than 90% of retailers plan to increase their investment in AI this year, according to software company Lucid.
“We’re thinking about how we can work together better to keep everyone safe,” said Dr. Reed Hayes, principal investigator in the University of Florida’s Loss Prevention Lab. The lab is spearheading efforts to develop new types of technology to deter theft in retail stores.
The lab, funded by the university and the Loss Prevention Research Council, houses more than 400 anti-theft technologies and evaluates how effective they are in the real world. Anyone at the country’s most prominent retailers can access the council’s research by paying an annual membership fee of $6,500.
To improve the shopping experience, retailers are also exploring customer-centric solutions, such as using FaceID and biometric technology to open locked cases that would normally require an employee to open.
“We’re looking at a lot of other AI initiatives here,” Hayes said. “We think we can do even more real-time mapping by picking up what people are saying, including threatening language and victim language.”
Less privacy
But the preventative technology has irritated privacy advocates, who say it’s illegal to obtain that level of detail without the person being monitored.
In late 2023, the Federal Trade Commission banned Rite Aid from using AI facial recognition technology in its stores, saying the company’s practices put consumers at risk of discrimination.
The FTC and Rite Aid reached a settlement in the matter, with Rite Aid agreeing to “strengthen and formalize the practices and policies of our comprehensive information security program.”
At the same time, the adoption of technology such as eavesdropping devices and facial recognition with added privacy restrictions makes it difficult for retailers to parse the data.
Mike Kroll, special agent in charge of the Department of Homeland Security’s Operation Boiling Point (a unit created to combat organized retail theft), tells Yahoo Finance that he is committed to fighting organized retail crime and respecting individual privacy. He said the challenges remain, particularly in how to respond. and where information can be collected.
“Law enforcement needs to be smart about where they’re collecting information from,” Kroll said.
To track the severity of retail theft, Krol’s team created an AI-powered analytics tool called RAVEN that uses machine learning to integrate crime data across multiple jurisdictions. This tool helps discover connections between individual crimes and disrupt criminal organizations and related organizations that support them.
Kroll, who recently testified before Congress about the sharp rise in retail organized crime, said Operation Boiling Point would increase investigations by 200% in 2023 and that his unit was receiving leads from retailers “on a daily basis.” .
“No one wants to shop at a store where they feel unsafe,” Kroll said. “Our main goal is to provide a safe environment for both our customers and employees, and technology, especially AI, will help us in that process.”
madison mills I’m a host and reporter for Yahoo Finance.
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