Retail theft soared in the first half of 2024, with a rate 24% higher in major U.S. cities compared to the same period in 2023, CNN reports. This theft also costs businesses an average of almost $70 billion per year. In response, some retailers have adopted facial recognition technology to curtail theft and associated losses. Facial recognition uses artificial intelligence (AI) algorithms to analyze an individual’s facial features to either confirm or deny their identity — which makes it an easier and effective way to catch known thieves. Although facial recognition promises to crack down on theft (both internal and external), business owners who use the technology should prioritize transparency and consumer privacy to strengthen trust and loyalty with their customer base.
How does facial recognition work?
Facial recognition cameras are installed around the store — with particular focus on high-value products — and capture the facial biometrics of every customer who enters. This data is compared to data stored within a pre-existing database of known offenders. Once a match is made between a person in-store and a criminal on the database, the system sends an alert to the security team. This alert shows where the person is in-store, as well as their real-time and database photo.
Retailers put together their own surveillance databases based on criminals they’ve already caught. So, although it won’t necessarily spot thieves as they commit their first offence in a particular store, once they’re added to the store’s database, the AI will identify them if they enter the store again. It’s also not easy to fool the AI as it still recognizes people who disguise themselves with masks, hats, or facial hair.
The power of video surveillance
With retail theft on the rise, store owners prioritize security now more than ever, and this doesn’t always involve AI adoption. For example, in a large survey of retailers across the U.S., UK, Norway, and Sweden, video surveillance came out on top as the most effective way to prevent theft. 58% of retailers said video surveillance directly led to fewer losses, while 9% said it put a stop to the issue altogether. In particular, cloud video surveillance improves security as store owners can access the live surveillance feed via their smartphones, anytime, anywhere. This means theft or suspicious behavior can be spotted and stopped sooner and with greater success.
AI to put an end to sweethearting
In addition to regular facial recognition tech and video surveillance, Corsight AI, an Israel-based facial recognition company, has also developed technology that catches instances of sweethearting — when employees give unauthorized freebies and discounts to shoppers they personally know. 67% of retail employees and customers in a survey of 800 admitted to sweethearting within the last two months. Shockingly, sweethearting, along with other employee theft, is responsible for 29% of retail inventory losses.
Corisght’s facial recognition technology monitors and analyzes individual interactions between customers and employees over a long-term basis. If a customer has a preference for a specific employee and tends to either stand close to them or always use their check out, this can indicate there’s sweethearting at play. The AI system will spot this and inform the security team who can then decide next steps.
What about privacy?
Facial recognition does, of course, come with real concerns about privacy for customers who generally prefer not to shop under the watchful eye of Big Brother. However, it’s important to note this technology doesn’t monitor and identify all customers, only known criminals who pose a security risk. Facial data is also anonymized and encrypted to preserve customer privacy. As retailers are required by law to inform customers if they use biometric technology, signs should also be displayed in-store to signal facial recognition is in use. In fact, Amazon was sued last year over their alleged failure to do this. Transparency is always the way to go. Let customers know you use the technology and explain how it creates a safer shopping experience for them. This eases concerns and builds trust and credibility.
Facial recognition technology has the potential to combat retail theft in the U.S. and further afield. However, retailers who adopt AI should be upfront about it. When businesses are transparent, people are more likely to accept use of facial recognition and remain loyal customers.
