This article was written by John-Pierre Kamel, Managing Director at RFID Sherpas, and Ted McCaffrey, Strategic Growth Advisor at GreyOrange. It was originally published on the RETHINK Retail site.
The retail industry is grappling with a surge in theft and shrinkage, driven by increasingly sophisticated criminal tactics and evolving legislative landscapes. According to the National Retail Federation’s 2023 report, retail theft has escalated to unprecedented levels, with organized retail crime (ORC) becoming a significant concern. The report highlights that retailers are witnessing a 10% year-over-year increase in shrinkage, with losses totaling $100 billion annually. These increases in retail theft, coupled with the rise of ORC, simple ways to sell to online marketplaces, and lenient penalties for shoplifting items under $1000, have left traditional loss prevention (LP) methods struggling to keep up. This environment necessitates a shift towards innovative, technology-driven solutions to stay ahead of these evolving threats.
Most retailers struggle to accurately identify the sources of their shrinkage, mainly driven by a lack of visibility into their inventory loss between annual counts. The inability to definitively identify and address the root causes of shrink results in reduced effectiveness in creating a targeted mitigation technique or deterrent. The traditional methods for understanding and countering retail shrinkage have not evolved significantly over the past 25 years, leaving retailers more vulnerable than ever. The most consistent tool in the loss prevention professional’s tool belt have always been reactive techniques, such as manual physical counts or associate identified “suspected thefts”, which are almost always outdated, often by many months. These methods are simply insufficient against the sophisticated tactics employed by modern thieves.
This article explores how LP professionals can leverage near time and even real-time, from RFID solutions, to develop effective new tools and strategies for combating shrinkage within their retail networks. RFID adoption within apparel and footwear retailers is at an all-time high, but use of the RFID data remains untapped by most LP groups. With small incremental investments in existing RFID programs, retailers can drive significant change. Below, we will discuss several potential solution opportunities.
Current LP tools often leave professionals looking at outdated data, which hampers their ability to respond proactively. RFID can provide real-time or near real-time data, enabling LP professionals to make proactive changes that can prevent future thefts. The key to being able to leverage this data is purpose-built reporting and dashboards built on the foundation of a robust RFID foundation. These reports can pull from a retailers existing RFID data to provide insights into trends and visibility into suspected thefts in stores. For many retailers this changes the “blind spot” that LP professionals have from months (and even a year) to weeks, days or even hours. We have been told on multiple occasions by our clients that this is a paradigm shift for them.
If you are already using RFID handhelds to capture inventory data, then no additional RFID hardware is required. Don’t let the RFID vendors convince you otherwise. Weekly RFID-enabled handheld cycle count data can provide visibility into what products are present and missing. This information, when compiled count after count, allows LP professionals to identify trends without needing to wait for annual physical counts. By collecting and analyzing this data, retailers can regularly update their loss prevention strategies, enhancing their ability to combat theft effectively. This data can be dissected and examined at the store level, the district level, the regional level or across the chain.
Beyond handheld solutions, RFID enabled exit readers and overhead RFID technology can further enhance a retailer’s approach to combating shrink. Real-time visibility systems, including RFID overhead systems (like Radar, Keonn, PervaisID, or Zebra), offer immense potential in shining a spotlight on theft incidents not just at the point of exit, but throughout the entire store. These advanced solutions provide Loss Prevention Professionals with improved tools to systematically detect thefts in progress, understand staging methods, and gain valuable insights into the entire path to theft. These overhead solutions, while not widely deployed, promise a level of visibility that was previously impossible.
“Having RFID at our store exits gave us the ability to further compress our theft data visibility from 30 days to real-time! This was literally like bringing TSA to the exits in our stores.”
Joe Coll, Former Vice President of Asset Protection, Macy’s
While many think of RFID at the exit as an alarming tool, there’s significant value in using exit data for loss prevention analytics and not just alarming. RFID pioneer Dr. Bill Hardgrave, President of the University of Memphis, highlighted at NRF 2024 that retailers should consider focusing their LP RFID programs on “loss detection” rather than traditional “Loss Prevention”. We couldn’t agree more. Capturing exit data is easier and less expensive than alarming, as it doesn’t require serialized reads at POS. By cross-referencing RFID exit data with traditional POS transaction data, retailers can identify loss events as they happen and drive significant insights from the data. This can have several key benefits, including, but not limited to:
This data can be leveraged in many ways. For example, a verified shoplifting event at the exit can be cross referenced with video footage to identify perpetrators and potentially use data from your camera systems to trace the thief back through your store, to identify who they came in with and interacted with. This can be done using advanced techniques such as facial recognition, or a manual review of your cameras, using the corresponding time stamps from the RFID exit read. Furthermore, this information has been used to create a “Watch List” or “Rogue Gallery” of known offenders.
Essentially, exit analytics can help retailers understanding the who, what, and when part of the retail theft equation.
“RFID is akin to a diagnostic and treatment tool, like MRI for retail. When paired with legacy loss prevention technologies like CCTV, it unlocks the potential for next-generation data analytics, shedding light on what, when, and how things are happening, to focus selling and protective actions.”
