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Addressing the Rise in Retail Crime: Strategies, Innovations, and the Role of Technology
How far would you go to secure your retail store and protect your associates? If you're one of the countless retailers grappling with the growing problem of theft and violence, this episode is a must-listen. We're joined by industry experts Mark Self, Gus Downing, Ted McCaffrey and Pedro Ramos to examine the alarming trend of organized retail crime and its devastating impact on businesses and communities.
We not only shine a light on the harsh realities of retail shrinkage but also the influence of technology and social media on employee retention and customer experience. You'll discover a variety of strategies retailers are using to secure their stores and the tough reality of needing to add extra time to customers' shopping experiences for the sake of security. Moreover, we tackle the implications of using more militarized language to address theft and discuss the broken window theory, underlining the urgency for proactive measures.
We delve into the importance of understanding inventory loss as a means to measure results and touch upon the advantages of RFID technology. As our conversation progresses, we explore how different retailers approach inventory counts and stress the need for creating standards to understand what's leaving the stores, helping to differentiate between counterfeit and legit items. Tune in for an insightful and compelling conversation that you won't want to miss.
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The question burning on everyone's mind is is retail shrink as catastrophic as it's painted in the media? Mark Self, what do you think?
Speaker 2:I think it's worse than how it's being painted in the media. I mean, for me there's more than a few proof points. When you have a CNN reporter literally interviewing a store manager at Walgreens and somebody's on camera walking out with a bunch of stuff and the interviewer says, hey, did they pay for that? This is worse than catastrophic. This is like the apocalypse for retail, my view. I'm sure there's tons of reasons why, but it used to be that loss prevention and I'm sure Guskin, if I could talk to this loss prevention used to be something that wasn't spoken about widely because a lot of it was coming from inside the store. Things like sweet-harding, where a cashier would kind of wink and let you go through without paying, or people taking things from the back of the store. Those are all problems for retailers and there were problems that they tried to address, but they weren't problems that they tried to highlight or promote.
Speaker 2:Now you've got flash mobs literally smashing through an Apple store in Philadelphia and running out, literally running over police people to get out of the store. Then you have some of our members in Congress saying things like well, they're just trying to feed their families. This is worse than catastrophic in my view and it's societal. I don't know what retailers should be expected to do about it, because me seeing merchandise behind locked plated glass or whatever those partitions are that I'm seeing in the news and expecting people to be happy with that shopping experience, that's not going to work either. I think this is really really bad and towns and counties need to think throughout what they're going to do to augment retailer's own efforts.
Speaker 2:One other thing that's on my mind and then I'll pass on to some of the other speakers there's been some noticeable trends from companies where they're giving police people free coffee. Now you've got a situation where different retailers I forget if it was Walmart, walmart, I think it was is doing something special in the Atlanta area, whether giving police officers a place where they can hang out. Now you've got retailers promoting for attention from local law enforcement and in my opinion, that doesn't really work either, because other people are going to jump in and someone gives you free donuts and someone else is going to give you a free hamburger. Really, the core problem is theft is happening and is very visible. Do you agree with?
Speaker 3:this? Oh, absolutely. I mean we as a digital newspaper collect data on organized retail crime and we reported in one of our reports exclusive report so far, just mid year. This year we've seen a 36% increase in the caseload in the first quarter, a 4% increase, a little bit of subsiding in the second quarter, which means ORC cases on average we're up about 18% this year alone in a full number of percent. One of the other things that we're seeing is average case value is up 95%. The average case value, the dollar amounts, are up 131%. So it is a much more sophisticated and aggressive situation that's going on in the stores than it's ever been.
Speaker 3:That kind of runs hand in hand with what even the FBI crime index said recently, a couple of weeks ago, when they reported violent crime retail actually represents 60% of all violent crime victims in the United States in 2002. It's up 7%. Property crime is up over 7%. So there in those are numbers from the law enforcement agencies. Actually they had more agencies reporting than in industry. They're not really apprehending, following through and prosecuting that many shoplip because of the progressive movement, because of the decriminalization, the lowering of the felony thresholds and such. So there's been this whole push to decriminalize shoplifting period across the boat. So where do you draw that line? I mean, what shoplifting and what's ORC? When the professional knows that it only steals $800 worth, $900 worth he's not going to get a felony, okay. So oftentimes the castle just give me a ticket and won't even take them into the jail or the station and process it, because the police departments are overworked, under staffed, the jails are just filled with the brim and the judges just don't have the space.
