Theft and fraud in retail – is technology the cause or the cure?

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In his latest round-up, Ed Jobson sweeps over the latest string of Mike Ashley acquisitions, further job cuts at Tesco and asks whether technology is helping or hindering retailers in the fight against theft and fraud…

Hello and welcome to another edition of This Week in Retail.

For the record, we have not been bought by Mike Ashley. Yet. Jack Wills is in fact the latest label to be snapped up by the Sports Direct retail mogul, the most recent in an acquisition spree increasingly reminiscent of a frantic game of Monopoly. One wonders where the Salcombe-based (think sailing and corduroy trousers) brand fits in with an increasingly eclectic portfolio that now includes such diverse – and generally failing or ailing – retailers as Evans Cycles, Game Digital and Sofa.com. Using the license for the Jack Wills name, Ashley could be aiming to produce clothing at his usual low cost coupled with a cut price sales strategy. This is generally Sports Directs’ preferred approach, since the margin is better than buying and selling a high-end sports or fashion brand (eg. Adidas), who keep a much higher percentage of the margin.

However, Ashley’s’ acquisition strategy looks to have backfired in recent weeks, with the announcement that more than two-thirds of House of Fraser’s 59 stores could close after it reported an operating loss of over £50m. House of Fraser is unfortunately a prime example of an increasingly redundant high street retail model. The department store chain has failed to develop a winning online or omnichannel strategy, has done little to offer customers a personalised or tailored experience in store and it has been unable to differentiate itself in terms of brand or price. Old fashioned department stores could take some inspiration from this impressive fashion retail concept store founded by creative studio Something & Son. Time will tell if Ashley is the right person to eventually turn around House of Fraser and his other purchases, but for me an even more intriguing acquisition came in the form of online fashion specialists Boohoo taking over high street stalwart Karen Millen. Could this be a glimpse of the clicks-to-bricks future?

In Mike Ashley’s defense, he has saved a significant number of front-line retail jobs recently – or at least provided a stay of execution. 1,700 Jack Wills’ staff will keep their jobs for now, but at Tesco the axe continues to swing, with the announcement of another 4,500 job losses, mostly from 153 Metro stores in the UK. The cuts may be part of a bid to automate or revitalise the mid-size Metro format, which looks increasingly strategically redundant given changing consumer habits and the general shift in preference from a weekly to a daily shop. Tesco caters for convenience with its Express format and has been taking the fight back to Aldi and Lidl with its Jacks discount label, so it will be interesting to see if Metro has a future at all, or whether these stores will be repurposed or perhaps sold, given the premium inner city real estate they tend to occupy.

Digital transformation is unlocking a myriad of benefits and opportunities for our retail clients, but of course any large-scale technological change also carries risk. Increasing use of technology or automation can open up new opportunities for thieves and fraudsters. A Spanish man has been accused of carrying out an audacious $370,000 scam against Amazon by ordering valuable electronic gadgets, weighing the packages, unpacking the products, filling the boxes with dirt (yes, dirt) and sending the dirt-filled packages back to Amazon. Picking up on a flaw in Amazon’s highly automated returns system, where packages are weighed rather than opened and examined by humans, the fraudster was able to pocket the refund, and later sell on the items he had supposedly returned. We have heard a lot in the news recently about Jeff Bezos’ enormous wealth and the relatively low corporate tax paid by several ecommerce retailers – I wonder if people feel less guilty about stealing from or defrauding a retailer like Amazon? It will be interesting to see how this will play in Amazon Go stores – if unscrupulous shoppers find a loophole in the cashier less technology, will we see a related rise in theft?

It has already been well documented that self-service checkouts can lead to a rise in casual shoplifting. Readers may remember the famous “carrot-gate” discovery by a UK criminologist that one major supermarket was selling more carrots than it ever had in stock, and in some cases customers were apparently purchasing 18kg of carrots in one go. It turned out that certain shoppers were scanning more expensive weighed produce, such as avocados, through as carrots – the cheapest item. So, what can retailers do to reduce theft and fraud opportunities opened up by technology? Could the answer be more technology? RFID and Blockchain have been heralded in recent years as the answer to retailers’ theft and fraud problems, but recent developments in facial recognition technology sound even more promising to me, particularly if this can be made increasingly accessible and affordable for smaller retailers. And if machines can be taught to recognise human faces, then surely the next step should be… carrot recognition technology?

– Thanks for reading,
Ed

 

Author


Ed Jobson

Senior Consultant, Retail Supply Chain (Operations Transformation)

Ed has a proven track record of guiding retailers through large scale international business transformation programmes, with a particular focus on Grocery and GM.

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