Editor’s Note: This story first published at Retail TouchPoints
According to the National Retail Federation (NRF), retailers lost $112 billion due to shrink in 2022, up from nearly $94 billion in 2021. As such, electronic article surveillance (EAS) hard tags, locks, alarms and other physical or visual deterrents to theft have become an expected part of the in-person shopping experience these days.
Still, as intelligence-led loss prevention (ILLP) systems that rely on radio frequency identification (RFID)-supported inventory insights to help retailers get ahead of organized retail crime become more common, retailers are considering a change in approach. The increasing availability of these systems, coupled with a desire to reduce labor costs, simplify operations and remove friction from shopper experiences, have even motivated some retailers to explore the idea of removing hard tags from their LP programs altogether.
However, early experiments with the idea have shown that eliminating hard tags could be a costly decision for retailers—and have proven that each technology in the LP toolbox has a part to play in the effort and that a customized strategy is the key to success.
Tried and Tested: The Results of Removal
Despite the promise RFID and ILLP programs hold, it seems the key to optimizing LP programs still lies in balancing real-time deterrents (like EAS hard tags, locks and alarms) for prevention, with analytics-based optimization and monitoring for an added capability of loss identification. After all, visual cues have a significant impact on individuals’ behavior.
Research routinely shows that simply seeing security equipment makes all the difference for would-be criminals. It’s the reason that police proximity and the presence of alarms, outdoor cameras or exterior lighting all deter home burglaries. There’s evidence to show that just having a security sign can reduce the chance of a break-in by 25 percent.
The same is true in retail locations, where exit pedestals, signage and hard tags act as visual reminders that theft is taken seriously. My company, Sensormatic Solutions, has seen firsthand how removing hard tags can contribute to increased shrink. After launching successful RFID tagging programs, several of our retail partners experimented with adjustments to their physical security deployments.
Nearly all of those who removed physical hardware saw shrink increase in turn:
- One retail customer that experimented with eliminating hard tags from its LP programs saw shrink more than double in test locations within one year.
- Another retailer saw shrink grow 40 percent to 70 percent in test departments in just seven weeks.
- A third retailer saw shrink increase by 40 percent in stores or categories where tags were removed — but not elsewhere in the store.
Workplace Safety
It is also important to note that from a labor standpoint, removing hard tags resulted in an unexpected but understandable byproduct: decreased workplace safety. Numerous retailers that tried to do away with hard tags reported the move negatively affected workers.
As the number of theft events increases, so does the likelihood that associates or security will witness or become involved in an incident. LP teams shared that their associates felt less safe in the stores without tags, and many said associate requests for the redeployment of tags played a part in their decision to reverse course.
Shoppers also report that retail crime affects their shopping habits. A Civic Science survey found that 38 percent of shoppers who have noticed retail crimes taking place say they have decreased the frequency of their in-person shopping, and 14 percent say they switched retailers following the incident.
Other research shows that visual deterrents can help restore feelings of safety among shoppers, with an LPRC survey finding that one-half of the customers interviewed feel safer in retail locations with visible security measures. Tagging also can be an effective alternative to locked cases for open merchandise, considering that 26 percent of US consumers would shop elsewhere if their local store put items under lock and key.
The Best Offense is a Good Defense
With the above in mind, it’s becoming increasingly clear that eliminating hard tags or other visual indications of a retailer’s security program isn’t an optimal option. RFID and predictive analytics systems provide incredible value for historical analysis, loss identification and proactive planning, but they are ultimately intended as a complement to a hard tagging program. Visual cues (like hard tags) are the first line of defense.
If you imagine that the retail store is a football field, the roles of each element become a little clearer. If the products are the football, the door is the end zone and the thieves are the other team, the hard tags are your linemen. Ideally, they intimidate the opponent and block them from scoring. But let’s say the other team scores anyway. The coaches will look at the playback to see how it happened. It’s that opportunity—to reflect on the incident—that ILLP systems provide to LP teams.
Data Insights from RFID
Essentially, RFID-based systems guide retailers to opportunities to enhance—not replace—their physical deterrents. They use RFID tracking to gain comprehensive inventory intelligence and AI to analyze operational data, helping to mitigate shrink by identifying its root causes. ILLP systems turn products’ movements, sales logs and other critical in-store information into insights about which items need to be EAS tagged, which need RFID tracking and which would benefit from both. This allows retailers to adjust their approach to physical deployments in order to address actual drivers of losses within their operations.
Once retailers understand the drivers and patterns of shrink through RFID, they can balance their LP programs to control cost and labor demands by select hard tagging of items, strengthening the store and display layouts, streamlining customer journeys and more without seeing shrink rise in turn.
It’s a way to improve resource allocation and efficacy which — as many retailers hope — can help reduce labor costs, friction and operational hurdles.
Final Thought: No Two Retailers are the Same
The importance of analytic insight to modern LP programs cannot be overstated, but it is not the end of the road. It’s just one piece of the puzzle of creating reliable, tailored and effective LP strategies. After all, what RFID gives you is insight into your operations — what you do with that information will depend on your size, segment and locale.
What “effective LP” looks like will be as diverse as the retailers striving to achieve it.
As retail technologies progress, leaders who recognize the value in covering all their bases and commit to adjusting their approach will likely see better results. The same goes for every tool at their disposal; modern LP is about recognizing the value in EAS tags and RFID systems, artificial intelligence and a human touch. The constant will be staying open, informed and flexible. And if history is any indication, the retail industry is more than prepared to heed that call and innovate its way to a more secure future.