Digital Front Door

Ep. 6 - Shrink Is More Than Theft

• Scott Benedict

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Shrink isn’t just a shoplifting problem, it’s a systems problem. We sit down with Brand Elverston, former Walmart asset protection leader and now principal at Elverston Consulting, to unpack why losses start at the purchase order and ripple through the supply chain long before an item ever hits the shelf. The conversation gets practical fast: what “total retail loss” really means, why administrative errors and inventory chaos can be as expensive as theft, and how leaders can target the biggest drivers without destroying the customer experience.

We dig into item-level RFID as the backbone of truth. When you can reconcile orders, receipts, and on-hand counts at the SKU level, you stop guessing and start fixing. Brand shares how leading retailers are pairing RFID with computer vision to move beyond post-event video. Real-time analytics at self-checkout, abnormal shelf sweeps, and frictionless associate interventions are shifting loss prevention from reactive to proactive. The result: fewer lockups, faster service, and fewer reasons for customers to abandon baskets for next-day delivery elsewhere.

Omnichannel adds new doors for product to move, curbside pickups, ship-from-store, third-party shoppers, and each door adds risk. We outline the playbook for controlling these flows: identity verification for pickup, serialized tracking on high-risk items, exception alerts that prioritize engagement over confrontation, and upstream data-sharing with CPGs and carriers to reconcile discrepancies before they become write-offs. We also tackle the hard topic of store closures, making the case for re-engineering high-risk locations with scalable tech and smarter processes so communities keep access to essential retail.

If you care about retail operations, asset protection, or customer experience, this is a clear-eyed roadmap to cut shrink and grow sales at the same time.

Subscribe for more conversations at the intersection of data, store design, and omnichannel performance, and leave a review to tell us where your team is starting the journey.

SPEAKER_02:

Well, hello everyone, and welcome to the Digital Front Door. I'm Scott Benedict. Today we're going to dive into a topic that's both urgent and often misunderstood: loss prevention and asset protection in modern omnichannel retail. Retailers today face a convergence of challenges, rising theft, operational shrink, and complexity in managing inventory that moves fluidly between stores, warehouses, and online fulfillment centers. Technology like RFID, computer vision, and AI-powered analytics are transforming how retailers protect their assets. But tech alone, we believe, is not the only answer. It's about integration, it's about leadership, and it's about the smaller operations or smarter operations that don't sacrifice customer experience for inventory control. And joining me today is someone who's been at the front lines of that transformation, Bran Elberson. Bran is the founder and principal at Elberson Consulting and is a former senior leader in asset protection at Walmart, where he spent over two decades helping redefine and refine how the world's largest retailer approaches shrink and security. And Bran, it's so exciting to have you here today and thank you for joining us.

SPEAKER_01:

I appreciate it, Scott. It's good to be here.

SPEAKER_02:

Good deal. Well, uh, one of the most interesting vantage points that you've had in the industry is by helping companies like Walmart during the rise of Omnichannel and now advising retailers uh that are integrating advanced technologies like RFID and AI into asset protection has really kind of given you an uh, in my view, a very interesting perspective on this topic. And you've said, I've heard you say many times, that shrink is more than theft. Uh we've seen the headlines a lot of sensational stories about shoplifting and organized retail crime. But you've pointed out that administrative errors, so supply chain losses and even poor inventory processes can be just as damaging for a retailer in crediting those losses as theft is. Is that a the right way for retailers to be thinking about that?

SPEAKER_01:

Yes. Yeah. And, you know, uh really during the pandemic, Scott, is when I really began to see the amplification of mischaracterizing what shrink is. And, you know, so everybody was on lockdown, everybody's at home, they're watching videos endlessly, and really those smash and grab videos started to dominate the headline of retail problems. And, you know, as any experienced retailer knows, that's not new. That happens. What is really uh concerning for the senior leadership was the escalation of violence. So if you talk to any one of the VPs of asset protection across re major retail, um, number one is safety. And, you know, I spent 22 years in the saddle at the world's biggest, and safety was always in the top three, but rarely was it ever number one. Now it's number one.

SPEAKER_00:

Right.

SPEAKER_01:

So that began to hijack the narrative that the vast majority of shrink is theft. And I came, as you know from my background, I came from active duty into retail. So I had a completely uh unprogrammed view on retail. I didn't know anything. And I never subscribed to the vast majority of shrink is theft. I never did. And largely because I was lucky and I had a market manager in upstate New York who took me under his wing and educated me on all the facets of store operations from receiving to the checkout. And it was then I began to get exposed to and understand the increasing risk of the failures of those processes that relate directly to shrink. So retailers today, we you know it's been around for a while, but the concept of total retail loss is actually gaining traction now, thankfully, because that is really bookend to bookend. So that is from when, as you well know from your retail experience, from when you transmit a purchase order to the CPG.

