Retail crime, whether it’s online fraud, shoplifting from stores or employee schemes, is increasing at a troubling pace. In fact, the Office for National Statistics reported a +26% increase in consumer and retail fraud last year and noted shoplifting offences are at their highest in two decades.

UK retailers can’t afford to lose wasted revenue and sales on crime, says Shaun Callow, Senior Customer Success Manager at Appriss Retail.

Unfortunately, profit margins are already feeling squeezed by high labour costs, the Employment Rights Bill and tighter budgets overall. Where retailers can exhibit some push back is fighting crime – and there are ways to enhance loss prevention through Gen AI and retail analytics that help spot areas of retail loss.

Savvy fraudsters find new tricks

One consideration for the current jump in retail crime is that fraudsters are getting smarter about how they take advantage of a retailer’s sales systems and policies. Unlike fraud and crime from decades ago, retail criminals today are leveraging AI, design software tools and social networks to exploit businesses.

Newer tactics that retailers should be aware of include gift card abuse, where criminals use Buy Now Pay Later accounts to purchase gift cards, only to liquidate them immediately and disappear before the payments become due.

Returns fraud is another where organised retail crime (ORC) groups attack returns online by having multiple fraudsters file claims, each altering a request — such as using “street” in the shipping address of one claim and “St.” in another — and make false claims that an item purchased never got delivered. Each incident looks like a one-off exception for a consumer, but they all lead to one ORC ring.

Now, with AI tools and photo-manipulation software, retail criminals can also create fake receipts, rewards certificates and invoices that look like the real thing. Savvy criminals can also swap out barcodes on store items so associates scan lower-priced items.

These are just a few tactics, but also troubling is how ORC syndicates share successful scams online through sources like Telegram. These modern tactics spread like wildfire from one group to another, turning retail crime into a full-fledged industry.

AI helps retailers see crime where associates can’t

Fighting AI with AI, retailers can defend against ORC groups and retail abusers by embedding the technology into a centralised system that monitors sales and returns activity online and in-store.

Having a singular view of what’s happening and enabling AI to quickly identify any suspicious behaviour across the many transactions helps protect retailers from any abuses slipping through the cracks.

Specifically with returns fraud, an in-store associate or online system can use AI to analyse the details of a returns claim. AI models can identify if a rash of claims is occurring from one address, whether the claims are varied by “Street,” “St.,” or “street,” for example. Alerts can help inform an associate if a return should be looked into or even denied. AI reviews a consumer’s shopping history, loyalty data, credit card information, multiple addresses and more, hunting for anomalies or questionable behaviours in a claim.

Going further into actual incidents of shoplifting, Gen AI technology can help loss prevention teams at retailers to investigate criminal groups. For instance, teams can use Gen AI for natural-language queries that help link multiple theft reports, potentially connecting incidents to one larger ORC ring. The technology can also help retailers collaborate with law enforcement and build stronger cases against ORC offenders.

Retail insights that close the gaps on shrink

When retailers use AI to support their centralised returns and transaction systems, it also serves as an insight tool to uncover areas of retail loss the company may not have noticed.

Even beyond theft, a retailer can leverage AI to analyse why a certain product is frequently being returned. Loss prevention teams can rule out crime and learn that the item is getting damaged during shipping, advising them to strengthen the packaging.

During tight financial times, sales leaks must get plugged and preventing or catching retail criminals can reduce losses. AI can support a retailer’s operation and help ease the squeeze on profit margins.