As we come to the end of 2024, RFIDJournal writers and experts who contributed their knowledge are taking both a look back at this year and what is ahead in 2025. This entry is from Jon Ross, senior product manager, Appriss Retail
Over the last year, among the many challenges facing retailer executives, like inflation and high food prices, shrink and organized retail crime (ORC) has been a serious problem.
In fact, a survey of leading retailer executives found roughly 8 in 10 believe ORC is an increasing threat to their businesses. The same report detailed that shrink caused retailers $112.1 billion in losses in 2022, up from $93.9 billion in 2021—estimating that theft (internal and external) represented nearly two-thirds of the total shrink.
Unfortunately, going into 2025, retail crime will persist. The reality is that crime rings are only getting savvier in how they use technology to target online returns fraud, and shoplifters are becoming more bullish, ransacking store shelves in coordinated groups. To combat retail crime and fraud, retailers are investing more in technology, including how RFID works with loss prevention solutions.
Here are three trends going into 2025, where technology can have a role in reducing retail crime and shrink.
As Online Shopping Grows, So Does Online Fraud
Globally, e-commerce is expected to reach nearly $5 trillion in 2025 and $36 trillion by 2026. In short, for loss prevention, more online buyers leads to more online fraud.
A leading driver of online fraud is claims and appeasements fraud, where a consumer buys an item online and fraudulently claims that they never received the item, or it appeared damaged. The retailer then issues a refund or appeasement. These fraudulent claims cost the retail industry on average $21-35 billion annually and it’s getting worse. In fact, for the first time, Visa’s annual Global eCommerce Payments & Fraud Report, in partnership with the Merchant Risk Council, listed returns fraud as the leading form of online abuse in 2024.
Assisting retailers going forward, AI and predictive modeling can identify unusual behavior happening across different areas of an organization such as a customer service system, in-store, and online. By monitoring behavior, AI quickly and automatically reads through the data of thousands of transactions and can alert a loss prevention specialist of potential ORC activity by identifying unusual patterns in the data that may expose purchases that lead to fraudulent claims and appeasements. Often these ORC groups will target high-value items to make claims in order to exploit the retailer’s customer-centric claims program. However, AI working in concert with supply chain technology like inventory data from RFID tags, can help mitigate these fraudulent returns.
Adoption of Generative AI Picks Up Within Loss Prevention
Retailers are far ahead in using AI and RFID technologies to help optimize the supply chain and forecast demand but shrink is somewhat uncharted territory. In 2025, it’s expected that retailers will go from just testing generative AI to deploying it more within their loss prevention strategies.
A few benefits of implementing AI in the fight against ORC include:
- Democratizing data — Any user of a generative AI solution can have complex datasets translated into conversational, retail-specific language. For loss prevention specialists and investigators, they can query the technology to make quick, informed decisions on cases.
- Linking ORC cases — Retailer investigative teams can use limited memory AI to automatically search data, including RFID data, and link related incidents and characteristics across cases. By linking cases, such as seeing if a certain car or weapon was used during a retail crime case, retailers can connect and build larger cases of ORC.
- Backing large-scale investigations — Collaboration is key in fighting retail crime. Generative AI facilitates collaboration between loss prevention specialists, supply chain teams, store managers, and even law enforcement by providing insights into cross-case connections, enabling a deeper understanding of ORC networks.
RFID technology is expected to advance how loss prevention specialists monitor shrink. The trackable electronic product code (EPC) in RFID can support loss prevention solutions by accelerating how retailers identify issues of shrink by tracking instances of products directly.
Improved Returns Technologies Enhance Sustainability
Fraudulent or not, online returns are a detriment to a retailer’s sustainability goals. If a loyal consumer buys a pair of shoes online, has them delivered, finds that they don’t fit, and sends the shoes back, that entire back-and-forth delivery process increases greenhouse gas emissions. What’s more, there’s time and money spent on repackaging items and getting them ready for resale.
However, AI-powered solutions can help reduce a retailer’s overall carbon footprint through personalization. For instance, AI anonymously reads through transaction data and alerts a retail associate whether a consumer is a loyal shopper or a potential fraudster. If the shopper is loyal and a high spender with the retailer, the AI might also recommend offering an incentive to that shopper if they return an item they bought online to a nearby store. This will prevent the shopper from sending back the item through the mail, adding to those carbon emissions.
Another tactic is to tell a loyal shopper to simply keep the item they planned on returning and the retailer will send a replacement, no questions asked. This reduces the carbon emission problem by removing one phase of that returns process.
Technology Targets Shrink
As issues of ORC and shrink continue to haunt retailers, loss prevention specialists will look deeper at how technologies such as AI and RFID can work together to reduce shrink. In a tight economy that is expected to continue into the new year, retailers need to protect their profits wherever they can.
Of course, loss prevention specialists can’t tackle the problem of shrink alone. Laws help, too. The National Retail Federation, for example, is pressing for federal assistance to develop a concentrated center targeting retail crime as part of the Department of Homeland Security. A proposed law — the Combating Organized Retail Crime Act (H.R. 895/S. 140) — will continue to make strides, seeking co-sponsors in the House and Senate. The bill addresses how federal, state, and local law enforcement teams collaborate and combine resources to fight ORC.
In the meantime, retailers can leverage technology to mitigate the impact of returns fraud, ORC groups, and overall shrink. As retail criminals get savvier in how they use technology to steal from retailers, loss prevention teams can fight back through innovative solutions that work together and protect profits.