WEBVTT - Yes, Those Locked Shelves Are as Pointless as You Think

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. It's ninety degrees outside,

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<v Speaker 1>you're sweating from your morning commute and almost late for

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<v Speaker 1>a meeting, so you pop into a Walgreens or a

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<v Speaker 1>CVS to grab a seltzer and just to be safe,

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<v Speaker 1>a little emergency deodorant. But you get slowed down because

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<v Speaker 1>that deodorant is locked up. Trying to get some deodorant,

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<v Speaker 1>I've been waiting three minutes ish.

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<v Speaker 2>You can't even get socks because it's locked Since when

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<v Speaker 2>are soft caramels a controlled substance?

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<v Speaker 1>This is the plight of the modern shopper. If you've

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<v Speaker 1>tried to buy something in person at a retailer like

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<v Speaker 1>Target or CVS in the past few years, you've probably

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<v Speaker 1>noticed that more and more everyday, items from deodorant to

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<v Speaker 1>soft caramels seem to be barricaded behind plastic shields.

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<v Speaker 2>If you're in a location where corporate leadership has decided

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<v Speaker 2>that stuff needs to be locked up in those stores,

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<v Speaker 2>it can be almost anything that you find behind lock

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<v Speaker 2>and key.

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<v Speaker 1>Bloomberg's Amanda Mole has been closely following this retail trend.

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<v Speaker 1>She says it's been around for a while, but it

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<v Speaker 1>really took off in the US in the aftermath of

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<v Speaker 1>the COVID pandemic, But four years later, Amanda says, there's

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<v Speaker 1>little evidence that locking up essentials has done retailers any good.

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<v Speaker 1>And now there's more and more evidence that the practice

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<v Speaker 1>might be backfiring.

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<v Speaker 2>Because when you lock things up, for example, you don't

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<v Speaker 2>sell as any of them. We've kind of proven that

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<v Speaker 2>pretty conclusively.

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<v Speaker 1>That was Walgreen's CEO, Tim Wentworth on an earnings call

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<v Speaker 1>in January. It was a surprising admission because locking up

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<v Speaker 1>items started off as a move that a lot of

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<v Speaker 1>companies adopted as part of a broader fight against shoplifting,

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<v Speaker 1>and now.

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<v Speaker 2>He acknowledged that locking stuff up has hurt the retailer.

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<v Speaker 2>It has reduced sales, It has annoyed customers, it has

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<v Speaker 2>driven people to shop elsewhere.

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<v Speaker 1>So where does that leave shoppers on a busy day?

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<v Speaker 1>Will your body wash stay behind lock and key? Will

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<v Speaker 1>that olay ever see the light of day?

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<v Speaker 2>I had to keep pressing the button of like assistants

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<v Speaker 2>needed for people who's not bad and over and over

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<v Speaker 2>and no one ever came. No one ever came.

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<v Speaker 1>What this is the big take from Bloomberg News. I'm

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<v Speaker 1>Sarah Holder today on the show The Consequences of the

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<v Speaker 1>Retail lock up Era, how the trend caught on, what

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<v Speaker 1>it would take for it to end, and how it's

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<v Speaker 1>already changed the way we shop. When did you first

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<v Speaker 1>start to see items locked up on store shelves?

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<v Speaker 2>Locking up certain types of things in certain types of

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<v Speaker 2>stores goes back to like when I was working at

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<v Speaker 2>best Buy in college in the mid two thousands. There

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<v Speaker 2>has for a really long time been like very particular

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<v Speaker 2>products that are like a high theft risk because they're small,

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<v Speaker 2>they're valuable, they're in high demand. Like what when I

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<v Speaker 2>was there, it was a lot of like PlayStation games.

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<v Speaker 2>Now you see a lot of expensive cell phone accessories,

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<v Speaker 2>sometimes phone chargers, things that are easy to conceal, it

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<v Speaker 2>would be easy to flip these days.

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<v Speaker 1>Amanda covers retail and writes a column about consumer culture

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<v Speaker 1>for Business Week. Since our college days at best Buy

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<v Speaker 1>stores have changed pretty significantly, Amanda says, they're not just

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<v Speaker 1>locking up small expensive electronic products. They're locking up everything.

