Crime, the economy, and artificial intelligence (AI) all weighed heavily on retail and loss prevention this year, and those trends will play a role in the coming year. But, retailers are up for the challenge.
Consider comments by Target CEO Brian Cornell, who said shrink was expected to reduce the company’s year-end profitability by more than $500 million, driven by an increase in organized retail crime (ORC). He also said they are making “significant investments” to prevent shrink and protect stores going forward.
Shrink and retail loss prevention will continue to challenge companies and retailers need to keep up with the fast-paced changes.
Online fraud is another issue challenging retailers, something the U.S. Congress is addressing through its INFORM Act to bring more transparency to online transactions. ORC groups are increasing online fraud by obtaining stolen merchandise, and 70% of the respondents in the 2023 Retail Security Survey said they have become more engaged in online fraud oversight.
Joining these major issues, let’s look at storylines that shaped retail loss prevention in 2023.
Omnichannel retail increases importance
Year after year, ecommerce grows its share of total retail sales. Though it’s a slow growth, projected to pass 20% of sales in 2026, retailers continue to invest in digital. Part of this investment is to find technology that blends the in-store experience with the digital experience.
From a loss prevention perspective, retailers continue to evolve how they monitor fraudulent behavior in an omnichannel world. In the last year, 52% of retailers said they have seen an increase in online fraud, including through buy online and return in-store (BORIS) activity. Retailers in the same survey flagged omnichannel shoppers abusing loyalty programs, manipulating systematic loopholes with online claims & appeasements, and stealing credit cards as leading concerns.
Retailers often employ a rule-based return policy that ends up hurting the company’s bottom line.
Adapting to new customer expectations
Each year comes with shifts in customer expectations, and in 2023 customers valued convenience and sustainability. Retailers have adjusted how they approach customer service to provide the most frictionless experience possible. AI-powered return strategies, for example, can relax policies and drive more sales.
Retailers often employ a rule-based return policy that ends up hurting the company’s bottom line. The stringent rule-based policy can alienate customers and increase customer complaints by 400%. Today, a seamless, frictionless, AI model-driven return experience is more personal to each shopper and further facilitates frictionless transactions while reducing risk.
Consumers seek convenience in how they shop, too, turning to buy online pickup in-store (BOPIS). At the same time, convincing customers to return those items in-store as opposed to online is important to reducing greenhouse gas emissions caused by transportation.
AI becomes talk of the town
Across industries, talk of AI and machine learning (ML) was widespread in 2023, as more companies looked to adopt the technology. AI is improving as a source for decision making and planning, and while still in early stages, when used correctly it can be incredibly powerful.
In retail loss prevention, AI continued its evolution, largely as an answer to rule-based return policies and expanding into mitigating risk in ecommerce. The technology can be leveraged for more personalized returns authorization, online claim and appeasement, and call centers to mitigate risk by incorporating the entire retail go-to-market channels.
Saying goodbye to 2023
In some ways, 2023 was a quiet year in retail, driven by high interest rates, inflation, and a potential recession that impacted customer spending. However, ORC caused significant financial pains during the year and it will be watched closely in 2024.
In loss prevention, retailers will take what they’ve learned this year and continue to improve. The days of easy shipping and returns are ending as retailers grapple with the associated costs. Shrink and retail loss prevention will continue to challenge companies and retailers need to keep up with the fast-paced changes.
For more on how to manage loss prevention, contact Appriss Retail. And, be sure to visit our blog regularly to learn more about our predictions for 2024.
