A Look Into the Role of RFID in Combating Retail Shrinkage

A Look Into the Role of RFID in Combating Retail Shrinkage

A Look Into the Role of RFID in Combating Retail Shrinkage

Shrinkage—the loss of products and inventory due to factors other than sales—is a significant challenge faced by all retailers to varying degrees. It encompasses misplaced inventory, spoilage of perishables, product damage, and point-of-sale (POS) errors. Additionally, fraudulent returns have become an increasingly problematic contributor. However, theft appears to account for the largest share of this issue.

Regardless of the primary cause, retailers are grappling with a dramatic rise in shrinkage, leaving many to question what happens to products that disappear somewhere between the distribution centre and the store. In response, industry leaders are moving beyond reactive, last-resort measures and seeking more proactive, strategic solutions. Specifically, they are looking for approaches that offer richer data insights and greater visibility into incidents of product loss.

One promising solution that is gaining attention is radio frequency identification (RFID). While RFID in retail is primarily recognised for its use with asset tracking systems, it also plays a crucial role in enhancing the customer experience while tackling the persistent and complex issue of shrinkage.

How Retailers Can Get More Out of Their RFID Integration

RFID inventory management solutions have long been a staple in the retail industry for tracking merchandise, controlling out-of-stock, and managing inventory. Now, retailers are exploring how RFID can also monitor retail shrink as it has a big potential in revolutionising the way the industry as a whole tracks shrinkage during last mile delivery and beyond.

By leveraging the highly detailed information provided by RFID tags and the capabilities of cutting-edge technologies like AI, retailers become better equipped to create an intelligence-driven shrinkage-prevention strategy based on real-time tracking. This data gets collected as the tagged products move down the supply chain, during which they get scanned by RFID readers at every step of their journey. When this granular item-level intelligence gets integrated with other loss-prevention tactics like CCTV, it allows retailers to extract more value from their RFID investment beyond just inventory tracking.

Innovating Loss Prevention Through RFID and AI

RFID shines when paired with AI-driven retail analytics that can transform the raw data it provides into actionable insights. Together, these tools empower retailers to address shrinkage—whether caused by mismanagement or organised retail crime (ORC)—with precision and speed. This dynamic duo enables loss prevention teams to identify and address shrinkage scenarios effectively, as seen in the following examples:

1. Pinpointing Missing Products

When a retail associate performs an RFID-based inventory scan and discovers a missing product, loss prevention teams can act quickly on the matter. By analysing RFID data, they can track the last recorded location of the item and synchronise it with surveillance footage. This process clarifies whether the product was stolen or misplaced, saving valuable investigation time.

2. Unmasking Fraudulent Returns

Fraudulent returns often have telltale signs, from mismatched receipts to suspicious purchase patterns. RFID simplifies verification by tracing a product’s journey to the return counter. If the item never left the store or isn’t linked to a transaction in the POS system, fraud is evident. Even non-receipted returns are easier to assess with RFID analytics, as they confirm whether the item was ever purchased.

3. Strengthening ORC Investigations

AI amplifies RFID’s capabilities by automating ORC case matching. For example, if items pass through store exits without corresponding POS transactions, incident reports can be generated in real-time. These reports link related theft cases, creating a robust record for law enforcement. This approach ensures that when ORC groups are apprehended, there’s comprehensive evidence of their theft.

Conclusion

RFID and AI are revolutionising how retailers address the pervasive challenge of shrinkage. By transforming raw data into actionable insights, these technologies illuminate the root causes of inventory losses, whether due to human error, fraud, or organised retail crime. This synergy not only empowers loss prevention teams with precision and speed but also fosters a more transparent and secure retail environment. As RFID and AI continue to evolve, they hold the key to unravelling the mysteries of retail shrink, paving the way for a more efficient and profitable future.