SPEAKER_02:

Right.

SPEAKER_01:

So when you know the retailer sends a hundred million dollar PO to Procter and Gamble, for example, the opportunity for shrink is right there. It's already started.

SPEAKER_00:

Right.

SPEAKER_01:

And traditionally, the more myopic legacy focus of it's all theft really isolates itself to within the four walls, and that's not representative of the entire risk. And so here we are today. But yeah, total retail loss is slowly gaining traction, not as slow as the adoption of RFID, but it's slow. Trevor Burrus, Jr.

SPEAKER_02:

Right.

SPEAKER_01:

Trevor Burrus, Jr.: Well, you never see a video of an accountant finding a$5 million error and everybody high-fiving each other. That never happens. It's not sexy.

SPEAKER_02:

Trevor Burrus, Jr.: Does that make the news indeed? Yeah.

SPEAKER_01:

No. Yeah.

SPEAKER_02:

No. One of the things that's really expanded in recent years is the role of tech technology in every aspect of retailing, but certainly in this area, the retail world has seen uh explosive growth in tools like RFID and smart video analytics. One of the things I've learned is that RFID isn't just about inventory accuracy anymore. It's become a powerful tool for visibility throughout the supply chain and for loss prevention. I'm curious from your experience, uh how are leading retailers using the combination of RFID and maybe in-store video together to create a more proactive kind of connected uh uh asset protection strategy?

SPEAKER_01:

Yeah, I I think it's still emerging. So uh in conversations with a lot of the major retailers, you know, RFID is not new. I mean, you can trace it all the way back to World War II. And in the early days, when we were at MIT's Auto ID Center in the late 90s, even back then when we were exploring RFID's uh capabilities and supply chain, um, we even had discussions there. Well, how can this help in the shrink visibility component? And that's what, almost 30 years ago. And it's it's a little slow in the broad spectrum of retail to say, okay, yes, it has roots and supply chain. Yes, it can definitely increase inventory visibility and increase sales, but the add-on of shrink visibility is still a little a bit of a challenge to understand that technologies you're already deploying, it's a switch to flip, metaphorically, to say we can provide what you've never had, which is item level shrink visibility. And really that's the force multiplier that in a retailer does not know today item level financial shrink. So if you went to any retailer and you said, you know what, what is your percentage of iPhone iPhone, whatever the newest one is, 17. What is its percentage of sales in shrink? And there are approximations, and I did that for a number of years, you know, with my former employee, and we have really sophisticated models, but it's not true financial shrink that you get the day after inventory. RFID is that, as my buddy Mike Green always says, that's the flashlight in the dark room. It tells you definitively, here is what happened. You never received it, or it doesn't match the reconciliation of the PO. You got billed for 18, but you only received nine, um, so on and so forth. So um it's frustratingly slow, but there major retailers are beginning to see that wow, if we leverage this in the shrink visibility space, that's a whole lot of money there.

SPEAKER_02:

Indeed. And it feels like it's kind of moving from passive to perhaps more proactive uh approaches. And I've I've heard you quote us as saying that you know just adding cameras in a store isn't really enough. Thieves know where many cases where the cameras are and whether they are or not monitored. And that struck me because many retailers still trait video as a post-event tool. Correct. So they find this is how they find out who did already steal something that they've already lost rather than it being a proactive approach. What does real-time uh visibility look like today? And how does AI potentially change the game for detecting and deterring loss before it happens instead of just being able to track it after it's already occurred?

SPEAKER_01:

Yeah, great, great point. And you're you're absolutely right. CCTV, closed circuit television, has always been a post-mortem tool. Uh we and we would keep video for 30 days. So if somebody filed a claim or something happened, we hope we had the video. Um now that's no longer the case with DVR technology, digital video recording and being able to take that video and alert near real time. Um, and again, this isn't new. Uh a lot of uh video companies, and I can remember I've been retired now uh from Walmart for eight years, and I remember marketing firms coming in saying, Well, we can give you dwell time in front of an end cap, we can tell you how long they're looking at it, and so on and so forth. Um, and that's making its way into the risk mitigation space. So uh great example, um, Everscene on the self-checkout. They can provide near real time, and there are other firms, but Eversine is most commonly known. And that really uh enabled us to be able to engage real time and prevent whatever the lost scenario was or customer service, not always nefarious activity, uh, but frustration, can't get the barcode to scan. Uh, and now that's with computer vision, and as you know, uh, you know, it grows like wildfire. It's it's sexy, everybody's involved in it. Um, so there are capabilities out there that allow us to do things we never could before, yeah, to engage near real time and prevent things uh through computer vision. So it's a huge asset.

