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07/21/2022

The Incredible Shrinking Grocery Store

Frictionless checkout drives new security solutions
Steven Duffy
SVP of Design, Cuhaci Peterson
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Amazon Fresh Gains More Grown in SoCal
Amazon dominates the implementation efforts for the frictionless shop.

It’s a tale as old as time. Just as sure as goods and services are being sold, you’d better believe that the possibility of theft is part of the equation. Shrink reduction in grocery and retail stores has usually been influenced by consumers, and a myriad of factors, among them product type, inventory count, store location, price point, economics and other factors. While loss prevention strategies have helped in the past, the current widely held view is that they’re trending negatively, especially when you factor in frictionless shopping and checkout.

An array of innovative security solutions is paving the way for reducing the incredible shrinking grocery story in a way that has its finger on the pulse of current and future trends, making grocers and retailers alike happy. When considering these security measures, we must do so holistically, with the store design in mind, realizing that it is a cost, a burden, and can cause friction on the shopping experience, but also poses a way out and a way forward.

As the checkout becomes more of a challenge for loss prevention, with the checkout itself rapidly moving from inside the store to shoppers’ personal devices and self-checkout, merchants are leveraging and looking for new solutions.

About Face

Facial recognition technology has made significant advancements worldwide, thanks to artificial intelligence and camera networks, but with this innovation comes consumer concerns regarding privacy and what data is being shared through a facial scan. The solution truly goes beyond simple loss prevention. Current technology can identify previous offenders based on whether their faces’ data points match with ones in a shoplifter database. Then the system automatically notifies the store’s security team when a match is found. Often simply offering customer service to a known shoplifter will deter them from stealing. In most cases, they’ll leave the store when they’re being watched. By using proactive facial recognition technology, you’ll also have an opportunity to reduce violent crime alongside theft.

Some popular big-box retailers use facial recognition technology, and as it becomes more widely accepted, stores will need to become transparent about its use, which could mean a decline in shoplifting instances. As all forms of camera monitoring technologies continue to evolve, the technology’s adoption will become more prevalent, with retailers embracing alternative forms of advanced tracking systems based in artificial intelligence. This alternative to store-based surveillance leverages frictionless checkout – the ultimate surveillance state without feeling like cameras are watching your every move.

No Checkout Required

Amazon dominates the implementation efforts for the frictionless shop. Having introduced its Amazon Go store in 2016, the e-tailer markets itself as having the world’s most advanced shopping technology, with no cashiers and no checkout, allowing customers to just grab and go. Amazon first filed a patent in 2015 naming it “Just Walk Out” technology. It uses a series of artificial intelligence, computer vision and data from sensors to monitor customers, who are only charged for items they pick up. Cameras continuously track items they remove from the shelf. The patent comprises a system of cameras, sensors and/or radio-frequency identification (RFID) readers to identify shoppers and store products. The filing makes no references to facial recognition and user data such as biometrics or a username and password.

There are other startups seeking to deliver a similar frictionless promise through checkout-free technology, as Amazon has done. Other players in this space include Trigo, Grabango, AiFi and Standard Cognition, a San Francisco-based company whose artificial intelligence-powered autonomous checkout technology is being used at a Circle K convenience store in Arizona.

These technology platforms don’t use or collect biometrics, facial recognition, eye scans or anything else. They seek to walk a fine line on privacy by not authenticating an individual’s personal identity. The systems also generally track images of products picked from shelves and shopper movements, thus continuously building a shopping basket. Stores using computer vision frictionless technology are deemed to be more than 99% accurate and theft-free.

Interestingly, some companies, like Trigo, have revealed the pending release of operating systems to manage and analyze operations data and shopper experience. These systems are reported to be Microsoft Edge based and not intended to permanently maintain shopper data collected. This is the slippery slope for these technologies, however.

A Solution for the Future

Without question, frictionless shopping technology reduces shrinkage and maximizes convenience. Other channels of this experience include buy online, pay in store; curbside pickup; and online shopping via a website or branded/third-party app. This is a paradox that minimizes store foot traffic, yet allows store sales, which in turn reduces theft. It should also be noted that with the emergence of micro-fulfillment and automated storage and retrieval system (ASRS) technologies, improved product handling, process limiting and stocking requirements positively affect the store. Furthermore, increased technology efficiencies free up time for store associates, enabling the reallocation of labor to focus on servicing customers.

As retailers and grocers grapple with the pressures for a more secure store, I propose a solution that leverages a series of security innovations and solutions that will enhance the customer’s experience and deliver a secure environment that supports the store-of-the-future format. I wrote about this in the January 2021 issue of Progressive Grocer in the article “Small Formats' Big Future in Retail,” and use this as a baseline. This new concept results in a smaller format that’s highly convenient, with the smaller footprint reducing build area and delivering a more secure and frictionless customer experience.

The current grocery landscape still delivers convenience to consumers but is causing grocers to take a deep breath to analytically consider what’s needed for the store of the future and how technology supports these formats. While security features today include increasing surveillance, updating physical layouts, and using detection features like electronic article surveillance to secure products and cart checks at wholesale clubs, it adds obtrusiveness to the experience, a level of inconvenience and an encroachment on the shopper’s privacy.

At the end of the day, it really breaks down into two parts: theft versus the operational loss of products. Research by FMI – The Food Industry Association and the Retail Control Group in 2021 indicates that 64% of store shrinkage is caused directly by a breakdown in, or the absence of, effective store-operating best practices, while 36% of store shrinkage is caused by theft and/or misdeeds. The data also reveals that on average, operational inefficiencies – such as ordering errors, employee errors and product damages – represent two-thirds of total loss. More than a third of the total is attributed to theft by shoplifters – employees from both individuals and groups. A typical grocer’s shrink loss annually equates to $750,000, which isn’t an insignificant loss to operate, but it’s enough to consider investing in emerging technologies, store design and operational improvements.

What does all of this mean for grocers? While your customers may not think about the economic pressures from increased shoplifting, erosion of laws, the raising of theft enforcement thresholds, and out-of-stock products, they do understand on some level that shrink equates to higher product prices and increased operational costs that will trickle down to them. Look at your store design, examine your current security infrastructure, consider your operational best practices, and embrace technologies that will not only keep your profits growing, but also keep your customers coming back.

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