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External Shrink Remains the #1 Cause of Retail Shrink – Here’s How to Stop It

The National Retail Federation recently surveyed 66 retailers about their leading causes of shrink. For the fourth year in a row, external shrink, including shoplifting and organized retail crime (ORC), has surpassed employee theft as the number one cause of inventory shrink. 

External shrink now accounts for 35.7% of inventory shrink age. Trailing behind are employee theft/internal shrink (33.2%), administrative and paperwork errors (18.8%), vendor fraud or error (5.8%) and unknown loss (6.6%).

Preventing External Shrink

Loss prevention professionals have an incredibly tough job. Using traditional security tools like CCTV and RFID tags, loss prevention can typically only react to crimes that are in progress, while forensic systems enable them to investigate crimes that have already occurred. Unfortunately, stopping crimes in-progress often results in violence. 239 people have died in violent retail incidents in the U.S. so far this year according to The D&D Daily. 

Facial recognition systems present loss prevention pros with the ability to predict when crimes will occur, before they happen. While this might sound like something out of science fiction, major retail chains are already using face recognition to receive instant notifications the moment an individual with a history of shoplifting, organized retail crime or violence enters a store. By closely monitoring these individuals and offering customer service, loss prevention is often able to prevent these individuals from committing crimes.

The Power of Prevention

A loss prevention program’s success is often evaluated based on apprehensions and merchandise that’s recovered from stopping in-progress crimes. But face recognition adds the dimension of crime prevention to a loss prevention program. By instantly identifying dishonest customers, and preventing them from committing crimes, loss prevention can dramatically impact a store’s bottom line. After all, when known criminals visits a location, they are almost certainly there to steal. Every time loss prevention is alerted to their presence, and a theft does not occur, it is tantamount to stopping a crime.

Traditional loss prevention technology may help, but external shrink still costs retailers billions of dollars a year. To truly make a dent in external shrink, it will require an investment in breakthrough technology like facial recognition.


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