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<v Speaker 2>At a particular target. I found men's underwear, men's socks,

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<v Speaker 2>all kinds of cleaning products, laundry, dechargent, mops, shampoo, body wash.

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<v Speaker 2>I've seen like shower puffs locked up, which costs like

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<v Speaker 2>a dollar. Sometimes you walk down a certain aisle and

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<v Speaker 2>the entire aisle on both sides is fully encased in

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<v Speaker 2>plexiglass and locked. So the average value of stuff being

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<v Speaker 2>locked up is on a lot of these aisles less

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<v Speaker 2>than ten dollars.

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<v Speaker 1>Amanda says this age of retail lockups, where anything and

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<v Speaker 1>everything is fair game, took off in earnest coming out

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<v Speaker 1>of the pandemic.

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<v Speaker 2>In twenty twenty one, I wrote about what I called

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<v Speaker 2>at the time the Great Shoplifting freak Out, which was

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<v Speaker 2>this sort of like generalized media panic about what they

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<v Speaker 2>termed as like increased rates of theft from retail stores.

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<v Speaker 2>There were like a couple of videos that went viral showing,

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<v Speaker 2>you know, groups of people rushing into there was a

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<v Speaker 2>nordstream in California. There are a couple like famous videos

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<v Speaker 2>of this, and that all got sort of spun into

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<v Speaker 2>this idea that retailers are at the mercy of the

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<v Speaker 2>sort of lawless public. And if you think about what

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<v Speaker 2>twenty twenty one was like in the US, there was

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<v Speaker 2>like a real sense of general unease coming out of

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<v Speaker 2>the pandemic, and people being nervous about going out again,

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<v Speaker 2>and a lot of people got really used to shopping online,

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<v Speaker 2>so it tapped into this like generalized anxiety about the

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<v Speaker 2>outside world.

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<v Speaker 1>Whether this shoplifting panic was backed up by concrete evidence

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<v Speaker 1>Amandas says is another story.

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<v Speaker 2>There's not a lot of good data available on theft rates.

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<v Speaker 2>Often these numbers are released by industry lobby groups and

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<v Speaker 2>people who are trying to demonstrate a phenomenon that they

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<v Speaker 2>believe is happening. From surveys that ask retail management how

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<v Speaker 2>they feel about shoplifting, how they feel about certain types

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<v Speaker 2>of product loss as a threat to their business, it

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<v Speaker 2>is very squishy.

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<v Speaker 1>Feelings are a lot different than numbers.

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<v Speaker 2>Yes, they're asking about perception instead of asking for proof.

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<v Speaker 1>These stores do keep tabs on what they call shrinkage.

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<v Speaker 2>Which is the industry term for inventory that's lost and

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<v Speaker 2>cannot be sold for any cause. And that can be

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<v Speaker 2>cargo theft, it can be employee theft, it can be shoplifting.

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<v Speaker 2>It can be checkout errors, it can be paperwork errors.

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<v Speaker 2>It can be missed delivery. You get spoilage damage kind

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<v Speaker 2>of like the cost of doing business right. You can

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<v Speaker 2>lose inventory in like a zillion ways. But like over

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<v Speaker 2>the past like fifteen or twenty years, the shrink rate

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<v Speaker 2>in US retail is like pretty stable. That generally hovers

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<v Speaker 2>at about one point five percent. So if you are

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<v Speaker 2>a retailer, on average, you're going to lose about one

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<v Speaker 2>and a half percent of your sellable inventory to something

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<v Speaker 2>that is like sort of beyond your control.

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<v Speaker 1>So that shrink rate hasn't changed much. It's a similar

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<v Speaker 1>amount of inventory lost over the last few decades. But

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<v Speaker 1>Amanda says, what has changed is the number of employees

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<v Speaker 1>stocking the shelves.

