Locked product shelf
Why Is Retail Increasingly Behind Lock & Key?
Dollar Tree has become the latest retailer to lock up merchandise in hopes of reducing shrink.
In the first quarter, elevated shrink levels impacted the dollar store’s earnings by 14 cents a share.
“This is not unlike what you’re seeing in many other retailers across the industry,” said CFO Jeff Davis on an analyst call. “Some of this is societal, some of this is economics, some of it, of course, is particular to us. And we’re taking all the appropriate steps that we can to control and mitigate this where we can.”
Options to manage shrink include “defensive merchandising” including locking up merchandise. “We don’t particularly care for it because we know that impacts sales,” said Mr. Davis.
Others include enhanced monitoring technologies, store closures and government action at the local level. Higher prices may offset the costs.
NRF’s recently-released Organized Retail Crime Report found 81 percent of organized crime groups exclusively focus on everyday consumer goods such as cosmetics, personal care items and over-the-counter medications that typically lack security tags and can’t easily be traced.
Reports started arriving in early 2022 of drug, consumer electronics, home improvement, grocery and mass merchandiser chains locking up products behind plexiglass with store theft rates elevated from pre-pandemic levels.
Lockboxes often dissuade customers from making purchases because of the wait. A reporter from The San Francisco Standard testing turnaround times for locked-up items found waits as short as 15 seconds for a car vent air freshener from a Walgreens to as long as three minutes and 20 seconds for laundry at Target.
Kroger, Lowe’s, and Safeway have introduced technology that lets shoppers provide their cell phone numbers to receive a code to unlock merchandise on shelves.
Shopper Maureen Holohan believes it’s “invasive” to have to provide a phone number to access locked-up merchandise. She told the Associated Press, “If they’re going to make it that hard to buy something, I’ll find somewhere else to buy that.”
Discussion Questions
DISCUSSION QUESTIONS: Is locking up merchandise more helpful or harmful to retail performance? Do you see better technology or operational solutions to reduce shrink?
Poll
Loading …BrainTrust
Katie Riddle
Global Retail Strategist, Verizon
Mark Ryski
Founder, CEO & Author, HeadCount Corporation
Whether locking up merchandise is more beneficial than detrimental is a calculation that individual retailers need to make. However, putting merchandise behind doors or counters and requiring staff to retrieve it increases customer friction and reduces satisfaction with a consequent negative impact on sales. There must be better solutions, perhaps including allowing customers to open locked doors using an app if they are signed up to a loyalty program, etc. Of course, dealing with the root causes or crime and punishing properly are also tools in resolving this.
It is sad to see what retailers need to do to address the increasing threat of theft. Theft is so bad in urban markets that we have even seen major brands closing stores due to decreased profits and concerns for employee safety. I am not sure better technology is the solution for this problem. We need to find a way to convict thieves so that there are negative consequences to stealing. Today, retailers are advising employees not to confront the thieves and let them take whatever they want. Maybe the solution is undercover police officers at random locations that catch the thieves in action and prosecute them.
It’s clear that locking up merchandise is a barrier to purchase, and while security technology and other loss prevention measures may reduce theft, the cost in lost sales is incalculable. The notion of having a ‘trusted shopper’ program, similar to trusted traveler programs that enable fliers to move through security quickly may be an answer. If trusted shoppers could have easy access to locked product, this would minimize barriers caused by security measures. The program could also be tied into a loyalty program. Retailers need to address theft, but they also need to keep selling.
In a world where shopping is often an escape, relying heavily on senses and emotion, it’s crazy that the last-ditch effort to stem shrink is to lock things away in cabinets. Coupled with the labor shortage that limits staff available to access the cabinets, this is a terrible idea that retailers will come to regret as sales and repeat visits fall.
Locking up the merchandise assures you will lock down your sales—and not in a good way. The “can’t be easily traced” problem is easily solved with RFID. Retailers need to combat this alarming behavior by leveraging RFID technology to thwart this threat. Video analytics can help, too. The phone number is also a great idea. We have the technology, so let’s use it.
Our taxes pay for politicians to make laws and law enforcement to, well, enforce them. Getting our money’s worth there would be a good start to getting retail LP back to normal, or at least to a reasonable baseline. As income disparity grows, people resort to desperate measures to survive. This is not all about organized crime.
Given the shrink numbers that Target and others have reported recently, retailers have few options to reduce shrink in heavily impacted categories. It’s not ideal, and they have to balance the cost of the fixtures, loss of sales, and labor for having to pay store teams to go to a fixture and unlock the products… it’s a balance that, at the moment, feels like a necessary evil. All of this adds friction to the transaction and certainly penalizes most shoppers, who I believe are honest.
Locking up merchandise is just one tactic; there are much bigger issues at play here that touch on law enforcement, prosecutions, and social media platforms looking the other way when goods are fenced on their marketplaces. Sadly the levers that retailers have at their control are limited to closing stores, locking up merchandise, and buying technology to try to combat this problem.