SPEAKER_02:

It's interesting because uh attending retail or the NRF's uh big show a few years ago, the degree to which uh technology was was shown to attendees not just as a marketing tool, but as a as an asset protection tool, and beginning to tell the story of how it can it can do both, and thus it becomes more valuable to a retailer was part of the story that that you hear at industry events like that. It's encouraging, but to your point earlier, it's taken a while. And some of the technology is not new, it's just finding its moment.

SPEAKER_01:

That's right.

SPEAKER_02:

That's here recently. Yes. Uh you've been vocal, and you you even mentioned earlier that that a lot of shrink happens before merchandise ever hits the store, ever hits uh the sales floor. It happens in the supply chain in receiving or wherever it moves throughout uh the path of purchase. I'm curious how can retailers and perhaps suppliers uh in collaboration uh work together upstream uh through that supply chain process, either with data, with tagging, or other uses of technology to try to reduce shrink before it ever hits the back, the back room of a store or the receiving door, and before it ever gets on the sales floor.

SPEAKER_01:

Yeah, that that um is that relationship, that collaboration in that space is also kind of new. So there are retailers that really have pushed the forefront of that and they're already working upstream with you know the Procter Gambles of the world. And to say, look, that shrink opportunity started, you know, when I go to a CPG and I said, you know, prove to me I got every one of my widgets. How do you prove that to me through your entire supply chain and two FOB and we pick it up at the warehouse and it's ours and we paid for it? And really, if there are discrepancies and something I started looking at probably a year ago in supply chain, how do we know, how do we guarantee the integrity in supply chain? And if we see breaches, losses, you saw the videos back to the video of the train in LA and you know, boxes everywhere all over the tracks. How does that get reconciled? So undoubtedly the carrier probably files a claim to make their books whole. But do they go back and electronically adjust invoices that are downstream going to hit the stores? And uh a multiple experts I checked with, the best answer I got was hmm, great question. So that should be alarming. Yes, indeed. Well, anyway. So it's going to be a slow dance to get that responsibility of it's everybody's problem.

SPEAKER_00:

Right.

SPEAKER_01:

Because I mean, you've been in the saddle a while too. You go to a most suppliers and they're like, look, we have automated warehouses, we know we're good, so you have to deal with a shrink because, again, mischaracterized, it's all happening within the four walls of the store. And that's absolutely untrue. Yes. Those risks are across uh from again PO creation all the way through the chain. And, you know, one of the things in my last role uh at can I say Walmart? It's not a secret up here, uh, was um doing reviews of operational execution. Right. And this is across retail. This is not unique to Walmart, but the appreciation uh to understand that uh non-malicious process breakdowns cost money, real money.

SPEAKER_02:

Yes.

SPEAKER_01:

Um, so when new programs come out that are great, um during the pandemic, you remember everybody you know was pants on fire, buy online, pick up and store, anything to keep the lights on.

SPEAKER_02:

Right.

SPEAKER_01:

And that quickly, and I understand it, the need for those sales far outpace the ability to manage the associated risk.

SPEAKER_00:

Yeah.

SPEAKER_01:

So for example, you know, if I order something on retailer.com, you and our buddies, you're the order filler. Well, hey, I text you, here's my order number, you fill it, and how about a few bottles of Jack Daniels for the game this weekend and some video games?

SPEAKER_02:

Yes.

SPEAKER_01:

And the auto process in the box in a lot of cases does not exist.

SPEAKER_02:

Right.

SPEAKER_01:

So uh, and you know, the another challenge with it is I have yet to talk to a retailer, and if one is listening, I'd love you to text me or call me. The staffing models are not the same pre and post-COVID. Right. Because we figured out during COVID, again, understandably, repurposing, counting people at the door, blah, blah, blah. That the finance guys are salivating. Like, wait a minute, we had a 10% reduction in staffing. We still killed it or survived.

SPEAKER_00:

Yes.

SPEAKER_01:

I don't need that 10%.

SPEAKER_00:

Right.

SPEAKER_01:

But that translates to shrank because crooks hate people. Yes. They don't want to be interfered with. So the malicious component, whatever that is, of shrink, yes, is now a notch up in risk.

