From Loss Prevention to Loss Detection: How Computer Vision, RFID and AI are Reshaping Retail Shrink

Inside This Report

This report details how retailers are modernizing their loss prevention solutions to more effectively prevent shrink while facing shifting shopping habits, greater adoption of self-service solutions and ongoing challenges with legacy solutions. At the heart of this is finding balance between customer experience and the shopping journey and the need to counter increasing levels of loss that cost retailers billions of dollars in revenue each year. Advances in AI and computer vision technologies and the expanding footprint of RFID in retail are among the key technology trends researched to support next-generation loss prevention solutions.

This in-depth report analyzes key strategic issues, both technological and operational, regarding loss prevention. VDC's research entailed detailed discussions with dozens of LP solution providers, plus a dedicated survey fielded among loss prevention technology decision makers across 180 retailers in North America and Europe. The report discusses ways in which RFID, artificial intelligence, computer vision / video monitoring, electronic article surveillance, and more technologies are advancing and being integrated, and retailers' expectations for investments and results.

What Questions are Addressed?

• What is the state of loss in retail today and how effective are retailers at addressing loss? From the retailer's perspective, what will their investment priorities be in the next two years? How does this differ by retail segment, such as apparel versus electronics versus grocery? In what ways are loss prevention solutions improving customers' shopping experiences?
• What are the leading and emerging loss prevention technologies and the strengths and weaknesses of each? How do these technologies align by store format and merchandise? What do loss prevention solutions do beyond loss prevention?
• From the retailer's perspective, what will their investment priorities be in the next two years? How does this differ by retail segment? How are retailers balancing customer experiences with loss prevention technology investments?
• What is the impact of self-service on shrink and how are successful retailers integrating loss with self- service solutions?
• How are improvements to inventory visibility impacting retailer loss prevention strategies and how are retailers leveraging recent RFID investments to better address loss?

Who Should Read this Report?

• Types of companies: Loss Prevention solution providers, POS hardware and software vendors, retail systems integrators, top tier retailers, retail industry trade associations and standard setters.
• Product Management, Directors of Strategy and Research, Marketing Communications professionals
• Corporate development and merger and acquisition professionals seeking a comprehensive understanding of the landscape of loss prevention
• Strategic Aliance and Channel Development managers

Organizations Covered in this Report:

Executive Summary

Retail shrink and in-store violence levels remain elevated across most store formats throughout North America and Europe. While retail decision maker strategies on how to best address shrink have evolved, many investments have backfired and significantly eroded the shopper experience. What has improved is retailers' ability to more accurately measure events; for example, by leveraging increasingly ubiquitous RFID solutions as a forensics tool to investigate patterns and deter internal and external loss. This research report is designed to measure the state of loss in retail today in the wake of heightened organized crime, expansive self-service solution deployment and shifting shopping habits and assess how retailers are evolving their approach and technology investment priorities to enhance monitoring capabilities, eliminate shopper friction while ultimately reducing shrink. Backed by a dedicated survey conducted among retail loss prevention decision makers across multiple retail categories and in-depth interviews with leading and emerging solution providers, the report addresses the key factors shaping this market moving forward.

According to VDC's research, in 2024 retailers incurred an average of 2% of shrink (as measured as a percentage of retail sales) with convenience/pharmacies and grocery/supermarket the leading retail segments. For 2025, however, retailers are projecting a substantial drop in shrink with average anticipated losses of 1.7%. Considering average US retail sales of $5.25 trillion in 2024, this drop represents a $15.8 billion benefit to retailers. While this is potentially a byproduct of increased loss prevention technology investments - 2025 budgets increased by an average of 6.9% - other contributing factors include the evolving loss prevention technology stack, retailers adapting to changes to shopping habits and policy shifts.

AI and computer vision innovation and advances with more mature solutions and those in the process of scaling are redefining the loss prevention technology stack. EAS and video integrations are becoming more commonplace, tying alarms to product and location to accelerate case resolution. In addition, RFID's scaling footprint in segments like apparel and general merchandise is opening the door to new applications such as its use to provide the definitive inventory ground truth and its utility to investigate patterns. In fact, over nine in ten retailers agreed that real-time inventory visibility (provided by solutions like RFID) was extremely or somewhat important to support loss prevention strategies.

Key Findings:

• Retailers address self-service vulnerability and retrench self-checkout policies. With growing labor cost and availability challenges, retailers are increasingly turning to self-service solutions to support customers. Over 60% of retail research respondents acknowledge that they currently have or plan to implement self-service solutions. However, just over 30% of retailers claim that self-service solutions (such as self-checkout) have had a significant or severe impact on shrink levels. Leading issues with self-checkout solutions include label switching (24.5%) and hiding one item behind another (23.8%). To address self-checkout impacted shrink, retailers are turning to computer vision and AI solutions to better detect missed scans and to visually confirm item identity. Leading retailers are pairing policy (item limits) with vision-assisted exception handling.
• Returns fraud is a major challenge for retailers and in many ways the new battlefield. Approximately 15% of returns are fraudulent (with online returns a greater issue). Thus, omni-channel returns and BORIS/BOPIS workflows becoming an increasingly critical loss prevention consideration.
• Labor shortages accelerating self-service investments; however, limiting retailer loss prevention goals. Almost one in four retailers agree that labor shortages have had a significant and/or a severe impact preventing loss prevention. In fact, retailers cite employee training and awareness programs and customer engagement tactics as among the most effective loss prevention measures. To counter labor challenges, retailers have turned to increased loss prevention technology investments and re- focusing staff at higher rick times and locations.
• Leading loss contributors are varied, requiring a multi-faceted approach by retailers to address. The top three contributors to inventory shrink include administrative/process errors (23.0%), opportunistic shoplifting (21.7%) and employee theft (20.4%). It is noteworthy that organized retail crime is not a "top three" rated contributor.
• RFID's retail value proposition continues to evolve and is becoming the source of truth supporting monitoring and loss detection solutions. Inventory visibility and accuracy remain a key challenge for retailers with more than three in ten retailers claiming moderately accurate, slightly accurate or inaccurate inventory visibility. RFID has become the de facto technology retailers turn to for greater (real time) in-store inventory visibility and over nine in ten agree that there is strong value integrating RFID inventory management solutions with loss prevention platforms.