Join Robin and Shelley and guest expert Dr. Read Hayes, leading criminologist and law enforcement pro, as they go behind the scenes of retail crime. Learn from Read how he has been using AI to help organizations worldwide, including Target, Home Depot, Bloomingdales, Coles Meyer, Disney, Proctor & Gamble and Walmart on loss prevention strategies.
Artificial Intelligence combined with IoT-enabled science can take a bite out of retail crime. Retail shrink hit $94.5 billion in 2021 and is currently on an upward spiral. Not to mention, ORC was up 27% in 2021.
For more strategic insights and compelling content, visit TheRobinReport.com, where you can read, watch, and listen to content from Robin Lewis and other retail industry experts, and be sure to follow us on LinkedIn and Twitter.
Join Robin and Shelley and guest expert Dr. Read Hayes, leading criminologist and law enforcement pro, as they go behind the scenes of retail crime. Learn from Read how he has been using AI to help organizations worldwide, including Target, Home Depot, Bloomingdales, Coles Meyer, Disney, Proctor & Gamble and Walmart on loss prevention strategies.
Artificial Intelligence combined with IoT-enabled science can take a bite out of retail crime. Retail shrink hit $94.5 billion in 2021 and is currently on an upward spiral. Not to mention, ORC was up 27% in 2021.
For more strategic insights and compelling content, visit TheRobinReport.com, where you can read, watch, and listen to content from Robin Lewis and other retail industry experts, and be sure to follow us on LinkedIn and Twitter.
As a result of an NRF Lost Prevention Conference. Target and nine other major retailers, including Walmart, gap and the Home Depot, for example, came to me and said look, we want you to start some kind of independent research organization. We're dealing with billions in losses, people are getting hurt and killed in our properties and we're not just winging it. But we know that science can help us get a lot better. So here we are.
Robin:Hi everybody and thanks for joining our weekly podcast. I'm Robin Lewis, founder and CEO of the Robin Report and, along with Shelley Kohan, my weekly podcast partner, and, by the way, she's also a professor at Fashion Institute of Technology. We welcome you to our conversation, and if not the hottest topic, it's like big number two, anyway, and the biggest concern for many retail executives today, and that is retail theft and what we're calling organized retail crime today. To say we have an expert in the field of retail crime is really an understatement. We have with us one of the most credible and influential people in the area of loss prevention. Dr Read Hayes serves as a research scientist criminologist at the University of Florida. He has over 30 years of hands-on crime and loss control experience with numerous organizations worldwide, including Target, Home Depot, Bloomingdale's, Khol's, Meyer, ro , Procter P&G PGamble Gamble and Walmart. So Read welcome, reed. I'm certain our audience will learn a whole lot today from you, and I know I will probably certainly learn a lot from you, so thanks for us usocteer . t c r P.
Read:Thanks so much for having me on and I'm excited to talk to you all and, hopefully, to your listeners.
Shelley:Before we jump into some of those findings that you're gonna share with us and advice you have for reducing losses, I have to really say that if anyone in our audience has not met you, reed, they should. I can't believe the work that you've been doing over the past few years and to say few years, I think it's been two decades. But the work you've been doing is just phenomenal and I can only imagine now, with all these improved technologies, how much deeper those insights can be in today's environment. You also have spoken at over a hundred conferences and you're constantly being interviewed on the news outlets about retail crime. In fact, my colleague, Marshall Kaye, recently wrote an article in Forbescom and, of course, CNBC wrote another article about some of the work you're doing a few months ago. And here's a little fun fact Reed, you just have to tell me if it's true or not. I believe you were on Oprah, is that correct? I?
Read:was on Oprah. Yes on the.
Shelley:Oprah show. Great, I gotta Google that one. But yeah, tell us about the research that you do.
Read:Okay, well, sure, we work our team, and our team comprised of 16 of us. Now this time we work on just about any type of theft, fraud or violence that the retailers are exposed to daily and weekly, and we work around the United States, around the world. We work with, at this point now, actually 92 major retail corporations plus all their divisions Some of them have multiple divisions, as you know and we have we work with 125 companies that provide solutions and technology, high tech, from NVIDIA or Intel, at&t types to most of those like AXIS and Bosch and Hanwha and others that provide high tech. So all the big retail associations are partners as well.
