- The study, commissioned by Avery Dennison, found that three-fourths of retailer responders have adopted RFID or plan to do so in the next 24 months.
- The technology is poised to act as shrinkage detection as well as asset protection and loss prevention
According to a report financed by Avery Dennison, retailers’ concern related to shrinkage is higher than it has been in years. In conjunction, three-quarters of the large retailers surveyed have deployed RFID or plan to do so in the next two years.
The survey known as “The Retail Theft Crisis – Strategies to Protect Your Business” was conducted to measure how impactful retail shrinkage rates are today, as well as what role RFID and other technologies might have in addressing those challenges.
The results of the study found that shrinkage rates are indeed high, and solutions would benefit from five considerations: end-to-end technology solutions like RFID; a comprehensive approach to a digital system’s data; hybrid solutions with multiple technologies; improving staff engagement; and building partnerships with community and police, said Marshall Kay, global director of retail transformation services at Avery Dennison.
Organized and Casual Theft Both on the Rise
Statistics have already been telling a story of rising retail theft around the country. According to a 2023 National Retail Federation report, retail shrinkage in the United States rose to $112 billion in 2023 from $94 billion one year earlier. Avery Dennison’s own report took a new approach by aiming at retailer leadership perception, and how RFID technology can benefit them.
The survey consisted of 300 retail leaders, in decision-making roles, and each retailer had at least 200 brick-and-mortar stores. Avery Dennison commissioned the survey from consultancy Opinion Matters and were conducted between May 9th and May 23rd of this year.
Among the findings, 42 percent of retailer leaders in the U.S. and UK believe that theft is more of a concern than it was a year ago. But when it came to being in theft crisis mode, 64 percent of those surveyed said that retail theft has reached a crisis point. And 33 percent believe they don’t have enough resources to deal with the problem.
Despite that perception of scarce resources, companies reported they were making efforts to address the problem. According to the study, 57 percent of respondents indicated they have increased their budgets to combat theft.
In fact, more than half indicated that they spent three to four percent of their total IT budget to combat theft. And 23 percent of the respondents are allocating even more at five to six percent. The solutions are not only digital: 54 percent say that security guards are their best preventative measure.
RFID Becoming More Prevalent for Everyday Goods
Another trend is underway in the retail sector: the wide-scale adoption of RFID tags on merchandise for inventory management. The survey found 76 percent of retailers are already using RFID or planning to use it within the next two years. And 38 percent say they plan to deploy AI-enabled cameras while 37 percent plan to use facial recognition.
With RFID tags already uniquely identifying many goods in stores today, the technology is poised to offer retailers access to data that can help combat shrinkage. So while RFID tags are still predominantly being used for inventory accuracy, retailers are now installing RFID readers in exits at some stores, to detect when and what product is being removed from the store without being purchased.
Seeking Answers about RFID’s Role
In taking on the survey, Avery Dennison intended to better understand the loss prevention and loss detection needs of retailers.
“What we—and the retailers and brands who we work with and support—are seeing is a situation where retail crime is on the rise, and the sophistication of that crime continues to evolve,” Kay said. “So part of it for us was shedding light on that, to seek out additional data to confirm or disprove [those perceptions].”
The percentage of budget that’s being allocated for theft is on the rise, according to those surveyed. “What this report is showing is that internally, within retail enterprises, we’re seeing an understanding of a need for a call to action,” Kay explained.
Call to Action
Macy’s is among retailers that use RFID for both inventory management as well as shrink detection and prevention. The retailer began introducing RFID-based exits in 2016, and the company found that reading RFID tags at the exit unlocked new data related to daily loss events with video time stamps.
“What that did for us was take our attention from low hanging fruit,” said Kay, related to inventory management to also include identifying what was removed from the store, when, and how to prevent future incidents like it.
When it comes to deploying RFID to digitize its products in the store, and to identify if they leave without being purchased, “it is definitively … the biggest innovation change we’ve had inside of Macy’s,” said Joe Coll, asset protection operations and strategy VP at Macy’s, earlier this year at annual loss prevention conference NRF Protect.
The data, Coll pointed out, directs attention to the event, without biases. Management can then know which shoppers, or employees, take which items from the store as well as what exit they used.
Moving Beyond EAS
In fact, some stores are migrating from older, non-serialized electronic article surveillance (EAS) to RFID, at the same time that the passive UHF RFID tags are being applied to the wider range of inexpensive consumer goods.
Therefore, RFID tag reads at exits provide awareness of what is being taken, for inventory replenishing, while it helps retailers understand theft events so that they can build a better approach to prevent it from happening again.
And by tracking an event based on RFID and pairing that data with other systems such as cameras, retailers can gain better insights into which individuals are responsible for a disproportionately large amount of the financial loss, such as specific employees.
Recommended Strategies Include Hybrid Solutions with RFID
Based on the report, Kay and AD officials recommend a hybrid approach of people and technology.
That can mean leveraging video footage linked to the RFID tag read. Image recognition can further streamline the process of incident reporting, and the data can enable a retailer to collaborate with law enforcement and prosecutors to ensure that perpetrators get taken to court and ultimately those cases proceed and succeed.
When facial recognition is used, if an individual comes back on site they can be identified, as well. “RFID contributes a lot to this evolution into the era of intelligent evidence-based retail loss prevention,” said Kay.
More Staff Engagement and Partnerships with Community
By reducing the need for staff to conduct manual inventory checks and to search for products, RFID may free sales associates to work more directly with customers, Kay said. “RFID means greater productivity for frontline store employees and store managers, and it also helps keep them on the sales floor rather than leaving it to perform rudimentary tasks.”
Kay commented on one retailer who employs a security guard who covers the store’s front door, and who is equipped with an RFID handheld scanner. That guard can use the handheld device to identify goods that are unpurchased when interacting with shoppers who may have set off the store alarm. For instance, a small-tagged item in a purse or pocket could be detected during that interaction without a long search process.
Ultimately, end-to-end digital solutions are a game-changer in detecting and preventing theft, Kay said, while there is still an extensive need for education.
“There is a wide disconnect between the small group that understands what RFID does and how it’s being used to aid investigations and prosecutions,” he said. “And the large group at the tail end that still is unaware [of the technology entirely] and that’s the gap that we’re looking to address.”