SPEAKER_02:

Yeah. Uh you know, it occurs to me as you're talking, one of my last roles as a buyer was buying uh flat panel televisions when they were not a very hot commodity. In fact, I think that's how you and I met, was I was the problem child buyer uh at the time. And not only was it a very hot commodity, but the average selling price for a large screen television was much higher then than it is today. And so uh my category was the epicenter of theft throughout the supply chain, not just in a in a in a store or a or a club uh location. And so the things that that you're discussing resonate particularly from my memory of that era. And even though uh big ticket items are maybe less expensive now because of innovation, they're still not inexpensive. Uh uh and so this collaboration between suppliers and retailers really resonates with me because it was through that collaboration with some of my suppliers at the time that helped try to mitigate that. We never got it to zero. Sure. But it was, you know, we we need to be partners from the the point it hit hits the dock uh on the west coast through to it going out uh in a flatbed out of the front of a Sam's Club after hopefully being after hopefully being purchased. Yeah. Uh and so I I think that that that collaboration and partnership really makes sense. Uh you know, one of the things uh that I we we've both heard a lot about recently, particularly coming out of the pandemic, was seeing retailers close stores in in open markets, citing theft or safety concerns uh target not that long ago, and made some news. Walgreens, CVS, others have been in the news about that. I'm curious about your perspective about closing stores or seeing closing a location as the only option rather than uh how retailers can re-engineer high-risk locations uh to make them more viable in communities that quite frankly need those retailers. They need places to buy food and consumables in an urban market just as much as they need it uh in a more suburban or rural market. And and I just it kills me because I know enough to know that there's technology and capabilities out there that could provide solutions other than let's just close the store and leave this local urban community, this neighborhood without uh a store. What what are your thoughts on that topic?

SPEAKER_01:

Yeah, you know, I've always felt so Target, they closed, I think, nine. You know, Walmart closed a few, and of course it dominates the headline, shrimp's out of control, and like Walmart has 5,000 stores. You close 10. That's not even a full percentage. So no, it is not, and you know, an epidemic across the retail platform. And in my view, in those instances where the the banner is theft, we're closing it because of the rampant crime, et cetera, et cetera, two things. One is has the retailer, like you just accurately explained, leveraged all available technologies to mitigate those risks? And oftentimes you find the answer is no. Um and you've heard me mention in the past maybe the sputnik moment. So are we there to a point where enough's enough? We gotta double down, we really gotta recruit and focus, or do we stay in the legacy box of well, locking up everything didn't work, so let's just close this door. Right. And I think the latter is really what dominates. The strategy is in a few cases, some retailers will double down. And years ago, we started tiering, and most retailers do this, risk levels of stores. So you had, you know, make it up max risk, medium risk, low risk, moderate, whatever. And you did different things in those boxes that you didn't do across the chain. But I think it's still a very slow dance in the computer vision category and RFID. And you mentioned, you know, earlier what can CPGs do to contribute or solution or uh merchandise providers. What can they do differently? And RFID tagging, you know, and I'm old enough to remember the early days of EAS source tagging and those cat fights that happened with suppliers. And we promised it was going to increase sales and reduce theft, et cetera, et cetera. And then fast forward 20 odd years, and here we are again, except the tags change, just now RFID. And so those same discussions, if you will, are in play. The difference, of course, is RFID is valuable information related to that specific item. It's intelligence layer that we never had before. But it's it's fun to be at the table with those discussions, and I'm rubbing my temples and I'm like, oh my God, this is 1997 all over again. When I'm going to the buyers and saying, look, you got to get these guys to put EAS tags on. It's going to reduce risk. And good people like Joe Grady, uh, when Joe had uh shave care at the time, he was one of the first that did it and got, I guess it was Gillette, a separate company back then, to start source tagging. So history repeats. Um, and we're here again with RFID, but that it's an entirely different scenario with RFID. Yeah. There's value prop there that didn't exist before.

SPEAKER_02:

Yeah, and I'm hopeful we can find a way because that it always, you know, uh knowing how uh the role of a retailer in a community is so valuable, not only in providing valuable services and products uh to a part of an urban market that needs it, provides uh employment, uh, generates tax revenue, all these sorts of things that are positive. There's gotta be a way to use technology and processes and things like that to solve the problem instead of just let's close this store and and move on. So I'm always you're in my mind when I read that those stories and hear about those things because there's gotta be a way to solve it. Trevor Burrus, Jr.

SPEAKER_01:

Well, it's it's as I as I did some video clips. Sorry, my allergies, I did some video clips uh right at the very last day of Euroshop or Eurosys in February.