Robin:Well, you know, reed, your work is fascinating and the research that you're putting out there is very impressive, and we'll talk about that in a few minutes. But you're also on the Lost Prevention Research Council, IPRC Everything's an acronym today. Can you give us a brief description of what the council does and who do they have as its members?
Read:Sure, so yeah, so, like most of us, I have two jobs right. I'm faculty at the University of Florida a top five public university, if you will but also, by day, also run the LPRC. So I've been at UF for 22 years. I've been with the LPRC, though, for 23, and started in 2000.
Read:As a result of an NRF Lost Prevention Conference, target and nine other major retailers, including Walmart, gap and the Home Depot, for example, came to me and said look, we want you to start some kind of independent research organization. You know we're dealing with billions in losses, people are getting hurt and killed in our properties, and we're not just winging it, but we know that science can help us get a lot better. So here we are with 240, excuse me, 240 corporations that are working together month in and month out in working groups and during events. We have a series of indoor labs that replicate retailer environments. We've got over 400 technology solutions deployed across our environment, our ecosystem, and we're working in five different communities that are living labs. So there's a whole lot going on. Let's put it that way.
Robin:Well, yeah, for sure.
Shelley:Well, that's amazing and I love the fact that you're actually doing the lab work so that you could make the retail environment a better place for retailers and shoppers and employees. So what I'd like to really start reading by asking you is in terms of what's been happening post pandemic. So, like many other things, the pandemic has shifted consumer behavior, so I would imagine that crime behavior has shifted too. Can you talk to us a little bit about what you're seeing now?
Read:Sure, I mean, you're right. I mean, when we're looking at the data and our data are not just coming from law enforcement, because they only know what people report to them. So, by the way, the retailers that we survey are only reporting not quite 50% of what they know about crime wise to law enforcement. So what we do is get the information directly from them as well, from all sources. So what we're finding is that the pandemic, as we all know, changed everything. It was beyond disruptive, but what seemed to change was a whole lot of attitudes because, if we recall, we also had widespread looting and burning of retail store environments. We had employees trapped in their cars and delivery vehicles and horrified, terrified, and stores were closed, and that changed a lot of dynamics.
Read:People started shopping in a lot of different ways than they did before, but we saw law enforcement lose scores and scores and that continues of officers that were out there to patrol and partner with the retailers. And then there were some prosecutors out there that were put into office in certain areas that were now not just reluctant but refusing to prosecute criminal offenders that were victimizing or harming people in places. So I think that mix, that perfect storm, has created a whole lot of changes. So you see, theft seems to be up, but aggression or violence during those thefts are up. Fewer employees want to go to work in retail environments and that's getting worse. The fear of crime, victimization, is up. We're doing surveys of people that work in these places and spaces and they're afraid. So the retailers are, as you all know, closing stores in many, many areas. Now more are planned and a big part of that, of course, is life, safety and the fear of crime and not being able to attract or retain good people to work in their stores.
Robin:Well, you know, yeah, it is amazing and there's one story after another and it used to be called loss prevention as a function within retail. But you know, now it really it's really taken on a big deal. I mean, it's all about, you know, well, organized retail crime and, as I said earlier, seems to be growing like crazy. I mean, the N-R-F reported that retailers, on average, saw a 26.5% increase in ORC incidents in 2021. And the amount of ORC is nearing $50 billion. I mean, that just awestruck me. So what's happening and what you just talked about are you seeing and what can retailers really do about this mess?
Read:You mentioned ORC and it really going back about just about 12 years ago. Retail industry leaders association asked us to do a report on organized retail theft, ort. So we went out and worked with the FBI and the Florida Department of Law Enforcement, but a whole lot of retail investigators were working on task forces and teams on more organized crime that was going on. What we came away with was really the clear finding that this was ORC, it was crime, not just theft. That fraud was intermingled with the theft and that there was a lot of violence. That these organized fences worked in different hierarchies. They used boosters, many, if not most, of the boosters being either intravenous or otherwise, drug abusers or users, and they're drug dealers. And so there were a lot of compromised law enforcement.
Read:yeah, human trafficking, you name it, it's going on and they're all sort of interlinked, including some of the funding going over to overseas terrorist organizations and all this kind of thing. So hence organized retail crime. But I think one takeaway would be more and more of the organized crews might involve one or more of their team. They're good at getting online and getting rid of stuff, converting stolen goods to cash.