Speaker 4:And let me add to that, gus. I mean, you're a legend in the industry and you also know, probably, joe Cole, who was the vice president of the Lost Prevention for Macy's, and one of the things that he did, one of the things that Peter Drucker says you can't manage what you can't measure, and sometimes we don't know what's leaving the stores, we don't know what's being stolen from the stores until you take a physical inventory. What have you, joe Cole, worked with my former company to install these smart eggs is where you have not only alarming, but you've got RFID and it's tied to me. So you probably heard this story.
Speaker 4:But in Queens, queens, macy's they actually caught a guy not only stealing a boatload of Ralph Lauren items, but he stole a suitcase to wheel it out.
Speaker 4:They followed him. They followed him all the way out to a fence location which happened to be a beauty shop in Queens, and these investigators went in with these little handhelds and put them in their back and went into this beauty shop and well, on the whole, they went downstairs and there was $90,000 worth of Macy's clothing down there. But here's the thing because of RFID and everything serialized, they were able to determine that a portion of that was from the Queen's store, a portion of that was from a San Diego store and another portion was from Chicago. So there has to be some kind of standards from a standpoint of understanding what's leaving the stores, what eBay is selling. There needs to be some kind of a certification to say this is either counterfeit or it's legit. So we need to get to that point where we give law enforcement the tools to be able to say that's you who stole it, because I saw the video and I saw the items that left the store.
Speaker 2:I think $90,000,. Ted, that's chump change. Those people need to up their. I think that's a little bit.
Speaker 3:Well, RFID and obviously a big solution from a standpoint of recovery, identification and such, but not all the retailers can afford that. And then that's something that's been the last 20 years they've been fighting for and fighting for, and the price of the ads are down, obviously, but it's still not applicable to probably 60, 70% of the retailers out there. Certainly Walmart and Target, I mean. They're pretty much into the RFID rollout and that should have a massive impact. So I agree with you on that.
Speaker 5:That's a guy that he originally asked a question, though.
Speaker 1:Let me intro Pedro, because a late entry into the conversation, but he was meant to be here at the beginning. Some technical difficulties. So, pedro, welcome to the stage he's from. He's the chief revenue officer at APRAS Retail. Over 20 years in fraud and loss prevention experience One of the best I had. Former AVP of loss prevention at Walmart stores. So thank you.
Speaker 5:Thank you to the state Apologies for joining late. I just want to thank my friends that are the largest software companies for all their privacy and security technology. Now I do agree that you asked the question is the retail shrink problem overblown? If you look at the data that's coming out of the NRF study, it's just suggests up actually 20%. It is clear from my conversations with some of my ex coworkers and partners in this industry and they're all so my partners and friends that the violence they're experiencing.
Speaker 5:20 years ago, 25 years ago, I was actually one of those folks in the stores. In my entire career I probably would experience three to four violent acts a year and I worked in some tough neighbor. Today, the conversations we're having with industry I think my experience with my industry peers is that this is the average short attack that we're so associate in the asset protection field, unprovoked, is dealing with violence several times a day and actually encountering weapons on a regular basis. Little scary, I mean, not for everyone, right? So see it's loss prevention professionals, the store associates and the public at large. So it's clear that violence ORC are at least. The violence seems to have escalated and I think we're hopefully we're coming out of the end of what was a kind of tumultuous four years, what will be four years next March, of a very kind tumultuous retail environment and just an overall societal environment. Hopefully we'll start to normalize in late 2024.
Speaker 3:Well, I don't think when in debut or C number, quite frankly, with relaparations online.
Speaker 5:Oh, absolutely so. What we do see in our own customer base and prospect base are the requests for online fraud prevention. So our technologies are analytical, which basically are backward looking and analyzing trends and predicting some future trends, and the other technology we have actually stops behavior at store level in real time, which is returned. In my brief six months here at this new organization, the requests for online fraud protection have exploded, and by at least 40% compared to the new year's requests. A lot of that is being perpetuated by what's like ORC has tried to find different vehicles to distribute the merchandise, and not only distribute it but the return merchandise. Flashmots, for example. Right, they pick up the stuff. They have no receipts, they want to return it and they a lot of times try to just convert that to cash and want their products back into cash at the retail stores they sold them.