Read Hayes, University of Florida and Director Loss Prevention Research Council
Beyond operational benefits, Serialization capture (both 2D and RFID) at the point of sale offers significant loss prevention advantages, including but not limited to:
It is important to note that serialized checkout can be achieved through various methods, including RFID scanning, serialized QR codes, or Data Matrix barcode scanning. QR and Data Matrix barcodes offer a cost-efficient alternative to installing RFID readers at each POS. These barcodes are compatible with most existing POS systems, enabling seamless optical scanning and precise capture of serialized data with minimal additional investment.
This versatility is particularly valuable for organizations aiming to comply with Digital Product Passport (DPP) regulations or preparing for GS1’s Sunrise 2027 initiative. Both initiatives prioritize traceability and transparency, making barcode-based solutions a pragmatic and scalable option for businesses seeking to enhance loss prevention strategies while meeting regulatory requirements.
“The insights and data generated when we integrated our POS transaction data with our RFID exit read data allowed us to identify and prosecute 30% more internal shrink cases in our first year.”
Blue Montez, Former VP of Risk Management at American Apparel and current Director of Loss Prevention at Tilly’s.
Retailers using RFID for inventory management are sitting on an untapped treasure trove of data—and no system loves data like artificial intelligence. When paired, RFID and AI form a symbiotic relationship where one generates data and the other transforms it into actionable insights. Together, they represent a game-changing opportunity to enhance loss prevention (LP) strategies.
Below are several ways we have been working with our clients to help them extract value from their RFID data, using AI:
Loss Prevention is seldom the driving force behind why a retailer adopts RFID, however, in many cases much of the functionality that we have described can be achieved with minimal additional investment to an existing RFID program. Understanding the ROI and the potential ways to unlock the value is critical. It all starts with asking the question “how can we use this to help our business beyond inventory accuracy and visibility” and creating a roadmap to get there.
For example, Macy’s deployed RFID more than 10 years ago with the focus being on inventory accuracy. Their initial deployment focused on the use of handhelds and monthly cycle counts to improve their inventory accuracy and improve their on-floor availability of product. After starting to leverage their cycle count data for loss analytics, they quickly began to see the value.
Capitalizing on this visibility, Macy’s made further investments, deploying RFID enabled Smart Exit technology at the exits of their higher shrink locations. These Smart Exits lead to a “47% increase in theft investigations value”, by giving them real-time data of what was stolen, when it was stolen, and who stole the items.
“Using RFID monthly counts, we were able to reduce our visibility window into what was missing in our stores from 12 months to 30 days,” said Joe Coll.
According to NRF & LPRC’s Retail Security Survey, collaboration and the sharing of data between retailers is becoming increasingly more important in the LP community, especially pertaining to ORC cases. Many offenders target multiple retailers. Without collaboration among these retailers and law enforcement, it becomes difficult to identify that offenses against their organizations are part of a larger pattern of organized criminal activity. This is a clear example of how working together as an industry, rather than independently as a single retailer, can have dramatic benefits.
RFID data allows retailers to share information like never before. Detailed information of who, what, where and when a theft occurred, including trend data by store, district, or region, can be sanitized and shared with the broader community, creating a “Ring Doorbell Neighbor” effect.
Additionally, by sharing the RFID serial numbers of known stolen items with law enforcement, retailers enable investigators to identify trends, link seemingly isolated incidents across different stores, and build strong cases against organized crime rings. This collaboration not only aids in the prosecution of offenders but also acts as a deterrent, potentially reducing the incidence of retail crime and improving overall security.
Another way to increase the accessibility of RFID information for law enforcement is to print the RFID serial number on each price ticket using either a DataMatrix or QR Code. This allows smartphones or barcoding devices to be used by law enforcement or loss prevention associates to verify a product’s status. By scanning the QR/DataMatrix code, officers can quickly look up the item in an EPCIS database to determine if it was stolen and identify its origin.
“Investigations and working with law enforcement are also made easier, as RFID technology provides a digital fingerprint for our product. By scanning a product, investigators can confirm whether it came from a particular store, when it left a building, and with whom. It wraps up the case nicely for law enforcement.”
Joe Coll
As shrink continues to rise and organized retail crime continues to threaten the industry, swift and decisive action is essential. Leveraging technology like RFID can revolutionize loss prevention, enhance customer experiences, and safeguard profitability. By adopting these innovative solutions, retailers can stay ahead of the curve and effectively combat the ever-evolving tactics of modern thieves.
The time to act is now. Retail executives and LP professionals must consider RFID as a vital component of their loss prevention strategy
Implementing RFID enabled LP solutions does not need to be CAPEX-heavy, such as deploying new exit readers across your entire fleet. Instead, retailers who are already using RFID for inventory accuracy and visibility should start by leveraging the data already available in their core RFID systems. Small, incremental investments in reporting can add significant value and serve as an ideal way to launch RFID-enabled LP initiatives.
Additionally, retailers should consider purchasing RFID-compatible or upgradable equipment during their procurement processes. This approach generally does not significantly increase the base costs of your current solutions but ensures your investment is safeguarded and future ready.
If your store fleet already has RFID on some or all the items in your stores, there are many ways to set up a cost-effective pilot to test RFID enabled exit readers. This is not a matter of just throwing an overhead reader up at a door and seeing what happens. Doing this can lead to more noise than good data. Be sure to find a partner who has done this before and can help you deploy a hardened exit solution that filters out the non-actionable events from your reporting.
Don’t be afraid to explore the potential of RFID technology to transform your approach to loss prevention today, one tag at a time. Feel free to reach out to us. We are happy to help you on your journey.