No question locking up product is going to reduce sales in particular impulse buying. I think there is a lot of experimentation going on at the moment to find the right balance of what to lock up, how to automate retrieval, and what the optimal staff levels need to be, if you can find staff in the first place. In the end it’s just arithmetic though, lower sales, with higher margins (reduced shrink) and probably higher staff costs, vs higher sales, higher shrink and probably lower staff costs. In the end the profit number will tell the tale. On the “sad” quotient though the answer is unmistakable…..what a state of affairs our bigger cities have come to.
Such a pet peeve of mine. Since browsing is no longer an option – reading the fine print and making an informed choice, I have gone online. Shrink is measured against sales. If sales are shrinking as well, reducing shrink is not a metric that can be viewed as a long term business win. No doubt there is technology in the works to remedy this situation but by that time more shoppers will have permanently moved on.
Well described!
“Locking up” Merchandise is a trend that will continue to evolve significantly over the next 5 to 10 years. It conflicts directly with one of the major incentives a consumer has to shop in person vs. digitally…..the ability to touch the item and leave the store with a frictionless experience. We will continue to see store formats and EAS technology evolve to support retailers. To some degree consumers expect high end electronics and small high value items to be locked up. However, when we start locking up the laundry detergent the only winner is Amazon.
Locking up merchandise will reduce shrink but also will shrink sales. Not only is it inconvenient for customers and store staff it alerts customer this is a place where it might be dangerous to shop. Reminds me of a dinner conversation years ago when someone asked about the then fairly prevalent check out areas in gas stations made with bullet resistant materials. One of the People asked why would I want to shop in a location where the clerk is protected behind bullet proof glass and I am on the outside and unprotected?
Does “Defensive Merchandising” strike anyone else as an oxymoron? Let’s add as much friction to the shopping experience as possible. If you have ever overheard shoppers’ comments about locked merchandise, they are not blaming the cri8minals, they are blaming the retailer. This is a case study on how best to take shopping out of the store and go online.
Does anyone else remember the first time they saw a security guard in a store? I don’t remember the specific occasion, but I remember my reaction: Why does the store need a security guard?
We have come a long way in the wrong direction regarding what to expect of people. In several of these discussions, we have focused on organized theft but be assured that non-organized is also at the highest levels. (Adolescents and young adults between the ages of 15 and 24 are the most common age group of shoplifters, accounting for approximately 55% of all offenders.05/29/23)
This is a cultural problem that is sadly predominant in America.
In terms of the actual act of shoplifting and the prosecution, we don’t see it as a crime.
Doesn’t the second sentence answer the title query?
Locked merchandise is only a band aid approach. It wasn’t long ago that smash and grab or grab and go thefts were quite uncommon. Now, in some cities, they are expected. The economy is sinking despite phony government statistics, so these thefts will only rise in frequency and expand to more suburban areas in the future. In places like California and New York, there’s essentially no disincentive to steal. Stores will be forced to get more draconian and lock more and more merchandise down and criminals will adapt to more violent ways of accessing merchandise, all of which will create more safety issues for shoppers and employees, both of which will become more sparse. Shoppers will be forced to make risk/reward assessments before visiting a store, evaluating for safety risk and the hassle of browsing.
The proper approach is for retailers to start taking a stand for the rule of law and enforcement. Making demands on city councils, law enforcement, and prosecutors is a needed approach. The NRF needs to lead that nationally. Reminder: this concept did work to help turn around NYC in the 1980s. Closing stores in cities that don’t respond is a necessary next step. Although that will cost the retailer in immediate lost revenue, it’s at least a clean break versus reaching the same financial point more slowly in time anyway. If they keep chasing criminal behaviors based on stopgaps and denial of the real situation, physical retail will absolutely diminish drastically in the next few years.
It’s sad that everyday items need to be under lock and key, especially given the role and value of stores in an Omni channel world is discovery, inspiration and immediate access to merchandise.
Additionally, the lack of labor and waiting for someone to unlock the product, and buy the product there – it gets to be too much and waiting isn’t worth having the product.
Regarding “locking up merchandise”–What else can they do? Target just stated that it lost $800M last year due to “shrink”…that is a LOT of money. Couple that with the news of retailers exiting entire markets because of shrink (San Francisco and Chicago immediately come to mind) and you have a problem that, in my view, no amount of technology is going to make an impact on.
Retailers, either singularly or as a group, need to address the core problem and lobby local, state, and federal governments to lower the rising crime that is a root cause of shrink.
Only then will the tide turn here.
Many commentators seem to think the magic answer is more laws, more police, and THAT will solve it. Right. A guy steals two boxes of condoms and needs a lawyer or jail time. How on earth does this scale? RFID is a very good way to track where most of these items go online but there are other answers than burdening our courts and police on such matters.