SPEAKER_00:

Right.

SPEAKER_01:

And really what I discovered walking the floor there with all the startups, you know, how you protect a store now is a choice. And it wasn't a choice back in the day. Our big choice was EAS tagging or not.

SPEAKER_00:

Yeah.

SPEAKER_01:

But we had lockups, we had tip, we had stuff that had been around for 50 years. Today's leadership has far more innovative, less friction tools to mitigate loss than ever before. So as we get into the computer vision and becomes, you know, ubiquitous throughout retail, which is quickly approaching, that's a conscious decision for retail leadership to close that store because they have a lot better choices. They're just not taking advantage of those choices. And it's not like if I put computer vision in this store, it's going to cost me$300,000. That's not the case. It's scalable and affordable. It's just a decision on whether you want to leverage it in that space. Do I want to know that a customer looking at uh iPhones in the back had a weird body motion and it looks like they took 10 of them instead of one? And I probably should alert somebody to go provide quote unquote customer service. Yes. That's a choice not to do that. So to me, the pendulum of ownership and responsibility of that shrink has swung closer and closer back to the leadership because you do have better choices today. You're just not taking full advantage of them.

SPEAKER_02:

Right. So you you mentioned the concept of locking things up. And when I both the categories that I bought as a buyer, which Benny Case is with the categories that got locked up, and then uh this this topic of urban stores, you know, retailers are kind of walking a fine line. They want to protect the merchandise, but locking everything behind glass is truly a frustrating experience for the shoppers, particularly in those, in those perhaps uh higher theft markets. And it it causes many of them to then go shop at Amazon because if if I can't get it conveniently, uh I'm just gonna go into the Amazon. Customers have choices just like retailers do. So I'm curious how can asset protection strategies evolve into more frictionless uh customer experience while still keeping those high-risk items secure? You talked a little bit about that, but are there other ways of having a good customer experience that still uh helps maintain uh uh inventory safety and and and prevents theft? Is there a middle ground perhaps to be found uh between those two?

SPEAKER_01:

Yes, uh absolutely. And two things, you know, if I were in the decision-making chair at a major retailer, and you know, there's a there's a finite bucket of money. Yes. So if I had money for two things, it would be RFID and computer vision. Um, because, you know, we mentioned before, so the retailers have more choices, but so do the customers. Right. And if I'm in a pharma, I won't mention a retailer's given name and everything's locked up.

SPEAKER_02:

Yes.

SPEAKER_01:

And there are two people in the store, two of employees in the store, why would I wait? I can have that on my doorstep probably the next morning from Amazon or any, you know, retailerx.com and avoid that whole frustrating experience unless I really need it.

SPEAKER_00:

Right.

SPEAKER_01:

So those technologies, the computer vision, and it exists today to be able to do that. Um, there are incremental improvements and locking showcases. There are some providers out there that um, you know, call it trusted customer technology that you with your own phone you sign in to retailerx.com and so it knows you. The anonymity is gone. We know who you are. So if something happens, we have a path.

SPEAKER_00:

Right.

SPEAKER_01:

Um, and you can unlock the showcase and you can do self-serve, and then of course close it back. So there are better options out there, but to use what we've done in the 1970s, and I I get a little frustrated, you know, when you tour retailers and certain elements, uh job codes, if you will, and the stores will say, Well, we don't lose that many sales locking it up, which is absurd. Yes. I'm like, okay, you obviously don't understand the full spectrum. You get yours, sure, you're stopping maybe shrink uh in the ORC, but you're killing your sales because customers don't have to wait anymore. They can order online.

SPEAKER_02:

Yeah. And and and my own merchandising career, uh uh again, having been a buyer of categories that people love to steal, yeah, in many cases, the uh my my products would be some of the ones uh that would be locked up. And you could literally tell the stores that were doing it based on their sales trajectory versus versus not. So I uh uh that one's kind of a personal one to me because you know uh we talk a lot about uh omnichannel on on this podcast. And today the role of stores as both fulfillment centers, pickup points, uh return hubs for online sales makes them operationally more complex uh every day, but particularly through the lens of loss prevention. And I'm I'm curious, how does Omni Channel uh kind of complicate uh uh loss prevention and what adjustments should good retailers do to kind of keep control of inventory that's moving in and out of the building from multiple different contexts, I guess you will, uh that's not just the traditional transaction that we that we knew back in the day.

