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Let\u2019s begin with some eye-opening facts behind the concerning developments with retail theft, the impacts on the retail pharmacy industry, and the unfortunate fact that retailers are starting to abandon major US cities:<\/p>\n
The Rise of Retail Theft<\/strong><\/p>\n\nThe increasing threat of retail theft\u00a0cost the retail industry $112.1 billion in losses last year, a 19% increase over 2021 levels<\/strong>, according to a new study by the\u00a0National Retail Federation<\/li>\nRetail Pharmacy operations responded quickly by putting those items behind glass, only to find that what was intended as a\u00a0theft-prevention measure, ironically, has turned into a sales-prevention one<\/strong><\/li>\nAn executive for a firm that supplies anti-theft devices to Walgreens said\u00a0locked cases\u00a0can result in a\u00a015% to 25% loss in sales<\/strong><\/li>\nFundamentally, there is a loss of\u00a0psychological safety and security<\/strong>\u00a0and also raises concerns with customers that shopping there may be a dangerous experience<\/li>\n<\/ul>\n\n
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The Acceleration of Retail Pharmacy Store Closures<\/strong><\/p>\n\nCVS, Walgreens, and Rite Aid are forecasted to close nearly 1,500 Stores in the next few years<\/li>\n CVS says it will close 900 stores by the end of 2024 \u2013 10% of all its shops \u2013 as it moves to an online strategy amid a rampant increase in shoplifting<\/li>\n This realignment is based on an evaluation of changes in population, consumer buying patterns, and future health needs, according to CVS<\/li>\n<\/ul>\nThe Mass Retail Store Closures in Downtown San Francisco<\/strong><\/p>\nIt\u2019s very distressing to see such prominent cities such as Chicago and San Francisco experiencing with retailers and grocers having to close locations due to mass theft, a lack of safety, and the infrastructure required to run a safe retail operation.<\/p>\n
\nBig brand names have been frequently leaving the city due to a drop in traffic and widespread crime<\/li>\n Out of 203 retailers open in 2019 in the city\u2019s Union Square area, just 107 are still operating, a drop of 47 percent in just a few pandemic-ravaged years<\/li>\n An employee at a Target location said earlier this year it was being robbed as often as \u2018every ten minutes.\u2019<\/li>\n This will perpetuate the challenges we are experiencing with underserved communities and now with major cities<\/li>\n<\/ul>\n\u201cPlexiglass as a Strategy\u201d at Retail Pharmacies<\/strong><\/p>\nThis is shocking and essentially a bandaid on a much more significant retail crime challenge.<\/p>\n
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As long as shoplifting and retail crime continue to be considered a misdemeanor, misguided strategies such as putting every item behind locked plexiglass is essentially a race to the bottom.<\/p>\n
The retail pharmacy sector, in particular, was already challenged with a lack of positive customer experiences, and it\u2019s full of tons of the wrong kind of friction. It\u2019s already almost impossible to find any customer support in a typical CVS and Walgreens, as most associates are filling prescriptions, administrating vaccines, or there is a single cashier checking people out.<\/p>\n
Now, we will have to find someone to open the shelving units and entirely depend on a skeleton staff throughout the process. This is a disaster waiting to happen.<\/p>\n
This is not the way and will only perpetuate the problem.<\/p>\n
The Virtual Arms Race Against Retail Theft<\/strong><\/p>\nCostco Wholesale,\u00a0Lowe\u2019s Companies, Inc.,\u00a0Best Buy, and\u00a0Tractor Supply Company\u00a0Supply are winning the battle against retail theft in a strikingly similar way.<\/p>\n
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In recent months, dozens of retailers have warned investors that an increase in inventory shrink, driven primarily by retail theft, is taking\u00a0a bigger bite out of profits this year. Taking a deeper dive, it\u2019s clear that these four companies have several striking similarities and qualities that are helping them win the war on retail theft.<\/p>\n
Store location and layout<\/strong><\/p>\n\nBoth Lowe\u2019s Marvin Ellison and Tractor Supply\u2019s Hal Lawton said a lower population density contributes to lower incidents of theft compared with busier locations<\/li>\n With the exception of Lowe\u2019s, three of the four companies use a similar entrance and exit strategy that funnels every shopper past employees at cash registers or security checkpoints<\/li>\n<\/ul>\nBig, heavy merchandise<\/strong><\/p>\n\nMany of the merchandise these four retailers sell is too unwieldy to be conveniently stolen<\/li>\n Whether it\u2019s a 96-pack of toilet paper from Costco, a flat-screen TV from Best Buy, a lawn mower from Lowe\u2019s, or a gun safe from Tractor Supply, it\u2019s often hard to be discreet (or quick) in leaving the store with merchandise<\/li>\n<\/ul>\nSecure displays<\/strong><\/p>\n\nFor smaller or more expensive items, all four retailers aren\u2019t afraid of requiring customers to get help<\/li>\n Electronics are often sold at Costco with a pay-and-collect feature before they\u2019re ever placed in a cart, much like Best Buy keeps specific inventory off the sales floor until a customer requests it<\/li>\n<\/ul>\nLess self-checkouts<\/strong><\/p>\n\nAnother big theme is the way each retailer handles self-checkout, which has been blamed for\u00a0spikes in theft rates\u00a0when it is introduced at stores<\/li>\n Self-checkout is minimal to nonexistent at Best Buy and Tractor Supply, while Lowe\u2019s has invested big bucks in its asset-protection technology to keep a sharp digital eye on the store<\/li>\n<\/ul>\nMore staff per square foot<\/strong><\/p>\n\nMeanwhile, a typical Tractor Supply location may have as many as eight people working in a relatively small, 20,000-square-foot store<\/li>\n For\u00a0Marvin Ellison\u00a0at Lowe\u2019s, the best investment was simple: \u201cHaving spent my entire adult life in retail at every level, the one thing I understand clearly is that the greatest deterrent for any theft activity is effective customer service.\u201d<\/li>\n<\/ul>\nAI to the rescue? Will AI and facial recognition solutions help to mitigate the levels of retail theft?<\/strong><\/p>\n\n
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Considering the increased rates of organized retail crime, preventive measures such as facial recognition capabilities are one of the levers that could be leveraged. Unfortunately, despite the recent news reports and viral social media posts, retail crime is not widely considered a serious enough offense for law enforcement to provide more of a presence in areas that recent thefts have impacted. The last thing we want to do is to put the accountability on store associates, as it leaves them in situations where they\u00a0could be injured and their livelihoods impacted.<\/p>\n
Between all of the capabilities available to mitigate organized retail crime and the level of theft, including cameras, RFID solutions, security tags, potentially facial recognition, and security guards, the most significant challenge retailers are facing is the loss of a sense of safety, comfort, and community that consumers seek when they go shopping.<\/p>\n
Suppose facial recognition and AI solution capabilities are going to be leveraged. In that case, retailers must be very transparent on their data retention policies and provide clear documentation on the safeguards around privacy and potentially the challenges around being misidentified.<\/p>\n
However, these solutions are only a deterrent and will not mitigate the retail theft rate plaguing the industry. These mitigating measures do not apply to all retail operations, and execution will remain challenging.<\/p>\n
Connect with Brandon Rael on LinkedIn. <\/div>\n
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