Bob, I agree with you. Unfortunately, we have reached a point where we don’t think shoplifting is a crime.
I know. And at the risk of sounding like Tipper Gore and messages in media, how many movies do we see people steal from convenience/drug/grocery stores, jump over subway turnstiles, and throw trash on the ground? Shoplifting has replaced smoking as the cool thing to do in general, and organized crime is profiting from it. #noeasyanswers
This is a continued escalation in responding to shrink issues. Locking and moving merchandise behind the counter is reactionary, and there got to be a better way. Introducing friction to the shopping experience has to be temporary while a real solution emerges or root causes are addressed.
Addressing the root cause of ever-increasing retail crime is imperative. I agree, George Mirza, that this must be at the center of determining a path forward.
First of all, theft is not just an urban problem, its a cultural problem acerbated by a tolerance for shoplifting, employer policies regarding what associates can or can’t do, inadequate followup on resellers of stolen goods, and an erosion of the economic middle class that puts more and more Americans in the No Person’s Land between outright poverty and marginal personal sustainability.Locking up merchandise reduces some kinds of shrink, but it isn’t a cure-all for theft. Nothing is going to reduce or stop theft until the root causes are addressed. There is no technology available to fix social dysfunction and no app to end economic polarization.
Theft prevention measures such as this may lead to sales prevention. Creating barriers to products and adding friction to the retail process will lead more and more to eCommerce and other means.
I’m intrigued by the use of technology to “unlock” products for consumers, but the jury is still out whether this will be widely adopted and how long it may take to recoup the required investment.
Too many solutions aimed at reducing shrink are focusing on extremes and treat all shoppers as “potential thieves”. Locking things up, alienates your core guest shopper. Analysis after analysis has proven it. Negatively impacting experience, impact sales. You take away the tactile, the thrill of the treasure hunt. Perhaps we are alienating the Boomers, GenXers, and deliberately migrating the NextGen’s Trillion $+ purchasing power towards digital only…. spoken as a true GenXer!
While shrink is an acute problem, it includes waste, policy problems, internal crime and organized crime. The organized crime (ORC) problem is smaller than all of the others and makes up a relatively smaller percentage of the shrink issue. Shrink is also a relatively smaller problem for most retailers. The NRF suggests $100B in shrink (all forms) and we have over a $5T US retail market, making it less than 2% of the business. For select retailers and select stores it can become an issue, but retailers will not wither on the vine by assuming it as part of the cost of doing business. Crime (even ORC) is a very local phenomena and needs local law enforcement to crack down on perpetrators for both deterrence and the appearance of security.
Here’s a thought, maybe if stores scheduled more than one employee to a 10Ksf sales floor, it would reduce theft (I believe this is known as passive aggressive loss prevention). Would it eliminate theft ?? Of course not; the goal is to reduce shrink to controllable numbers.
How long have we talked about making the experience delightful and frictionless. Forever, right? And here we are talking about locking away merchandise to thwart shrink and in the same context introduce obvious friction into the shopper experience.
There are many technologies that can and should be used. These include RFID, camera/video, scales, IoT sensors. They can be in-aisle, at an attended POS register, in self-checkout, at store entry/exit. In all transparency, my current firm has some pretty cool technology to help retailers. And then there is community relationships with local police and perhaps off-duty security professionals. There is a wide variety of options and retailers must look at all of them to combat this ugly trend that seems to have descended upon stores.
It is a sad commentary on retail life on today’s America when merchants have to choose between losses via shoplifting and locking up merchandise to prevent shoplifting. When shrink become so great, retailers have no choice but to act to protect themselves,
“Defensive Merchandising” = physical retail sales decrease AND online retail sales increase – all good for Amazon and Walmart.com. Locked cabinets create friction, inconvenience, require more time, and reduce the value of that retailer’s product. I agree with many below, that the core issue – rising shoplifting/crime rates – must be addressed by local law enforcement and society at large.
Locking up merch hurts the majority of customers who are honest, but for retailers, it just may be the only solution in some locations until tech and innovation can catch up to help stem losses. For local governments who either look the other way on misdemeanor crimes, or don’t have adequate and visibly present law enforcement resources to deter theft, these retailers will have to make a tough choice, hurting sales, or worse, close a location. Salaries and expenses gotta get paid somehow.
Having managed a retail category locked behind glass, I know first hand the impact of locked merchandise on retail sales. No customers wants to wait for an associate to interject themselves into their purchase decision journey; many opt to shop elsewhere instead. This is the first problem with locked merchandise.
Still, when shrink is having a significant impact on financials, retailers must take some action. Locking up merchandise is the simplest thing to do. However, given today’s advancing technologies, it would be smarter to have a more efficient shrink prevention strategy that didn’t also prevent sales.