Retail shrink—the loss of inventory due to theft, fraud, damage or administrative error—is a persistent and costly challenge for the industry. In 2022, U.S. retailers lost an estimated $112.1 billion to shrink. Traditional tactics like in-store security and employee training are no longer enough, especially in large, high-traffic environments. At the same time, global manufacturing and complex supply chains have made inventory tracking more difficult than ever.
To protect margins and improve operational oversight, retailers are increasingly turning to technology. Below, members of Forbes Technology Council share tech-based solutions that can help minimize shrink. From smart surveillance to real-time inventory tracking, these tools enable businesses to detect, prevent and respond to shrink-related issues with greater speed and accuracy.
“Retailers can minimize shrink by applying identity-based access controls to inventory systems, ensuring only authorized employees can access or modify stock data. Leveraging digital twins to model user access and continuously monitor activity helps detect privilege misuse, suspicious patterns or unauthorized changes, helping to prevent losses before they escalate.” – Craig Davies, Gathid
1. AI-Powered Computer Vision Systems
AI-powered computer vision systems can analyze customer behavior patterns through video camera data. They process visual data to detect anomalies, improve checkout systems and ensure smooth operations, allowing stores to deliver safer, more efficient environments. This approach is particularly effective in large retail footprints where traditional monitoring is most challenging. – Dr. Jason Corso, Voxel51
2. Facial Recognition Paired With Real-Time Alerts
Retailers should partner with law enforcement agencies to gain access to criminal data. Through the integration of AI-powered monitoring via cameras and facial recognition, stores can identify high-risk individuals as soon as they enter and send real-time alerts to law enforcement agencies when there is a high probability of theft. The usage of data insights can enable stores to proactively prepare better. – Sanath Chilakala, NTT Data
3. Item-Level Inventory Intelligence Systems
Knowing what’s happening outside the store allows retailers to zoom out and assess their entire supply chain to address total retail loss. By implementing item-level inventory intelligence systems that track products from source to store, retailers gain valuable insights to identify shrink drivers. Understanding these causes enables tailored strategies that reduce losses and improve efficiency. – Tony D’Onofrio, Sensormatic Solutions
4. Real-Time Tracking Systems Like RFID
Retail companies can use modern inventory management systems enabled by real-time tracking capabilities, such as RFID (Radio Frequency Identification). These systems provide real-time tracking of inventory items, along with associated predictive data analytics. – Arnab Mukhopadhyay, VNS Health
5. On-Device AI Models
A smart, often overlooked solution is placing edge AI right at the shelf. These small, on-device models can spot quick grabs, bulk handling or unusual activity, even without cameras. When synced with planograms, they quietly flag trouble early, fast and privately. – Joseph Olorunyomi, Accomplishr
6. Advanced Analytics To Diagnose Trends
The use of advanced analytics helps retailers identify and quantify shrinkage trends at both the store and key factor levels. Once trends are identified, relevant business cases can be developed for implementing controls—such as vision recognition, training, process improvements and other technologies. These measures can then be put in place to mitigate the quantified shrinkage in a way that closely aligns with the ROI of the technologies deployed. – Gladwin Mendez, GEC Prudentia
7. Advanced Demand Forecasting
One tech-based strategy retail companies can implement to minimize shrink is advanced demand forecasting using AI and machine learning. By accurately predicting customer demand, retailers can optimize inventory levels, reducing overstock and stockouts. This minimizes losses from expired or unsold products and lowers risk by maintaining tighter control over merchandise. – Gaurav Mehta, JPMorgan Chase
8. Video Process Monitoring
Deploy AI-powered video monitoring of key processes, not just people. Monitor stock levels in real time, trigger alerts for unusual shelf behavior, detect customer patterns like shoplifting or stock hoarding, and even track operational compliance. The goal is broader: Make shrink a solvable, measurable process issue, not just a security one. – Gabriel Gonzalez, Edenred
9. Shrink Dashboards
Equip staff with AI-powered shrink dashboards that gamify detection, offering micro-incentives for flagging potential shrink events. When real-time alerts are paired with a point-based reward system, floor employees become active participants in loss prevention, driving engagement and vigilance without adding overhead. – Jagadish Gokavarapu, Wissen Infotech
10. Supply Chain And Receiving Verification Systems
Implementing AI-driven supply chain and receiving verification systems can help minimize retail shrink. AI analyzes shipment data and visual scans upon arrival to detect discrepancies, missing items or damaged goods, addressing losses from vendor fraud or transit issues before merchandise reaches the sales floor. – Pradeep Kumar Muthukamatchi, Microsoft
11. Checkout Monitoring Systems
One low-friction way to tackle shrink is by using AI to quietly watch for patterns at checkout, like frequent scan skips or odd item swaps. It’s less about catching someone in the act and more about spotting repeat signals over time. With the right data hooks, you can flag issues before they become losses. Think of it as giving your loss prevention team a smart heads up. – Umesh Kumar Sharma
12. Automated Backend Processes
One impactful strategy can be automating the most repetitive, low-value backend processes. This would free up store associates to take on high-value customer facing tasks. By optimizing demand forecasting, labor scheduling and loss prevention using AI-driven data analytics, we can dramatically reduce shrink and out-of-stock losses. – Balaji Soundararajan, Adroitts
13. Digital Twins Of Retail Environments
One effective tech-based strategy is implementing digital twins of retail environments. By creating a virtual replica of the store that syncs in real time with inventory, point of sale and video data, retailers can simulate and detect anomalies like mismatched scans or product flow inconsistencies before losses occur. It is proactive and scalable, and turns shrink into a solvable data problem. – Sandipan Biswas
14. Automated Backup Of POS And Inventory Data
Implement automated backup systems for point of sale and inventory data. Regular data backups prevent loss from system failures or cyberattacks, ensuring accurate inventory tracking and reducing discrepancies that contribute to shrink. – Chongwei Chen, DataNumen, Inc.
Giving developers knowledge-graph-driven visibility into system identities, access pathways and governance fosters a deeper understanding of dependencies. When developers see how their work affects security and operations, it drives accountability and ownership. This transparency also empowers better decision-making around secure design and risk mitigation. – Craig Davies, Gathid
15. Omnichannel Customer Behavior Analysis
Shrink isn’t just a security issue—it’s a data hygiene one. Retailers can deploy AI to analyze discrepancies between online cart abandonment trends and in-store returns. When synced, these data points can flag patterns of misuse, turning omnichannel behavior into a new line of defense against theft. – Roman Vinogradov, Improvado
16. Identity-Based Access To Inventory Systems
Retailers can minimize shrink by applying identity-based access controls to inventory systems, ensuring only authorized employees can access or modify stock data. Leveraging digital twins to model user access and continuously monitor activity helps detect privilege misuse, suspicious patterns or unauthorized changes, helping to prevent losses before they escalate. – Craig Davies, Gathid