Shelley:That's interesting and I know if we were going to use a definition. You kind of said it, but it's. You know, orc is about volume, it's about resale, it's a gateway crime and it's volume right. So it's got some characteristics in terms of how we define it. And with organized retail crime, you know, I want to ask you so we're seeing an uptick in organized retail crime. Is there a particular area or is there a particular things that you're seeing from ORC that might be different than it was even, you know, 10 years ago or pre pandemic?
Read:I think some of the changes been how widely dispersed it is. You're seeing more suburban and rural areas, as well as the urban core, which you already expect, and so they are being victimized in there. They're, quite frankly, when we do one way, we do our research, we do multi method or mixed method research right. So we examine, analyze big data sets that the retailers give us. We do a lot of crime mapping, looking for hotspots and opportunities and patterns. We interview criminal offenders, active offenders, and have really for 20 years now we've stepped that up. We're interviewing more and more, even including porch pirates, arm robbers and burgers, those types of crews, but also, of course, boosters and fences and then the average shoplifter, if you will. But what we're seeing is that they have learned to go farther and farther out to those stores that are not as fortified and where the staff are not as savvy or experienced with it. So I would say dispersion has gone up the items.
Read:Part of this has been you can see what's being protected in the stores. There's a model that we used in criminology and still do, called craved. You know what's concealable, what's available. Of course, what's available, but what's really valuable would be another one is really disposable on the back end, because you mentioned that volume and the disposability of it or the ability to convert it to cash readily to convert it to cash. So the small items we've all known about infant formula canisters and you know also the blades and razors from, say, Gillette electronics and so on. Those are pretty and apparel, but you see other things like body wash and bar soap, even chewing gum sometimes. So a lot of this is opportunistic and they're going to hear about and follow trends and patterns and demand and so that's always changing.
Robin:It's incredible.
Shelley:That's really interesting. The other issue that's very concerning is something you had mentioned earlier, and this goes beyond the financial impact of orc and retail crime, and that's the increase in aggression and violence and, like you said, the fear of crime. So associates and employees are really being put in the center of this aggression, which brings up a whole nother you know area of safety concern. Can you tell us a little bit about that and can you tell us, you know, when you're working with the retailer, what is it you're telling them to do to address these issues?
Read:I think the first thing is be able to earlier detect and much better define their problems. Think of themselves as physicians, right? They need better diagnostic tools. You need to have earlier detection of issues and better diagnostic tools. Imaging, right, mapping what's going on in your areas, what stores are hotter than others and what types and times of day, and even then zooming in what's going on within that box, that store. Are there hot spots and opportunity areas there to change dynamics? Right? I think that's the first one. The second is partner, partner, partner. They've got to partner with each other. They've always retail's been lost.
Read:Prevention or asset protection probably one of the best I don't know a lot of the other verticals at just openly sharing what they're experiencing and what they're doing about it Now with our team and so on. Other research okay, what's actually working now? You wanna share what you're doing, but you wanna share what's actually working according to the evidence. So I think that partnership, but they need to share, detect and share.
Read:Criminal offenders, high-rate, high-impact defenders and those crews that are making threats online, that are talking about coming their way, that are on the back end boasting and bragging and showing videos and images of what they're stealing from them. And so pulling that information, sharing that information farther out in time is gonna be a big part and, I think, further partnering closer to the crime event itself. If you've got a known vehicle license plate number, individuals, if we have now with computer vision, with AI, we can pick up and pass those models around of that known threat offender, their vehicle, their crime tools obviously weapons, crowbars, garbage bags, other cutting tools and things like that. So I think sharing and partnerships are critical as well as good early detection and diagnostics.
Robin:Well, so I have to assume that with the current technology, particularly AI, and of course is VR, virtual reality as well but are you able to simulate situations in the Lost Prevention Research Council to better recognize and react to the Lost Prevention Issues and all the stuff you've been talking about? In other words, how can today's technology help to reduce crime and can you give us kind of an illustrative or situation example of how this type of technology may help?
Read:Absolutely so. It's a good one, Robin. So I think what we do is we look at the offender's journey to crime just like a customer's journey to buy right. There are steps and stages that a customer goes through. There are steps and stages that a criminal offender goes through, and those are aiming points for detection, those are aiming points for effects and so on.