SPEAKER_01:

Yeah. So really good point. The you know, we we we had it bolted down, the traditional methodologies have lost, you know, be that total retail loss or, you know, shoplifters, internal cases, you know, skip scanning on the front end, but those models got shattered with the e-con. And it was a whole new dimension that in my background really was a separate expertise. Your rank and file asset protection guy or loss prevention guy was not well equipped to start digging into e-commerce fraud and all of the tactics that crooks use on credit cards and gift cards and all of those complexities. So some retailers have segmented that. So you're you're in the store, and then a separate team does the e-com risks. And what's new and that you mentioned is the non- what I call the non-traditional tender. So it's not through self-checkout, and it's not through uh main bank register on the front.

SPEAKER_00:

Right.

SPEAKER_01:

So it's going out the side door or wherever they deliver, you know, buy online, pick up in store, drones, all of those things. And we kind of referenced earlier that all those new programs, which are terrific. I mean, uh no negativity to it. It's what's right for the paying customer. Right. And the paying customer is 99% of your customers. So we don't want the tail wagon, the dog to say, okay, there's a 1% chance this somebody's gonna do something they shouldn't. We're gonna lose money, so let's shut the program down.

SPEAKER_00:

Right.

SPEAKER_01:

But we haven't yet kept pace with operations, and you and I both have the that experience. Ops moves fast, yeah. And rightfully so. And the support groups are chasing it to try and say, hang on a minute, you know, let's put in these reasonable safeguards to protect us as best we can without compromising the shopping experience. And that is that delicate dance that routinely gets overstepped, i.e., lock and showcases. You have overstepped and added friction or tethers or alarms at the door that were like, okay, does that really deter the occasional thief? Probably not, because there's nobody at the door to answer the alarm anyway.

SPEAKER_00:

Right.

SPEAKER_01:

And ORC uh people don't care. You could have six linebackers at the door guarding the merchandise and they're going out the door. They don't care because they know you're not gonna be able to catch them. To catch on, you know, all the things that happen. So that's a completely new sandbox in in managing the risk and without sharing you know details with specific retailers, but they're all exploring with i.e. home delivery or you know, having third-party shoppers actually do the shopping kind of like an Uber or uh you know, Instacart uh scenario, but all of that comes with risk. And managing that risk is what's behind the curtain to be able to, again, that delicate balance of number one, get our arms around the loss, which is very muddy space. Right. It's not like sales, Scott. You always knew within three seconds how many TVs you sold. Right. You came to me and said, How many of them were stolen? I'm like, give me a week to figure it out, and I can come back with a pretty vague approximation.

SPEAKER_02:

Yes.

SPEAKER_01:

It didn't help you as a buyer manage your margin when you could say, okay, we lost X to shrink and get sold. So it's very different. Um, but again, it's ops has outpaced the risk mitigation component. They'll catch up at some point. Yeah, but it's still it's still a race.

SPEAKER_02:

Yeah. Now I uh it's funny. As you're talking, I w I recall kind of refereeing uh discussions between my suppliers and my employer, yeah, and my my store operations team uh and and my leadership at the at the corporate office. And and you had to you had to to respect the the perspectives they were coming at it from, but it was always we have to find a way to solve this because we need to sell merchandise and serve a customer with things that they want to buy. And that that kind of leads me from a maybe backwards looking to forwards looking. I'm curious about what you view as the road ahead in in this space and where do you maybe see the biggest opportunities uh with innovation? Uh will things like AI, data analytics, uh, item level tracking through technologies like RFID, how will they redefine how retailers think about asset protection looking forward? And uh if you had maybe the key areas where suppliers and retailers could work together to collaborate, not just you know, not just be compliant, but actually uh maybe lead and innovate together looking forward. What are some of those areas in your view?

SPEAKER_01:

To me, it starts with solving the unknown. Make the unknown known. And that to me, right today, scalable, affordable is RFID. Yeah. Because, you know, and I've been really surprised even to this day that senior operators um in-store operations or that should be in the know have they're surprised to know you don't have item level financial shrink. I do not know. And the approximations in that you remember, you know, back in the days with self-checkout, it was always the will prove it to me, it's risk. And we couldn't prove it to them because we didn't know.

SPEAKER_00:

Right.

