Focus Outlook

A.I. and Combating Shrink (Retail Theft)


Today’s retailers face numerous challenges and are under extreme pressure in this volatile, uncertain, complex, and ambiguous (VUCA) world. To meet the evolving needs of consumers and achieve business goals, they are responding by deploying solutions to unify the shopper experience across multiple touchpoints. But that isn’t enough, as we see a rise in shrink or other operational challenges. However, retailing today includes powerful new capabilities that help retailers adapt more quickly in ways that combat these challenges while still empowering retailers to provide delightful experiences for shoppers. 

Among the numerous technology offerings available to retailers, artificial intelligence (A.I.) profoundly impacts retail today, and I don’t see that slowing down with the rise in Generative A.I. coming. A recent state of the industry study by Incisiv explored innovation in retail and found there is increasing adoption of A.I.-powered technology in the retail space – 60% of retailers have either already implemented or are scaling the use of A.I. in their stores, with another 33% exploring the technology. As each week passes, I expect those numbers to rise quickly. A.I. offers flexibility and enables retailers to adapt to evolving trends or resolve pain points efficiently and quickly. It can enhance personalized customer experiences, help increase loyalty, optimize operations, support loss prevention strategies, enable intelligent decision-making driven by data, and overall accelerate innovation.

One of the most pervasive issues in the retail industry today is retail theft or “shrink.” Retail shrink, also known as retail loss or shrinkage, is the loss of inventory or profit due to various factors, including theft, fraud, error, and supplier issues – intentional or not. It is a crucial concern for retailers as they are experiencing unprecedented shrinkage directly impacting their bottom line. According to the most recent data available from the National Retail Federation’s National Retail Security Survey, losses due to shrink reached $94.5 billion in 2021. 

Retailers are merging A.I.-powered technology applications into numerous aspects of their business strategy to support loss prevention measures. While most shrink instances are accidental or unintentional, the right mix of solutions can help retailers address loss prevention across a broad spectrum, from everyday self-service errors to organized retail crime. Let’s explore how A.I.-powered technology can support loss prevention strategies tied to self-service, specifically enhanced produce recognition, checkout behavior monitoring, and biometrics. 

  • Enhanced Produce Recognition

    One of the most common causes of shrinkage is when item SKU numbers are entered incorrectly. Advanced produce recognition leverages A.I. and other technologies like Computer Vision to ensure products are accurately scanned, eliminating the need for consumers or associates to input product codes manually. Enhanced produce recognition assures retailers know that products are correctly identified, weighed, and priced to protect the business while creating a more customer-friendly checkout experience – even when produce is already in clear plastic bags.

  • Checkout Behavior Monitoring

    A.I. algorithm technologies can empower retailers to implement additional loss prevention measures through monitoring behaviors at checkout. At self-service checkout, these A.I. algorithms can monitor anomalies and perform complex pattern detection. The A.I. technology in edge-computing cameras can detect unusual activities such as improperly identified checkout items or even when items are not scanned at all. By comparing current and historical data or expected patterns, A.I. can flag unusual checkout activity or patterns to give retailers better insight into the front end of their stores.

  • Biometrics

    Biometric recognition technology also discourages theft at various touchpoints across the store, including at checkout. Consumers are showing a growing interest in non-traditional payments, and new biometric technology enables people to authenticate their identity for payment using A.I.-based verification software. Biometric payment solutions enhance loss prevention measures by accurately identifying who is paying for items at checkout and encouraging consumers or store associates to have on-point checkout experiences.

Innovation in retail is moving rapidly. There is no doubt that A.I. applications will continue to expand, providing retailers with new opportunities to improve their operations and deliver better customer experiences. Retailers understand the benefit and impact of implementing new technologies in their business, especially when supporting loss prevention measures that have such a significant impact on their bottom line. Like other solutions, A.I. technology is most effective when applied strategically with a focus on achieving business priorities. By doing so, retailers can effectively harness the benefits and stay ahead in a constantly changing retail landscape.  

By Fredrik Carlegren, VP of Marketing and Communications at Toshiba Global Commerce Solutions

Fredrik is a marketing enthusiast with a knack for communicating how innovation empowers retailers to serve their communities by enabling them to evolve with generations of consumers. He leads the company’s product and channel marketing, corporate marketing, events, enablement, education, and communications efforts. 

With over 20 years of experience, Fredrik offers a unique perspective based on his work with business strategy, branding, marketing, communications, and sales management in a cross-cultural, global context. His outside-in approach has led to the company’s award-winning global brand marketing and communication efforts. He’s an ally and executive leader supporting diversity, equity, and inclusion inside and outside the workplace. 

Before joining Toshiba in 2012, Fredrik held various positions at IBM, Ericsson and Hewitt Associates. Fredrik is a Pragmatic Marketing Certified professional with an MBA from Thunderbird School of Global Management.


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