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<v Speaker 2>Something that's really important to understand about retail stores in

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<v Speaker 2>the US, especially retailers that sell sort of like low dollar,

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<v Speaker 2>everyday essential types of things, drug stores, big box stores,

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<v Speaker 2>is that they are almost entirely, like woefully understaffed. It

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<v Speaker 2>is really hard to staff these stores because the jobs

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<v Speaker 2>themselves just aren't very good. They don't pay very well,

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<v Speaker 2>their hours are not predictable, you're on your feet all day,

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<v Speaker 2>you may or may not get benefits. So retailers are understaffed,

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<v Speaker 2>and over the years, retailers have cut staffing even further,

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<v Speaker 2>and that is like sort of an ideological thing, like

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<v Speaker 2>retailers really love to reduce labor costs, and that after

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<v Speaker 2>a certain point just means having fewer workers. So when

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<v Speaker 2>you get to that point, it becomes really hard to

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<v Speaker 2>manage a store.

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<v Speaker 1>Well.

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<v Speaker 2>So what retailers have done is sort of retrofit stores

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<v Speaker 2>with systems that mean in their minds that they can

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<v Speaker 2>run a store with fewer employees. That's what self checkout is,

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<v Speaker 2>and that's what these locked up shelves.

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<v Speaker 1>Are, and that great shoplifting freak out of twenty twenty one.

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<v Speaker 1>Amanda says, it just helped justify these sorts of measures.

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<v Speaker 2>If retailers can't and won't hire more people, then what

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<v Speaker 2>they're going to have to do is justify the sort

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<v Speaker 2>of externalities of these staffing choices. So you lose the

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<v Speaker 2>essential functions of the store, and more of the labor

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<v Speaker 2>of running the store is put on the customer. And

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<v Speaker 2>it's really convenient to have sort of an external threat

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<v Speaker 2>that has forced you to do these things rather than

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<v Speaker 2>your own management decisions that has forced you to do

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<v Speaker 2>these things.

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<v Speaker 1>That's so interesting. So basically stores stopped hiring people at

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<v Speaker 1>the same rate to do the work of actually staffing

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<v Speaker 1>these stores, helping people with check out and keeping an

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<v Speaker 1>eye on things, making sure people weren't stealing goods. And

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<v Speaker 1>so instead of hiring more people, they installed more plexiglass.

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<v Speaker 2>Yes, and when you do that, you get some.

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<v Speaker 1>Externalities, externalities that you're probably familiar with.

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<v Speaker 2>You press the button, nobody comes. She pressed the button again.

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<v Speaker 2>You know, it's been five minutes, ten minutes. You got

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<v Speaker 2>to go back to work. You're on your launch break.

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<v Speaker 2>You just leave.

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<v Speaker 1>Social media is filled with angry customers complaining that locked

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<v Speaker 1>shells have ruined their shopping experience.

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<v Speaker 2>It took me fifteen minutes to get somebody to come

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<v Speaker 2>over to like get some laundry soap.

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<v Speaker 1>This turned into like a thirty minute or deal just

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<v Speaker 1>to get facial cleanser.

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<v Speaker 2>It is one of the fundamental building blocks of like

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<v Speaker 2>modern life in the United States that these stores work,

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<v Speaker 2>and when they stop working, people get really mad because.

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<v Speaker 1>You want to hop in, get your toothpaste and leave right.

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<v Speaker 2>It is a situation in which something that should be easy,

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<v Speaker 2>something that has been easy for decades, becomes totally unworkable.

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<v Speaker 1>How have shoppers reacted to these changes.

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<v Speaker 2>They've reacted by moving their consumption of these items to

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<v Speaker 2>a different retailer. So it's been a boon for grocery

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<v Speaker 2>stores because a lot of them carry these same goods,

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<v Speaker 2>and it's been a big boon for online retailers.

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<v Speaker 1>It's hurting retail employees too. We are good at reducing

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<v Speaker 1>all kinds of shrink, not just elusive shoplifters, but self

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<v Speaker 1>checkout issues and paperworkers, tracking shipments that arrive with only

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<v Speaker 1>nineteen bars of soap instead of twenty.

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<v Speaker 2>The retail employees that I've talked to sort of uniformly

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<v Speaker 2>hate this system. Your employer is making you run around

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<v Speaker 2>like a chicken with your head cut off to unlock

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<v Speaker 2>cabinets of moisturizer or whatever. So you're forcing out people

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<v Speaker 2>who are your best workers in most cases, and you're

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<v Speaker 2>just going to lose product in like so many different ways.