SPEAKER_01:

And so we limped along until the ever scenes of the world hit the stage, and it's like, oh well, there's a problem. Because we now have the data. So to me, the cornerstone of any total retail law strategy has to start with item level visibility. And right now, that's RFID. And until I have that, I'm still gonna depend on those approximations and varying levels of sophistication. So retailer A may have what I was fortunate to have at Walmart, a very sharp group of analysts that did a lot of great things to get us close, all the way to the other end of, you know, it's a gut feel. I don't know. We probably lose 10. Um, but once we get item level visibility, we can put financial, meaningful numbers to that. And you as a senior buyer would know, oof, okay, I'm losing two points on margin to theft. I need to do something different. And you take that to the Vizios of the world or whoever Magnabox and say, look, I lost two points on margin to theft. You got to join the party. Here's what we have to do. And the the ambiguity is solved with that RFID. So until we have that, I think to your question, it's still um a one-legged race. We're still gonna you know approximate our way, have those pushbacks and forth and in in the absence of real data. And once that comes, it is the moment of ever seen uh to be able to tell us what we're losing on self-checkout. And that was powerful.

SPEAKER_02:

Indeed.

SPEAKER_01:

It's just like you can be the naysayer all you want, grab a cup of coffee and let's watch. It's like, okay, that's more than a gallon of milk. But with those solutions, the computer vision allows you to not interfere with the honest customer. They don't even know it's happening.

SPEAKER_00:

Right.

SPEAKER_01:

So to affect the 1% that do have malicious intent, computer vision. And there's, you know, companies ever scenes one, zero eyes on the active shooter, computer vision, um, vision out of Paris, um, there are a number of them, as you know, going to NRF. Right. Um, but none of that interferes with the honest customer shopping experience. That's where we need to get to and quickly, yeah, because of the near-infinite number of alternative choices they have to purchase and buy stuff. So if I can tell you as a buyer, not only dwell time in front of your end cap that you think is going to crush it, and then you find out people are not even stopping, I can also tell you that normal body motion is you took one box of crest white strips off the shelf. If I see you take 25 and the shelf's empty, I can real-time alert, whatever the protocol is at that retailer, whether it's customer service, call the cops, take them, whatever. And that is valuable deterrence. Um, and one thing I'll be um, I'm gonna dance around this topic, but the other technologies I might have mentioned the other night is holograms in retail.

SPEAKER_02:

Right.

SPEAKER_01:

There, in my mind, maybe not in the near future, could be the potential of virtual customer service with holograms. So you're of an age, and hopefully a lot of our listeners are on Star Trek. When you saw the pixelation, the snowstorm, and bone, there's a 3D uh hologram, if you will, of a person to engage. So with the reduced staffing, with the um heavy penetration of computer vision and those associated technologies, why wouldn't you consider that in your high service departments? So cosmetics, you know, jewelry, maybe electronics, that it senses you're there, pixelation appears, we have a conversation, they get the answers beyond scan the QR code and fumble through 38 menus to get your answer. It's a conversation. Um the footnote, not a footnote, but in the pitch to get money to do that, a footnote could be that's deterrence. That would freak crooks out. So no, number one, how did that happen? There's no risk to physical injury, it's a hologram. You could have through AGI or remote um could uh remote uh not call centers, but off-site engagement where you would see it on a video in store six and you could actively talk to that customer and answer their questions.

SPEAKER_00:

Yeah.

SPEAKER_01:

But it's that deterrence impact. So that's something that I saw in uh Germany in this past February at Eurosys. The technology I'm told by my buddies at MIT, that's a little on the edge. We're not quite there yet in a scalable format. You've seen proto, the big phone booth looking thing. And that's not scalable. If I'm Walmart and I'm I need it in 5,000 stores, that's not going to happen. Right. So things like that, we have to remember that 99% of the customers are honest, and the strategy has to be positioned that way and not interfere with every transaction to affect 1% of the problem. The math just doesn't add up. It's out of balance.

unknown:

Yeah.

SPEAKER_02:

And it occurs to me that uh good uh asset protection strategies are also good customer service strategies because you don't interfere with an honest customer, but you certainly provide a better shopping experience for those that are. And through the lens of OmniChannel, when associates are picking online orders, it helps that what they think is there is there and they know where to find it. That's right. Uh, because of some of these technologies that serve dual purpose. They support great loss prevention strategies and they provide support for great omni channel sales and for it make it easier for a store associate to pick orders quickly and efficiently, and it solves kind of all of those challenges in retail, right?

SPEAKER_01:

Yeah, the the it's still, and you've been around a while. You've heard, you know, sales prevention instead of prevention. And I never said that. It was well, it's true to a degree, even to today. Yes. Uh, but I was at a uh conference at Harvard um last summer, this past summer. And it was troubling that, you know, when you're in there and you've got all the technologists and the academic, it's a mixed crowd. Yeah. And it's there for it's the COER conference, coalition of experiential retailers, something.