Speaker 3:Yeah, one point and I'll hand it over to you guys. We do a retail violence fatality report every year and have been doing it now for eight, nine years. And just this past year, in 2022, there were 694 violent fatalities in the retail industry. Now that's as a result of a crime, something that happened in the store, or as a result of a store incident 17% up from 2022 and 86% up from 2016. And that's we're only reporting what is publicly reported. We're not reporting confidential information or information that is associated with any one retailer. This is what the news outlet is reporting, this is what they are reporting.
Speaker 3:So, and there's a you know there's a distinction there, but nonetheless, you can follow those trends all the way to the FBI crime stat and it kind of. They go hand in hand. Very frankly, and from an ORC perspective, it's also much bigger than what a lot of us have even been thinking about, in that we have recently found that a large manufacturer of apparel of the retail industry and a group of them and we won't name the country or the companies are experiencing some unbelievable cargo theft issues, and that apparel is made for the American, our country headed to the same ship and ends up in the United States and that merchandise is probably being sold on the marketplaces. Obviously there's a huge channel there happening as well that we're going to be reporting on in the next month, by the way, so that's not new guys.
Speaker 2:Well, the number of fatalities mentioned in that report to me somewhat. Even though I think it's, I still think it's ludicrous. But it somewhat endorses some of the procedures in place by companies like Lulu Lemon that have famously said we don't want our employees to do anything when someone comes in and shop lists to let it go right. So it endorses the fact that they're trying to protect their associates. And yet, conversely, when you make it public that, hey, no one in the store is going to do anything about it if you come in and steal, that's to me like putting up a sign saying you know, pay if you want, because we're not going to do anything to prevent you from just taking it. It's a double-edged sword that doesn't have a very good answer, in my view.
Speaker 5:Right, but we don't in our recession earlier about RFID and overall controls on inventory. There are ways to target by minimizing the exposed product, the amount of product that is exposed on the sales floor and subject to loss. Now there's all kinds of other costs associated with that. It means you have to cycle product more often and train associates. I mean there are legitimate reasons to publish to associates that you don't want them involved. I mean, if you think about what retailers had to do, they went from closed locations to suddenly having to open the doors.
Speaker 5:When it comes to people, you can't just turn the lights on, you need to find people.
Speaker 5:And one of the worst labor markets we have seen and that way Mark was already kind of in place when we get COVID it just got exacerbated, not to mention all the competition from the gig economy where you know I have to get their working-age kids, their adults, but their kids and the reality is they don't want to be exposed and so they find out of all alternatives to the work.
Speaker 5:So these stores have to stay open, have to find ways to minimize the exposure or at least hard with target in a way that it uses inventory levels and other protective measures, so it makes it more difficult or more Lavorious for the orc actor or booster to come in and try to lift the product. If there's very minimal product on the shelf it's not worth going in and it makes it for a better environment and more safe environment for these socials. But I don't think that's me. We've spent quite a bit of time talking about orc but if you look at the data, there's other and some of the retail or some of the big retailers that start to kind of Re-evaluate their positions. I think there's a lot of other issues driving the shrink numbers.
Speaker 4:I was just gonna say I think.
Speaker 4:I think that 9-11 and I don't want to draw Evan, but this is kind of retails 9-11 moment where we have to wake up as to how we enter and exit stores, and I think that if you think about Costco, you think about BJ's, they don't have quite as much of a of a staff problem because a you got to be a member to get in there, be you get checked on the way out.
Speaker 4:So I think there could be a some point, a not a TSA, but some kind of a TSA scenario where it's not as easy just to leave a store with a bag of items or what have you, that that item, those items, have to go through something that is almost like a conveyor belt that basically scans everything via video or or RFID and To make it a safe process to where it's safe but it's also Secure and it's also Something that is fast for the customer. I think we got to figure that out because we now We've adjusted ourselves when to go to the airport, we know we're gonna add another half hour to 45 minutes to get to the airport, knowing that we have to deal with that line. I think we've got to figure it out in retail and use the technology so that we can move people through safely and also Scan everything that goes through well, well, well intentioned.
