Compared to many other industries, retail is known for having particularly thin profit margins, and this has only been exacerbated in recent months by the rising cost of doing business coupled with declining consumer spend. Another factor that is putting pressure on retail margins lately is theft.Data collected by Capital One Shopping disclosed that shoplifting losses grew 19.4 per cent in 2022 compared to the previous year and theft losses increased by 10.5 per cent year on year. Last April, the National Retail Federation (NRF) released a shocking report that claimed organized retail crime was responsible for nearly half of the $94.5 billion in store merchandise that disappeared in 2021. The report was retracted in December and the NRF corrected the amount of merchandise lost to organized retail crime to 5 per cent, but that hasn’t done much to reassure retailers, who have continued to take steps to combat crime.Retailers like CVS and Target have resorted to locking up certain products behind glass partitions, a safety measure that requires customers to ask sales associates to unlock them, slowing down and potential reducing in-store shopping.In addition, Target, Walmart and other retailers have closed certain brick-and-mortar locations, citing the prevalence of shoplifting.What happens with shoplifting prevention methods go too farJoe Budano, the CEO of anti-theft technology company Indyme, noted that frustration with locked-up goods and additional shoplifting deterrents can lead to sale decreases between 15 to 25 per cent. With many customers feeling like they can’t shop in-store, they turn to online channels to fulfill their shopping needs.Retail analyst and GlobalData managing director Neil Saunders said that while retailers may prevent theft by locking things away, they also deter people from buying products, so it’s “very much a win-lose situation”.“There is no doubt that locked-up merchandise drives more shoppers online. Locking up products worsens the shopping experience, and it makes buying things inconvenient and difficult. When faced with this, many consumers will switch to other retailers or simply move their purchases online. In the online space, Amazon is the major beneficiary. Once shoppers have made the move, it is very difficult to win them back,” Saunders said. As Amazon’s chief executive officer Andy Jassy commented during a company earnings call earlier this month, “It’s a pretty tough experience with how much is locked behind cabinets, where you have to press a button to get somebody to come out and open the cabinets for you, and a lot of shoplifting going on in the stores”.“So the combination of what’s happening in the physical world and how much improved we’ve made our [expanded Amazon Pharmacy] experience is driving a lot of customer resonance and buying behavior,” Jassy concluded. While Jassy did not provide exact sales figures for the company’s pharmacy platform, the CEO noted “a lot of growth there.” Are preventative measures worth it?Earlier this year, the NRF’s vice president of asset protection and retail operations David Johnston explained how the organization got its 2023 report on the rise in shoplifting so wrong. “The report, published in April 2023, was intended to provide context for understanding how retail theft rings operate. The inaccurate text and citation, which inferred an estimate – and it was an estimate – of losses due to organized criminal activity was purely incidental to the findings and didn’t even merit a mention in the report’s executive summary or conclusions,” he said in February.However, retail expert Dylan Carden of global investment banking and asset management firm William Blair offered an alternative theory about why the retail crime panic remains so heightented in a client note from last October. “While theft is likely elevated, companies are also likely using the opportunity to draw attention away from margin headwinds in the form of higher promotions and weaker inventory management in recent quarters,” he wrote.“We also believe some more recent permanent store closures enacted under the cover of shrink relate to underperformance of these locations.”How to prevent theft without losing out on profits? Ironically, the steps that some retailers are taking to prevent theft could be denting their bottom line anyway. “If retailers feel they have no choice but to lock things away, then the very least they need to do is ensure there is sufficient staffing to unlock cabinets quickly,” Saunders said. “Unfortunately, this is often not the case and locked cabinets add more pressure to already stretched store labor.”Moving forward, Saunders suggested that retailers need to look at more creative solutions, such as allowing customers to unlock cabinets via loyalty cards or other authentication on their phones. “This is far from ideal, but it is a more creative way of trying to maintain some sense of normality in the shopping experience,” he said.One example of this is the “Freedom Case” from Indyme, which has a touchscreen that allows consumers to open locked display cases using their phone number, the retailer’s mobile app or store loyalty card. Shoppers can select an option to receive a text message with a four-digit code that will let them open the case. For consumers who feel uncomfortable disclosing this information, Budano clarified that consumers can still ask an employee to open the display. However, despite all the new methodologies and gadgets available to prevent theft, Saunders said that it’s important to remember to maintain a sense of normalcy and humanity in the shopping experience.