Retail Reduced – April 2024

In recent years, organised retail crime, cybersecurity breaches, and fraudulent activities have become enormous threats to retailers. According to the report for financial technology platform Adyen by the Centre for Economic Business and Research (CEBR), more than a third of UK businesses fell victim to fraudulent activity, cyber-attacks or data leaks over the last 12 months costing retail businesses an average of £1,394,518. Meanwhile, 33% of consumers became a victim of fraud in 2023, losing an average of £311.09.

There are several reasons for the rise in suspected digital fraud, including the fact social media has grown as a platform for communication and commerce between consumers and brands. Increasingly, consumers turn to social media to seek new, trending products and experiences but these sales opportunities are coupled with heightened risk. Adyen chief operating officer Roelant Prins said:

“Criminals are deploying more sophisticated methods when they attack businesses, including the application of AI, and it’s therefore critical to invest in the right defence mechanisms to protect the company and customers.“

So how can retail businesses protect themselves against fraud?

Tokenisation for sensitive data

Sensitive data is exported and transferred to a third-party to transform payment information into a unique token. If systems are hacked, cybercriminals will encounter tokenisation protocols which make the data unusable.

Multi-layered authentication

More businesses are requiring customers to verify their identity during the payment process to add an extra layer of security to transactions.

Real-time fraud detection

Companies are adopting advanced technologies to effectively identify suspicious transactions, including artificial intelligence to detect unusual transaction patterns, multiple accounts associated with a single device, and anomalies in customer behaviour. AI’s ability to analyse vast amounts of data can enhance a business’ detection system but these algorithms require training using historical data to reduce false positives and it is strongly recommended it is supplemented with human expertise.

Collaborative risk management

Seamless management of the challenges presented by cybercriminals demands collaborative risk management and the sharing of insights and intelligence across networks.

Whilst the retail industry continues to flourish online, business operations remain vulnerable to cybercrime because of the immense financial data stored and processed. Failure to safeguard can lead to significant financial and legal consequences.

In February the British Retail Consortium (BRC) published its 2024 Crime Survey which revealed that violence and abuse against retail workers soared in 2023, with the number of incidents rising to 1,300 per day in 2022/23 from almost 870 per day the year before. Such incidents against retail workers include racial abuse, sexual harassment, physical assault, and threats with weapons.

Occurrences of shoplifting have also risen, with trade bodies, including the Association of Convenience Stores, the BRC, and the British Independent Retails Association, launching the campaign ‘Stop Shop Theft’, which calls on the Police and Crime Commissioners to take a tougher stance on retail crime. Given the statistics, some retailers have decided to take matters into their own hands, with supermarkets such as Lidl, Co-op and Sainsbury’s (to name a few) investing millions into body-worn cameras to protect staff from assaults and anti-social behaviour. The BRC has previously reported a significant reduction in incidents within stores equipped with body-worn cameras, with a 45% decrease in incidents of theft and violence compared to non-equipped stores.

In response to the growing issue, it was confirmed this month that a new team within Opal, the national policing’s intelligence unit for serious and organised acquisitive crime, will soon begin the process of gathering, scoping and analysing information about organised retail crime groups as part of the government’s plan to combat shoplifting. The team, funded by the Pegasus partnership, launched in 2023 by PCC Katy Bourne, is rolling out training to retailers and police forces to support them in understanding Opal’s role and how to refer to intelligence which can then be analysed and explored on a national scale.

On 10 April, in what can only be described as a long-awaited decision, Rishi Sunak announced that assaulting a shopworker is to be made a separate criminal offence in England and Wales in a clampdown on the surge in shoplifting. The government will introduce the new offence in its Criminal Justice Bill, which includes a £55.5 million pledge in facial recognition technology and £4 million for bespoke mobile units to identify those repeat offenders wanted by the police.

The announcement has been welcomed, with BRC’s chief executive Helen Dickinson confirming: “It will improve the police response, which has historically been poor, as police will now have the necessary data to understand the scale of the problem and allocate sufficient resource to address this issue. Government has taken action, and it is vital that the police use this new legislation to step up their response to incidents”.