Speaker 2:I think that you know that's gonna have a dramatically Negative impact on store environment and the quote-unquote shopping experience. I mean, wouldn't you love to get on a plane and and not go through TSA checkpoints? That's been gone for what? 30 years now. It does nothing to enhancing the experience it's to your point, ted yet lengthens the experience. Now I think if I'm going to wear name a store, I'm not gonna be real excited about doing it. Yeah, if I know that I've got to add another 30 minutes to my journey. Just an observation I agree with you that something pragmatic needs to happen, but I'm not sure what the answer is when you've got we've been talking a little bit in veiled terms about organized crime, but when you've got a flash mob that just runs through a Store and taking whatever they want I mean, did you see the Philadelphia video without the feathers? Like nothing left for anybody to Drink. That is gonna be a dry, dry block for a while because all the flickers been stolen, right? Well?
Speaker 3:the young people. The young people are absolutely a head of law enforcement over use, the social media and technology and this usually always the case. The criminal always adds the advantage in the beginning. Right, I could the number of reasons, obviously, from privacy issues being that whole litany of you know, privacy issues, like I said. But in we really haven't had as a law enforcement, either public or private, the manpower to really Monitor social media to the point where we can prevent these. For a react, you know, in real time, I mean it's always a reactive method that they move in. By that time You've got 300 kids, they're beaten up tops and you're kidding, yeah. And, by the way, this isn't just happening in the United States. I mean this is happening simultaneously. Exact same thing in the UK is going on in Canada and it's going on a number of other countries. So this is not some phenomenon of the United States. This is the retail industry as a whole.
Speaker 2:So for almost from a global perspective, but hey, you know, there's a bank robber back in whatever by the name of Willie Sutton and any, famously, that's why you drop banks. And he said that's where the money is. And it seems to me that now the money's in retail. Yeah, you know, there is. It's just an Apple store. There's hundreds of thousands, probably millions of dollars worth of equipment in there and that's where the money is. So something has to happen.
Speaker 4:Well, I think this is not only our 9-11, but this is also our COVID moment, where we need all the different the governments, the local governments, the authorities, the retailers, technology companies all working together. I mean, you've got a guy like governor gas and Gavin Newsom is putting they may not be enough, but $267 million into a whole effort to stop this, and he says you're gonna steal, you're gonna go to jail, and so we need more of that in supporting the stores. And I know that that is, you know it. That may be, that may not be enough, but I think that's what we need to do.
Speaker 5:Yeah. So, ted, you make a great point. I think the industry is doing a great job Educating law enforcement both the regional all the way up to national, and less of the recent national legislation and it's also using technology, for example, to shut down the the way this stuff gets laundered. I mean, nobody's gonna need 20 Louis Vuitton backs or 50 rounds of lipstick lipstick maybe Gus does, but you know the average and does they need place to resell the product, and the digital marketplaces is pretty typical go. So there is federal legislation, but there are technologies where we can help stop this problem by enhancing the security measures in digital marketplaces to prevent some of the stuff from so I'm getting to that Just started, pedro, with the informant.
Speaker 3:I mean it's correct. So I need to kind of regulate them at least. But it's only the first step, which everyone obviously is aware. But you, still read.
Speaker 5:You're still requiring the merchants or the, the operators of the digital marketplaces, to manage thousands upon thousands of Recentlers, which you're putting them in the role of being police of their own marketplaces. And generally you, gus, you know as well as I do they will react. I think so. When someone Notifies them of a potential problem. They'll investigate it. But to ask them to monitor every single person, you're basically it's the comment that Ted made earlier and the conversation she said in Mark had you, we could put gates at the front of every store and it had. Some of the Europeans do that, but it just becomes a burden on everyone else. So there are those measures are in place, but there's technologies that can actually enhance the ability To stop that behavior at the at the actual market place.
Speaker 2:One thing that strikes me was we talked is that Eventually, sadly, all of these costs, whether it's technical or more law enforcement or go police, the Yo, I'm her sights those costs are going to get larder back on to all of us at every level associate I'm extra out of and it's going to be larder on as additional costs. We're gonna everybody's good, so kind of. Coming back very briefly to an earlier theme in our conversation, I think this is this is a societal problem. It's not just a retail problem.
