AILSA CHANG, HOST:
Among the big retailers, one word has been coming up a lot - shrinkage. That basically means stuff that has gone missing, either by corporate mismanagement, fraud or another reason that's been surfacing in headlines - theft. Paddy Hirsch and Wailin Wong from Planet Money's The Indicator explain how some companies are handling it.
UNIDENTIFIED SPEAKER: Meet Bose TrueSpace.
PADDY HIRSCH, BYLINE: It's been a while since I set foot in a Best Buy, but I popped around to one of the electronic retailer's stores last week to take a look at how they deal with customer theft there. Not that I planed to steal anything, you understand.
WAILIN WONG, BYLINE: No. You were there to pay 18.99 for a compact disc.
HIRSCH: (Laughter) Was actually looking for a cable, but anyway.
WONG: Oh, OK.
UNIDENTIFIED SPEAKER: Now this is TrueSpace.
HIRSCH: There was a security person on the door there, and there was plenty of inventory on the shelves. But in some cases, for some of the most, I don't know, easy to pocket items, there's nothing there. There are just these little laminated labels with QR codes on them. If you want the item in question, you just scan the thing with your phone, and a customer service person will bring it to you.
WONG: This is all aimed at combating a problem that many retailers say is one of the biggest issues they're facing right now - theft. Organized retail crime is part of what the National Retail Federation calls external theft, where people walk into your store and steal stuff.
HIRSCH: Hayley Peterson Herrin wrote about this in a recent story for Insider, where she's a deputy executive editor.
HAYLEY PETERSON HERRIN: We've been hearing so many companies talking more about it lately, particularly on earnings calls - Target, Walmart, Dick's Sporting Goods, Dollar General.
HIRSCH: External theft is the biggest cause of shrink - 37%. But it's not the only cause. If you add in the other causes of shrink, which is theft of inventory by employees and loss of inventory by corporate mismanagement, those two internal problems actually add up to a lot more than external theft - 54%.
WONG: And what's more, while companies are making a big deal about it in their earnings calls of late, shrinkage as a proportion of corporate profits is not growing.
HIRSCH: Still, Hayley says companies are focusing on external theft as an issue that they do need to deal with.
WONG: Some companies are finding ways to combat external theft. Costco is one. Best Buy is another.
HIRSCH: In a recent earnings call, for example, the Best Buy CEO talked about a few strategies that they deployed to tamp down on external theft, many of which I saw firsthand when I was in the store.
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PETERSON HERRIN: One of those is employing security workers at store entrances, and they have more salespeople across the floor. And she also said that they have very few self-checkout registers, and self checkouts have often been blamed for rising theft.
WONG: At least until recently, many retailers have not taken Best Buy's approach. They saw shrinkage as just another cost of doing business.
HIRSCH: Yeah, but Hayley says the comments that she's heard recently by companies on this issue signal a change. And she says we're already seeing stores step up their crime-fighting game beyond merely putting guards on the doors and locking up high-value items.
PETERSON HERRIN: You can increase cameras and the visibility of those cameras.
WONG: All of these security measures not only cost money, they can also impact the customer experience.
HIRSCH: Yeah. I have to say, on my visit to Best Buy, the occasional lack of physical products on the floor was mildly frustrating. I mean, it is hard to compare two pairs of headphones, for example, when they're not physically in front of you and you're just looking at two QR codes instead. I don't know, maybe that's just our new retail reality.
WONG: Wailin Wong.
HIRSCH: Paddy Hirsch, NPR News. Transcript provided by NPR, Copyright NPR.
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