SPEAKER_00:

Yeah.

SPEAKER_01:

And it's where all quote unquote the deep thinkers are that are, you know, looking down the road.

SPEAKER_00:

Yeah.

SPEAKER_01:

And a couple of presentations I was really surprised came up with Shrink in Mind, which is refreshing. But the disappointing part, it was quickly dismissed by the MC of Harvard that was running it, saying, Well, that's just essentially sales prevention.

SPEAKER_02:

And I'm like That's not good conversation.

SPEAKER_01:

In in a place that you hope to have open civil dialogue and sharing of knowledge and saying, okay, understand our past rep. That's not where we are today. There are things we can do smarter and better to maximize profitability. Um, it was very disappointing. My point in all that is that still exists today in retailers. The AP groups are still in battle in some places with the merchants.

SPEAKER_02:

Yes.

SPEAKER_01:

You know, it's my new, you know, product. I want it out, I want it on open sale, I want to, you know, run it in, you know, advertising and merchant. Well, you okay, great. But at a$800 price point, you're gonna lose more than you sell, probably. Because if it's sexy for sales, it's sexy for it. Yeah, and you'll find it on eBay, no time at all.

SPEAKER_02:

Yeah.

SPEAKER_01:

So it's it's a balance, um, but it's one I hope that I had hoped during COVID we had reached our sputnik moment that enough was enough. Because as you well know, Scott, I mean, the retailers were mentioning shrink in their earnings calls.

SPEAKER_00:

Yeah.

SPEAKER_01:

We never did that back in the day. That was classified information essentially.

SPEAKER_00:

Yeah.

SPEAKER_01:

But it got so bad it was pension. You had to talk about it. You had to put that on the front and center.

SPEAKER_00:

Yeah.

SPEAKER_01:

And what's interesting is all the major retailers you hear it in the earnings calls, all of them either don't mention it anymore or they've seen significant improvements in shrink performance. That's it. Um, still not pre-COVID, maybe never be, but is significant improvements. And in my one-on-one conversations with several retailers, the end result is, Brian, it was less to do about people didn't wake up and say, okay, I'm not going to steal anymore. It was more about inventory management and the absolute chaos of inventory, and you were a buyer, you buy a head, you're going to order three in hopes of getting one, et cetera. And when the inventory settled down, and we used to track this all the time: the shrink rate in the inventory levels. And as one went, the other went.

SPEAKER_00:

Yeah.

SPEAKER_01:

Correlation is not causation, I get that, but there's a relationship somehow under the covers of they both move the same direction. So when inventory started settling down and we got predictability back, and the buyers could depend on what's coming in, unsurprisingly, shrink rates have dropped. So that even further reinforces shrinks a problem, or theft is a problem, but is it the problem in an aggregate number? Individual stores, yes. Could be.

SPEAKER_02:

Yeah.

SPEAKER_01:

Uh, but in aggregate, when you lose a dollar, you can't convince me, and I've never been convinced. As survey data will tell you, 70 cents of every dollar is theft. That's I don't buy that. I never have.

SPEAKER_02:

Doesn't make sense.

SPEAKER_01:

It's just not there.

SPEAKER_02:

Indeed. Well, Brandon, it's been a powerful conversation, and it r really reminds us that that shrink is is more than than just theft, that there are challenges throughout uh the supply chain in every element uh of an omni-channel retailer today. But there are a lot of a lot of great technologies, and we've touched on some of them today, from RFID to AI, uh video analytics to deliver a lot of value. And it's only when a retailer and a brand work together and make this uh a priority that it unites all the different parts of our organization, from merchants to operators to technology people, a kind of a shared mission to drive uh improvement in this area and try and keep the shopping experience for a consumer uh uh what we all hope it would be in in modern retail. So it's it's been wonderful to talk with you and thank you for joining us today.

SPEAKER_01:

Greatly appreciate the time. Always enjoy talking about this.

SPEAKER_02:

You bet. So uh as we think about this, uh retailers are right uh to think about this in a more holistic way and to really think that uh it's not just about preventing loss, but it's it's unlocking a better performance in an omnichannel world. And there are so many improvements to technology and innovation and processes and collaboration that really unlock uh a more efficient, effective, and improved omnichannel uh shopping experience for consumers. If you'd like to reach out to Brian and learn more about his work uh in this area, put up on the screen uh uh the link to his website. And I can tell you from my experience, he is a very knowledgeable and valuable voice in this space, and we're thankful to have him with us today. Thanks for watching the Digital Front Door. I'm Scott Benedict. We'll see you again soon.