The Evolution of Shrink

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Shrink is trending up. News reports from cities across the country document what loss prevention specialists are calling a huge increase in “organized theft.” Walgreens and CVS have closed stores in San Francisco and LA as a result of ongoing store losses.  The looting in Nordstrom in Walnut Creek was shocking with police reports that some 80 people were involved. As a new industry standard, store security personnel are being asked not to pursue or confront thieves because of the risk of violence. Theft is one of the most corrosive issues in contemporary retail.

Losing Track of Loss, by Design

In the late 80s I was working in a South Carolina drug store. The store manager complained that headquarters had mandated a policy on returns – no receipt required. The customer presents the item, the store hands over the cash. He led me back to a corner of the store and showed me a $30 hair dryer. He said it had been returned three time in the past two weeks. What’s the problem I asked? First, we haven’t sold any and second HQ won’t allow me to change the location of the dryers so I can keep better track of them.

[callout]Shrink experts point to changes in laws governing shoplifting that have “encouraged” small scale organized theft. Are the courts willing to go through the effort of prosecuting small-scale theft? If what is stolen is less than $500 or $1000 is it worth the court’s time?[/callout]

The link between loss prevention and store design is obvious from outside the retail organization, but problematic on the inside. Communications among the very different people working in different corners of the corporate headquarters are often dysfunctional. More than once in my career I have witnessed the first time the director of loss prevention met the head of store design.

Losing Track of Loss

Shrink was once explained to me by a gruff ex-policeman. “It comes in two forms,” he said. “The first is casual – it occurs when the shopper moves through the store to put something in their pocket. Often the thought process is linked to self-entitlement: I’m taking these items and rewarding myself. This tends to happen everywhere to a greater or lesser extent, generally linked to the level of prosperity of the specific market a store is serving. Still, you can be in wealthy suburb and that well-to-do lady, well, she just does it, or forgets she has taken the item. The second form is more serious and what concerns us the most – when the person, or sometimes the group comes in the store with the intention of stealing. Organized theft is poisonous.”

Organized Theft

Shrink experts point to changes in laws governing shoplifting that have “encouraged” small scale organized theft. Are the courts willing to go through the effort of prosecuting small-scale theft? If what is stolen is less than $500 or $1000 is it worth the court’s time? In troubled times the answer has been no. The word on the street is that it’s easy to get off – even if you are caught. And the internet has made it easier for that thief to sell what they have stolen.  Shrink as organized crime in key markets across the country, particularly where there are ongoing issues with homelessness like San Francisco, Los Angeles and Portland has exploded.

Camera Ready

The retail security camera has been around for decades. The premise is that it is both a passive and active tool. The cameras themselves and security signage remind customers that someone or something is watching them. Go into a back office and you can often see the bank of monitors capturing images of the store floor. The monitors are used in a variety of ways. The first is that someone sits and watches. It’s a recipe for a headache; the joke is that it is worse than watching multiple baseball games at the same time, much less cricket. The second and more active use is that an employee notices suspicious behavior and then tracks the person or persons that triggered their attention. For much of the past 10 years AI has designed software to load into security cameras to better track or monitor shrink. The ongoing issue highlighted in the painful history of retail’s PostPan existence is simply what do you do with the footage correlated to ongoing in-store operations? The resignation of some drug stores to simply close their doors as the best solution to combat shrink is real and sad.

Social Inequities

What we are now seeing is a third form of shrink in which organized crime and anger are co-mixed. The confrontation between the haves and have nots has been catalyzed. First some context. The birth of the department store in the 19th century marked an important shift – for the first time in retail history shoppers were invited to look at desirable objects without the expectation to buy. Social scientists point to customers’ ability to inspect/admire goods as one of the engines that drove upward mobility. The trappings of affluence were visually accessible and planted the seed to acquire. Still, it took courage for the person of modest means to step inside Macy’s, Selfridge’s, or Bloomingdale’s faced with so many temptations. Well into the 20th century, shopping districts tended to be self-segregating. Just consider the differences in pedestrian street traffic on 125th Street, 34th Street, and upper Madison Avenue. The merchandise in any location reflects the needs of local customers, and also that the “right” people walk into the store. However, that thinking can lead conscious and unconscious bias. Ten years ago we were asked to calculate the conversion rate of customers in a luxury goods store by dress, as a way of cueing staff which customers should be served first. Much to everyone’s surprise the conversion rate for customers in “Chanel” suits was identical to customers in sweatsuits. Looks can be deceiving, and with the casualization of dressing, first-generation, self-made wealth and a radical shift in luxury status symbols, looks can be very deceiving.

Social Stratification

Fast forward to a PostPan world. Stock markets are up since Covid 19 hit. A portion of the working public is doing just fine. But in key urban markets the visible contrast between the well to do and the struggling is all too apparent. Walk through Union Square in San Francisco you see both Gucci and homeless side by side. Stroll up Sixth Avenue in New York City from Silicon Alley to Herald Square and count the bodies sprawled on the sidewalk.

But the looting of Nordstrom in November wasn’t orchestrated by the homeless. Over 80 people drove up in cars. They arrived at a prescribed time; they took and also smashed and slashed. This wasn’t some gangland action; it was part protest and anger. It’s hard to reconstruct how it happened without some element of social media engineering as an accelerator. As scary as it is for retail employees, what does it mean for customers when a store is attacked? Is overall traffic to that Nordstrom location down? My guess is yes. Will it happen again? News reports similar incidents at two Best Buys in Minnesota.  In Chicago a large group of looters invaded a Louis Vuitton and North Face stores. This is not going to stop.

Design Solutions to Shrink

How are merchants going to respond to organized theft? In select markets, the roles of windows and doorways are going to be revisited. The ability to shut a door and close a window is a timeless security precaution, although locking in the mob with customers and the staff may provoke even more anxiety and destruction. In an effort to create a safe shopping space, key customers will be offered “membership hours,” exclusive to big-ticket customers. Store locations are going to be rethought to ensure safety and security. Like malls in other parts of the developing world, access to parking lots will be controlled. Just like entering a corporate campus, there will be a security gate. Street parking in urban locations can be rethought – limiting parking places in shopping districts. For in-store security, a Brazilian shopping mall company I worked with had relationship with a boxing school from which they recruited their security staff – a step beyond Mall Cop.

Another key issue is sightlines. Stack it high and watch it fly is an outdated concept. Staples pioneered arena design with lower fixtures in the middle of the store and then stepped up to the walls. Stand at the front of the store and almost all customers are visible.  In smaller stores we have recommended rethinking cash wrap design, by reducing the number of steps between working the register and getting to the store floor.

All that said, the broader question remains about the polarization of class and the anger it provokes. This is an issue that isn’t going away any time soon and requires a thoughtful and strategic solution to address the short-term issues and solve for a longer-term inequity.

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