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<v Speaker 2>The store is going to leak like a sieve.

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<v Speaker 1>So customers aren't happy, employees aren't happy, and company's bottom

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<v Speaker 1>lines are taking a hit too. More on that and

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<v Speaker 1>what they're doing about it after the break. On top

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<v Speaker 1>of alienating customers and annoying employees, locked up shelves at

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<v Speaker 1>retail stores have not exactly been good for business.

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<v Speaker 2>I think Walgreens and CBS in particular, If you look

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<v Speaker 2>at their financial results over the past few years, like

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<v Speaker 2>it's not been great. They are two companies in a

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<v Speaker 2>situation where they really do need to figure out how

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<v Speaker 2>to gain back some customer loyalty and encourage more foot

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<v Speaker 2>traffic into their stores and things like that.

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<v Speaker 1>Amanda says the first domino to fall was Walgreen's CEO

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<v Speaker 1>Tim Wentworth's submission on an earnings call that this policy

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<v Speaker 1>had hurt sales, that locking things up made them harder to.

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<v Speaker 2>Buy, because when you lock things up, for example, you

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<v Speaker 2>don't sell as many of them. We've kind of proven

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<v Speaker 2>that pretty conclusively.

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<v Speaker 1>How big was that to hear that from him?

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<v Speaker 2>It was huge. This is a topic that retailers do

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<v Speaker 2>not want to talk about because they know that the

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<v Speaker 2>general public hates this, and so hearing a CEO of

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<v Speaker 2>one of the main culprits in this phenomenon say like, hey,

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<v Speaker 2>we understand that this is bad, that this is not

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<v Speaker 2>a benefit to customers, that something's got to give here,

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<v Speaker 2>that we are turning away shoppers, it was one of

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<v Speaker 2>the few rare public acknowledgments that, like, this system is bad,

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<v Speaker 2>we got to figure out something else to do here.

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<v Speaker 1>In March, Walgreens agreed to a sale. It will go

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<v Speaker 1>private after years of shrinking profit margins and a volatile

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<v Speaker 1>stock price. Slumping retail sales didn't help. It's not the

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<v Speaker 1>only company that's looking closer at its lock up strategy.

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<v Speaker 1>A few weeks after that Walgreen's earnings call came news

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<v Speaker 1>from CBS.

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<v Speaker 2>CBS announced that it was expanding a pilot program that

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<v Speaker 2>it had been running quietly in a couple of New

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<v Speaker 2>York City stores. What it does is allow people the

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<v Speaker 2>CVS Health app on their phones to unlock certain cabinets themselves.

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<v Speaker 2>Do you think it'll work well? I think that the

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<v Speaker 2>theory is that they're going to have your name, your information,

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<v Speaker 2>like you're a known quantity to them, So it takes

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<v Speaker 2>an element of anonymity out of opening those shelves and

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<v Speaker 2>could potentially be a way to move the middleman, which

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<v Speaker 2>is the employee with the big key ring, out of

0:12:26.760 --> 0:12:29.559
<v Speaker 2>these transactions in a way that like helps the store

0:12:29.640 --> 0:12:30.880
<v Speaker 2>run a little bit more smoothly.

0:12:31.320 --> 0:12:35.240
<v Speaker 1>It's not quite removing the locked shells altogether, but Amanda

0:12:35.280 --> 0:12:38.240
<v Speaker 1>says it's essentially a way to walk back the policy

0:12:38.640 --> 0:12:41.360
<v Speaker 1>and put more control in consumers' hands.

0:12:41.840 --> 0:12:45.160
<v Speaker 2>I think that they understand that they have like overcorrected

0:12:45.360 --> 0:12:49.199
<v Speaker 2>or gone too far in like how these programs were

0:12:49.200 --> 0:12:52.360
<v Speaker 2>implemented and they can't like fully walk them back.

0:12:52.200 --> 0:12:54.880
<v Speaker 1>Because it's just too expensive to rip up your work.

