Recent dramatic viral “flash rob” events in multiple U.S. states and rising retail crime trends have elevated the importance of the loss-prevention function in the retail industry. With shoplifting and employee theft, particularly in response to the COVID-19 pandemic, retailers face a $61 billion annual problem, with more than two-thirds of surveyed retailers stating that the pandemic increased the overall risk to their company, stimulating new ways for shoplifters to steal from stores.
According to the latest NRF Security Survey, 69 percent of retailers have reported an increase in organized retail crime (ORC) activities throughout the past year. More alarmingly, 65 percent of retailers are seeing an increase in retail violence, while 37 percent reported that ORC gangs were more aggressive than in the past.
How Advanced Technology Is Improving Retail Operations
Artificial intelligence (AI) has swept headlines in recent years with the introduction of the metaverse and the advancements in technology; however, at its core, AI is rather simple. It collects data, analyzes it and generates a pattern or intelligence that can be used in a variety of scenarios for different industries and organizations, including retail.
Leveraging big-data analytics, AI allows retailers to analyze everything from shopping patterns and in-store traffic to supply chain management and personalized customer experiences. What complicates AI is the massive amount of unstructured data that is generated. Ninety percent of the world’s data was created within only the last two years, and it’s expected that the volume will double every two years. Research shows that the global big-data analytics in the retail market generated $4.85 billion in 2020 and is estimated to collect $25.56 billion by 2028.
Collecting this unstructured data requires AI technology to analyze and organize it to create more efficient retail store operations. For example, biometric and facial-recognition technologies, which are gaining popularity and are currently used by major retailers such as Macy’s, can scan employee and customer faces to identify customer shopping patterns and traffic trends, while also preventing fraud. Advanced algorithms can even track a customer’s digital footprint to cater to more personalized experiences, like displaying certain ads or offering customized promotions.
RFID is fast becoming a major contributor to the growing retail unstructured data. As reported by Accenture, RFID adoption rates in North America grew to 93 percent of retailers surveyed that are using RFID, while Europe and Asia-Pacific adoption rates are at 77 percent. As the research confirms, the pandemic has had a direct impact on the acceleration of RFID and other emerging technologies. In 2020, volumes of UHF RFID labels applied reached nearly 20 billion units. The combination of all item-level information with AI leads to much more profitable, harmonized and efficient retail channels.
Why Retailers Must Have Real-Time Inventory Visibility
The most important element for the future of retail is inventory visibility, which prevents inventory distortion, in which retailers do not have accurate insights into their inventory, costing them more than $1.8 trillion, according to an IHL Group report. Using RFID and AI technologies, retailers can improve inventory accuracy and visibility in order to combat inventory distortion, which causes overstocking, out-of-stocks, shipment delays and, ultimately, financial losses. Additionally, as more brick-and-mortar stores evolve into in-store micro-fulfillment centers to bypass the hassles of expensive warehouse fulfillment, inventory accuracy is becoming increasingly important.
With RFID tags, every piece of merchandise is assigned a serial number in the store and can be tracked across the entire supply chain. Through this tracking system, retailers can analyze trends in the items that are leaving the store, not only those that are selling faster, but also any that are being stolen, leveraging security footage for thefts. This has the potential to result in smarter and more effective security solutions. Additionally, the data generated by RFID can be linked to other security devices to identify the time and location of a theft, as well as the individual who exited the store with the specific item. RFID tags offer up to 99 percent accuracy and can deter theft by sounding an alarm when the tag is detected leaving the store.
Combined with electronic article surveillance (EAS), RFID technology provides retail stores with high visibility of their inventory that delivers a powerful solution for loss prevention. New EAS platforms, such as Prosegur’s EVO System, combine the greater effectiveness of EAS with a cloud-managed exit/entrance consumer-focused advertising platform, and with RFID item-level “smart exits.” The EVO solution also includes advanced security features, such as AI-based analytics on store traffic, gender identification, and integrated video features that further value-add RFID-generated exceptions. Imagine the possibilities of targeted advertising at this most critical area of the retail store being influenced by the intelligence generated from analyzing RFID events at the entrances or exits.
High visibility is essential not only in brick-and-mortar stores, but also in ecommerce. Shipping costs may be reduced by eliminating warehouse logistics, but loss can still occur if inventory is not readily visible. Regardless of whether commerce takes place in-store or online, RFID elevates inventory accuracy to more than 90 percent.
As Accenture pointed out, the expanded use and increased omnichannel enablement is leading to a higher return of investment (ROI). Retailers that have fully adopted RFID are reporting more than 10 percent ROI, compared to 9.2 percent in 2018. “When retailers ‘layer’ the use cases, specifically, those that have enabled five or more omnichannel shopping experiences, they are seeing a 20 percent higher ROI compared to retailers that have only paired the technology with four or fewer omnichannel shopping experiences.”
As Macy’s recently discussed in a Wall Street Journal article, RFID plays a huge role for their company from an investigative (loss prevention) point of view. While RFID may have not prevented the recent viral flash robs, it does give retailers detailed information regarding the stock-keeping units, size and color of stolen items that can be passed along to law enforcement.
Looking Ahead to the Future of AI and RFID in Retail
Artificial intelligence and RFID have enabled retailers to avoid inventory distortion, support loss-prevention practices and assist businesses in leveraging a better consumer experience. Data collected by these technologies can benefit all aspects of a retailer down to marketing dollars, because leadership can make data-driven decisions about which items to promote in upcoming campaigns.
This connection to the consumer will grow as technology becomes more in tune with customers to deliver the customized experience they desire. With consumers already utilizing smartphones to communicate with retailers, RFID may play a role in this in the future. Overall, the digital consumer experience is gaining momentum, and technologies like AI and RFID will only continue to improve how stores track inventory, reduce shrinkage and increase profitability.
Tony D’Onofrio is the global CEO of Prosegur‘s Global Retail Business, for which he regularly engages with the world’s largest retailers to provide innovative and holistic security solutions. Tony is consistently listed as a Top Global Retail Influencer and publishes on multiple global platforms. His career has extended decades and includes executive roles in both security and information technologies companies.