Read:So what we're working in now is we have a bow tie model and that bow tie, if you're looking straight at it, on the left side of the bow tie, that triangle, if you will you can see them moving from before they get into your parking lot. Things are doing online or in the physical space. They're moving into your parking area. That's zone four. Zone five is beyond. Three is entering into your store and that interior space, two is around whatever you're protecting that person, that money, that merchandise, and that's the target zone one. So, okay, they're envisioning that and this is what we're doing. All of our research and all of our events. We're working on this. But here's the key how do we affect offender choices, just like the shopper choices? Hey, I want this item, not that I wanna go get it at this store, not that one. I'm gonna initiate and move toward that. I'm gonna help them do the same things in the store. It's reverse. It's the other side of the coin that we're doing trying to affect the offender's decisions. Don't come here or, if you do, don't do what you're gonna do today, that kind of thing, right, so we can detect and affect them. And then the connect part of this is connecting again the retailers together with their law enforcement partners. So some of the wins and some of the simulations we're injecting things online, if you will, and simulating threats and how to look for those and what works. We're working in the parking lot doing scenarios. We did a tabletop at the end of February of this year. We had 31 retail chains participating, 46 executives. We had eight law enforcement agencies federal, state and local. We did tabletops and we simulated what we just talked about. Out there, where these offenders are hitting other stores, what could we pick up? How do we share that? How do we affect that? Now, here they come, they're coming our way, they're hitting our store now or, in this case, our simulated lab. Now they're leaving, right, they're right of that event, right of bang or that kinetic. Now, what do we do to share it with our next store so they're not victimized, and all that.
Read:We have virtual reality. You mentioned VR. You can put headsets on. We've created indoor and outdoor environments that we can put different scenery in for our women shoppers, particularly where we have fear of crime as a critical issue, and in the parking area. We can simulate day, night, all types of conditions. People in the scene do all these things. And then finally, I think, with our labs we can simulate these things. We even have a SIM lab. You can go in and on all sides, or three of the sides, there are images. You can be indoor and outdoor at almost real life size as well. Well, it's 3d sound. So you know we're doing a lot to learn and speed up what we need to do. The best way to do it, those key it's dosing. It's like an antibiotic how much do you, what do you give, how often, for how long and how much right? Those are all dosing. We, everything we do. It's about dosing, not just what, but how we do it.
Robin:Whoa. Wow that's really interesting.
Shelley:I you know what. I gotta be honest with you. I've been, you know, in retail for Uh too many years, but I've been in retail a long time and I never really likened this Retail crime to the to like a shopping journey. Of course they had their same journey, they're just right pay for the good, so it's really interesting how they're selling the coin.
Read:Well, sometimes the green actors, who, who, we want to come there and come back right to work at shop and and so on, the red actors, the one we don't want to come there or not come back. But we know that the green can flash yellow or red and and I think it comes. If you look at privacy and those kind of issues, look, nobody has a time or interest in Anybody because of who they are or how they look or what their background or genetics are it. But if everybody's green, everybody's a green actor. Unless and until that second you threaten another person or take action. You know criminal act action. Now you flash yellow or red. Now that retailer or that law enforcement agency is now interested because they've got a safeguard vulnerable people in these spaces.
Shelley:Yeah it's really interesting, and I've heard that a lot of retailers are using artificial intelligence to better detect bad behavior before it happens. So, for example, um like you had mentioned I forgot the acronym may used effect offender choices, um, it was the terminology used, but um. So, for example, you know a I can detect when someone's in a physical retail store and can pick up on behaviors of that particular person to then say this has a high potential for being a bad actor, and then we can then tell the store to respond a certain way to Really stop the behavior. Does that is that that I kind of say that correctly?
Read:I think you did. It's very accurate. And you know, at the University of Florida we are, if you want, a AI university, if you will, but because we have a hundred million dollar investment with Nvidia Uh, where we have a hypergator 3.0 here, ai, and that's the most powerful AI compute Uh capability really of any academic institution in the world bar none, um, and so we can leverage that as well as uh. We've had Lenovo and Nvidia provide all kind of on-premises, on-prem compute here right, as well as cloud. So we have a lot of resources and we're working on probably 30, maybe 40, uh AI use cases. We went through some of them this morning um, but you know recognizing uh A classifying a weapon.
Read:You know garbage bags, uh magnets, of course, a firearm or knife or something like that. Or you know bolt cutters to cut things. Those things are not easy but they're easier. Now you're talking about the movement towards somebody rapidly, or raising your arms and lowering it. You know you're now striking a person, of course, selecting multiple, high, known, high-loss items. Normal rate to sell is two or three First shopping visit and this person's just taken five or 20 or whatever the number is.