The bill is currently being considered by Parliament; we will keep you posted….

Foot Anstey, in partnership with Retail Trust, is working hard to support retailers to make stores safe places to work through our award winning Retailers Against Harassment Certification | Foot Anstey. The proposed new law is a welcome measure to address the most serious incidents of retail crime but the societal issue of verbal and threatening behaviour persists and requires continued vigilance to tackle and manage it.

First, Tesco changed their Meal Deal to £3.90 (or £3.40 with a Clubcard) to the outcry of the public. Then came the ‘Applejuiceification’ scandal with many supermarket juice drinks revealed to contain at least 50% apple juice, despite not advertising ‘Apple’ in the name. Finally, Sainsbury’s revealed a yogurt no longer counts as a ‘snack’ but is classed as a main.

Picking a main, drink, and snack each day used to be a fun part of the day with the food deal being the embodiment of good value. But since the COVID-19 pandemic, the average cost of a Meal Deal at five of the biggest retailers has gone up by 21%.

Food is one of the hardest-hit categories during this period of high inflation in the UK. Prices increased by a record-breaking high of 19.1% in March 2023, and whilst recently this figure has dropped, many across the UK have expressed a concern that amidst the cost-of-living crisis they will be unable to afford food. Especially because lower inflation does not necessarily indicate prices are dropping but that they are rising slower.

There has also been pressure on supermarkets to contend with rising business costs and pursue pricing strategies which remain competitive but manage inflationary pressures.

But it’s not only economic factors affecting food prices. Rising global temperatures and extreme and unpredictable weather are impacting the productivity of the agriculture industry around the world. An Energy and Climate Intelligence Unit (ECIU) report claimed that energy costs and climate change have pushed up food bills by an average of £605 over the past two years [in the UK], with climate change driving 60% of that increase.

Measuring the impact of climate change on specific goods, International Water Association research suggested that a 1°C increase in temperature could cause a 5% decline in global tea production, whilst regions of West Africa responsible for growing 75% of the world’s cocoa beans have been severely impacted by harsh weather patterns.

Whilst the trusty Meal Deal clings on as the friend of the cost-conscious consumer, it is a useful indication of the cost-of-living crisis and other external pressures impacting the UK food industry.

In a bid to make fashion more circular, second-hand platform Depop has recently announced that it will remove selling fees for UK users. The move will see the company ditch its 10% selling charge for newly posted listings. Last year saw Depop’s community grow from 17% to a total of 35 million registered users and has given more than 25 million products a second life since 2021. Chief executive Kruti Patel Goyal expressed:

“Our mission is to make fashion circular. We want to encourage as many people as possible to choose second-hand instead of new. With more and more people now looking at resale as an alternative to retail, we want to amplify the impact of our growing community by continually finding ways to make it easier to participate in the circular economy”.

Circular fashion concerns the entire life cycle of a product and refers to a method within the fashion industry that aims to create a closed-loop system, which reduces waste and maximises the lifespan of clothing and textiles.

Most recently eBay scrapped charges for buyers and sellers of pre-owned clothing in an effort to keep items out of the landfill and “put more cash in their pockets while supporting circular fashion”. The company’s latest research revealed that 70% of people wear 50% or less of their wardrobe in daily life. The analysis also showed that 92% have more than one item of clothing in their wardrobe that they have not worn in the past year.

The fee shake-up comes as the European Environment Agency recently reported that the fashion industry is estimated to be responsible for 10% of global carbon emissions – more than international flights and maritime shipping combined.

Kirsty Keoghan, general manager of global fashion, has said:

“Free fashion selling has come at the right time for a nation sitting on billions of pounds worth of unwanted clothes. By encouraging more people to buy and sell pre-loved clothing, we’ll keep more clothes out of landfill as we collectively enable a circular economy for fashion”.

Eyes are now turning to Vinted, which has not changed its sellers’ fees in eight years…