Speaker 2:I remember and I'm dating myself but I don't know how old I was I literally took like a Single BB gun target. It must. It was like less than a penny and the dude followed me out of the store I was hiding. It was somebody like my fur I'm one and only attempted joblifting. The guy popped me in the parking lot and I never touched anything again. I was like less than a penny, I was scared to death. That would never happen now. And no, and I'm not saying I'm not, I'm also not trying to make a point for the quote-unquote good old days.
Speaker 3:I just think that this is a huge societal Problem that is more than just on the retailers and, if I may inject one point there, there are a number of community right now that are actually going to some of these retailers and asking them why aren't she doing something to stop our kid, you know, from coming into the store? There's one particular incident that we reported that high school gets out at three o'clock. 20, 30 kids go to this one store. They steal the heck out of it and everybody just stay in the fair and watch them and the manager says well, that's because we can't touch them. They go over to a smaller store and the store manager standing by the door and wouldn't even allow me in. We got community leaders throughout the country going to some of these retailers Asking them to get involved in in kind of getting up about it. But once again, you know, you get the retailer in all kinds of liability. It may don't want anyone to get hurt over a shirt or blouse or a candy bar. I mean that's ridiculous.
Speaker 5:Yeah, I think we all agree that this is Mark. I completely agree, and we now know that markets and Shoplisters so.
Speaker 5:I think we all agree that that is a larger societal problem, absolutely. But if you go back to you know Chase's original question, if you look at the RF study, you know retailers who responded to this are still telling you, regardless of what's in the headlines, that over 50% of it Of strength. So it tributed back to some type of an internal process issue and journal associate issue. And if I'd heard you call it correctly, I'm still back to the old days when I was now one of the black, to the old day. That was our purpose, right, fix the process.
Speaker 5:If you look about at any grow, any retailer that's in the grocery business I don't think anybody's doing flash mob that perishable products or any of those other things. So there's still a significant focus that needs to take place, given the current labor market, given turnover, on Training issues on basic shrink prevention principles, inventory controls, basic watering, analyzing data to determine where your issues are, and RFID is one of those components. There's still a lot of basic blocking and tackling that the industry can take and it's starting to focus on again from my Savas fears of that LPRC two weeks ago, for those of you don't Understand, it's a lot for venture research council at the University of Florida for the listeners that may not Be familiar with it and I have several conversations with three tellers and a couple of other solution providers. Out the conversation, although it remains important, focus on our C and crime and all these other issues to start Kind of focusing again back inside the box under internal process and other training issues and associate theft right, which that's continued to be a decision.
Speaker 4:So when does a barcode turn into, say, full-on RFID? I mean, if Carter's with an AUR of under $10 per item can put a 5 cent tag on, I think just about anyone can, except for small trinket items but when does? What I love about RFID is it serializes every item. So if you can certify that out of based on a serialized display, you're going to try to return that. You know what they're going to know exactly where that came from. It was stolen. If you've got the gates to show it, you've got the gates to show who stole it.
Speaker 4:So, and at some point, do we ever have some kind of a body that keeps track of that? A knock, if he will, that they see, razorblades just got stolen from the target on Route 9 in Framingham and then all of a sudden the Walmart gets hit on Route 9 heading west. So now you know, maybe at the third store where the Razorblades are, that you can hit them at the third store. I mean, rudy Giuliani talked about the broken I hate to use the name, but the broken window concept of all these train cars that were getting painted with graffiti, and what he did is he hit them every time they got painted. He put them in and he washed them every night, and so when you have graffiti, everything else looks bad, everything else is a blight and so, but if you hit them back every time, and hit them quickly, I think they're not going to do it. They're not going to do it as much anyways.
Speaker 1:So as we wrap up, pick one of your favorite solutions, and we've established there is a problem. I think most was the consensus here that it was as bad as the headlines say, or even worse, or was there anyone who was on the side of? It's not as bad as they say? Definitely it's bad, definitely good. If you had to choose one solution, it's probably a holistic thing. Right, it's a lot of things, but what is one solution that retailers that you would put your money on Really do? Rfid?