Read:Now that AI can pick up some of those behaviors and actions and and results and and then further pull in other sensors and say, okay, now this, this person's flashed red, but we can use other AI. Is this makes sense? And in every case? Every case, ai is just a heads-up tool. That's all it is. It's pulling Potential signals out of all the noise and all the things that are going on in the world and letting that decision maker hey, just like, here with you have scientists and physician scientists. Hey, doc, stop on that. That tape right there that might be a lesion on that x-ray or that ct or mri. Maybe go back and take a second look. The AI doesn't send the patient to surgery here. Ai doesn't send somebody to jail. It just says, hey, manager, you might want to take a look at this and maybe even lock the door, you know, or call 911 or about.
Shelley:Wow, I love you. Go ahead, Robin Sorry.
Robin:Well, I just can't believe what I've just learned. I mean this is incredible. I mean it is like this is a whole new, new industry, for the god's sake. I mean it's. It's kind of like drugs, which you know. Drugs used to start it out at kind of a random pace, but you know the drug industry, the drug I'm not talking about big farm and talking about illegal drugs. It's like an industry and what you've described here is like it's. There's so many aspects of this. It's just enormous, it really is enormous.
Shelley:And then I want to ask you a question, reed, before we close out. So you work with the National Retail Federation. I know you work with them, you work with retailers, you're working with law enforcement and you know. So you have just such a holistic view of what's happening and I want to find out you know, are you also helping to change legislation? What's happening in the world of legislation that would you know retailers can benefit from? Are there things changing? Are there things in the pipeline that you know about?
Read:Well, I think that you know you saw the Inform Act made it through Congress and was signed into law. That's just a start because that's got to be executed. There needs to be more teeth and follow up and follow through on that. So there are other bills, one particular that might provide a little more of an action model. Our role as scientists, of course, is to do the work that needs to be done, help them with coming up with the frameworks and executing those and informing those that lobby the legislators. So that's why we do. We work with FMI and ACDS and International Council of Shopping Centers, rila we mentioned Retail Initiative, leaders Association, nrf and beyond, right, so we're working with all of them the chains, drug store excuse me, the convenience stores, and now Retail Council of Canada and even BRC in the UK and Australia is equivalent. So, yes, that's a big play, but you know we're talking about national.
Read:What's so important I think right now, Shelley and Robin, is the local level too. Right, we always hear you know locals what matters and you know what that really matters in three areas. One, do you have the right ordinances and laws in place that are written the right way? Two, you have well-written reports that the retailers and law enforcement put together, get those to good prosecutors, not those that are reluctant or whatever they're doing out there. They take it. They take it seriously and a lot of the AI we've just been talking about that's going to be helping pull together and it helped the prosecutor understand it and the judiciary and the jury. More importantly, hey, this individual didn't just harm this place. At this time, we also can show they harm this place and this place and this place. Right Now we have a better chance of putting them in time out for a longer period.
Robin:Well, I'll tell you, reed, it's been an amazing awakening for me. It's like a huge leap from what the old world defined as shrink right, so you know, to what we call organized retail crime today. It is incredible, and I must say this, that the industry is fortunate to be able to reach out to somebody like you for assistance in addressing this really horrific issue. So thank you very much for joining us.
Read:We're here, we're working with 92 retail corporations. We're open to work with more and I appreciate this discussion with you all and your audience.
Shelley:Oh no, it's so great to have you here. Thank you so much, and so, if someone in our audience wants to reach out to you, what's the best way to find you?
Read:I think the quickest way is operations at LPresearchorg, operations at LP for law students right LPresearchorg.
Shelley:And another way to find you because you're so credible and well known in the industry is you could literally put Reed Hayes into your Google search and up pops everything he's been doing for the past 20 years. So, reed, thank you so much for being here. We are so appreciative of the work you're doing and really making a difference in the industry For our listeners. You can find more of our podcast on Apple, Spotify, buzzsprout and, of course, www. TheRobinReport. com, and please follow us on social media. Link in with us for the latest thoughts about the industry.
Robin:And Reed. Thanks again, and for our audience, I want to thank all of you again for joining us and, as I do every week, if you have a topic that you would like Shelley and I to cover, just send me an email To robin@therobinreport. www. robinattherobinreportcom. Thank you very much again.