Speaker 5:Yeah, I'm going to have a biased answer, so I'm shot out the link with the sales pitch. I'm trying to really make this. I think the solutions are going to be the evolution of technology in the business. I think RFID and proper inventory controls are going to be critical to stopping external theft. But I think solutions that help retailers take as much of the decision process out of the employee's hands as possible and automate that decision process and then focus their employees training on core issues and he's just going to provide general, overall, better benefits. Right, I am also like the rest of my peers, except at the Umbringer. I have lived through several of these cycles. They are a little bit magnified because of social media. Inevitably, I've always fallen back on. Where can I focus on best practices? Back to core, and I just pointed down I think law enforcement is taking a very passive and process and they're starting to come back. So my solution is our technology, because that's kind of where I made my decision. What's the technology solution.
Speaker 2:I would say this is probably 65% tongue-tied, but 35%. I'd put the baddest looking Wagner mercenary in front of every store and just have them fully vested. I bet they wouldn't have to touch anybody, they just stand there and be bored all day. I would do something very provocative and very visible, like the German Shepherd's in New York City. Yeah, I have the same with the Masson and Frowlin, oh well that's going to go well.
Speaker 5:The German Shepherd's in New York City Everybody go out and start.
Speaker 1:Oh, I know two retailers that did it, Gus. What was your number one solution?
Speaker 3:I would say there's two things.
Speaker 1:No, making the rules Only one.
Speaker 3:I got to say it is passing the current federal organized retail crime legislation in Congress. That's an absolute necessity to truly get it on the boards, not just within retail but in the law enforcement community. A lot of this money that's been going into the law enforcement locales like Newsom's and all around the country doesn't really end up going to fighting ORC. I mean there's got to be a big percentage of that that's probably going to be psyched off at other places. But anyway I don't mean to go there. But we have the Interact has a huge effort right now, on the 26th tomorrow I believe it's the 26th for a white retail crime effort, which is what they're doing is kind of bringing all the people together in the industry in order to be able to communicate with their local representative, senators and such and show their support of the federal legislation. We need this just to get on the blackboard, because right now, if you look at the FBI crime in debt, we really can't determine anything about ORC there.
Speaker 3:It was hard enough to get shoplifting on the years ago. That's one thing. So it gets spanner F white retail crime day, looking up on the net, on the web, and jumping and getting involved. And the second thing I'd like to say is facial recognition. I since we believe that that can be a very different experience in the diamond age scenario is a necessity To increase the safety and the security of every box out there. As long as there are parameters and it's able accordingly, bottom line, those might do salute.
Speaker 1:I think really three actually.
Speaker 4:So much took to a mind. Yeah, but I just let him know it. Yeah, we put off. Well, I think he is, he's. I really how I'm gonna either. I had you know, like.
Speaker 1:Yeah, we had RFID, we had technology. Good answer.
Speaker 3:Pedro.
Speaker 1:We had a guard or some kind of physical presence, knowing that we walk through the door. And then Gus's answer facial and facial recognition. This has been such an insightful conversation. Oh, did you have a?
Speaker 2:I just one one, one, one more observation for for my colleagues here and for you to chase, I would I strongly suggest that we stop calling it loss prevention. It's theft. Loss prevention is, like you know, sounds like we're making an excuse for something. It's theft, whether it's coming out through the back door or a sweet arning, or its splash mobs or its organized crime. The industry should talk about kind of I don't know militarizing its language about this, because it's go backwards to security. Yeah, yeah, exactly, all right, pedro, I so anyway. Yeah, I, I support Pedro and security.
Speaker 4:So one thing that people forget about is that lost, there's the loss, and then there's a loss to sell it to the next customer. The beauty I'll go back to it, rfid is that when those items leave the store, you know they're gone, so you know to replenish them right away, versus the next week, the next month. Macy's counts their entire store once a month. You're gonna wait 30 days to replenish those items that especially the items that just came in for the season You're out of stock. So it's important to know what left, and so you know what left, you know how to measure your results, and that's that's the key thing for me the very good point.
Speaker 1:Very good point, all good points. Guys, this has been such an insightful conversation for me to be part of. I feel lucky to be here and I'm sure I'm sure the audience feels the same. We'll be sharing this across different social channels. We'll have clips and we'll have a replay available that we can share with. You know, any of your colleagues or Friends, or anybody else you think it was, would would benefit from this. Thank you all for being here.