0:12:54.960 --> 0:12:58.760
<v Speaker 2>It's too expensive, and also it signals failure, like you

0:12:58.880 --> 0:13:02.520
<v Speaker 2>have to sort of present to the investing public, like

0:13:02.880 --> 0:13:06.080
<v Speaker 2>the idea that like, oh, like the numbers aren't great,

0:13:06.160 --> 0:13:08.520
<v Speaker 2>but this is working, because if you rip all that

0:13:08.559 --> 0:13:10.640
<v Speaker 2>stuff out, then people have other questions.

0:13:11.080 --> 0:13:14.000
<v Speaker 1>CBS appears to be doubling down on its app based

0:13:14.120 --> 0:13:17.440
<v Speaker 1>unlocked system. A company spokesperson told us they plan to

0:13:17.480 --> 0:13:21.360
<v Speaker 1>introduce it in other communities this year. On social media,

0:13:21.640 --> 0:13:24.360
<v Speaker 1>people have raised privacy concerns about the data the app

0:13:24.400 --> 0:13:28.000
<v Speaker 1>collects because it requires customers to sign in to use it.

0:13:28.800 --> 0:13:32.560
<v Speaker 1>CBS said it quote complies with all applicable regulations to

0:13:32.600 --> 0:13:36.360
<v Speaker 1>protect customer information. For customers who prefer not to scan

0:13:36.440 --> 0:13:40.360
<v Speaker 1>the app, assistance is available to unlock the merchandise. So

0:13:40.440 --> 0:13:43.360
<v Speaker 1>we're not necessarily going to see our locked up socks

0:13:43.440 --> 0:13:47.840
<v Speaker 1>unleashed overnight, but not because keeping them behind plexiglass is

0:13:47.840 --> 0:13:49.520
<v Speaker 1>the best way to deter theft.

0:13:49.800 --> 0:13:52.200
<v Speaker 2>The best way to deter theft like this has been

0:13:52.240 --> 0:13:54.680
<v Speaker 2>studied is to properly staff your stores to make people

0:13:54.720 --> 0:13:57.199
<v Speaker 2>who might be thinking about stealing something feel like they're

0:13:57.240 --> 0:13:59.320
<v Speaker 2>going to be seen, They're going to be caught, that

0:13:59.400 --> 0:14:02.199
<v Speaker 2>they cannot go in there undetected and walk out with

0:14:02.240 --> 0:14:02.920
<v Speaker 2>whatever they want.

0:14:04.080 --> 0:14:06.480
<v Speaker 1>What do you think the future of shopping might look like?

0:14:06.600 --> 0:14:09.640
<v Speaker 1>At places where these lockups have been so central.

0:14:09.720 --> 0:14:14.559
<v Speaker 2>Stores in that arena are probably going to feel more

0:14:14.559 --> 0:14:17.640
<v Speaker 2>and more like vending machines. I went to a retail

0:14:17.679 --> 0:14:20.400
<v Speaker 2>conference recently where like there was a lot of exhibitors

0:14:21.000 --> 0:14:25.640
<v Speaker 2>with third party vendors that sell like technology solutions for

0:14:25.880 --> 0:14:28.800
<v Speaker 2>automating more things within stores that make it possible for

0:14:28.840 --> 0:14:31.600
<v Speaker 2>a customer to unlock something themselves, that makes it easier

0:14:31.600 --> 0:14:35.160
<v Speaker 2>to track customers in stores and identify people that do

0:14:35.240 --> 0:14:38.880
<v Speaker 2>all of the stuff. That seems to be bent toward

0:14:39.400 --> 0:14:42.800
<v Speaker 2>automating a lot of these things or putting more things

0:14:42.880 --> 0:14:48.160
<v Speaker 2>on the customer's plate to do themselves. I think there's

0:14:48.200 --> 0:14:50.320
<v Speaker 2>been like a re estimation of the value of like

0:14:50.360 --> 0:14:52.320
<v Speaker 2>a good in store experience and a lot of other

0:14:52.360 --> 0:14:54.600
<v Speaker 2>types of retailers, and I think this has been a

0:14:54.600 --> 0:14:57.800
<v Speaker 2>pretty effective cautionary tale because like the level of ire

0:14:58.040 --> 0:15:02.000
<v Speaker 2>and the level of anger that is directed toward retailers

0:15:02.080 --> 0:15:06.040
<v Speaker 2>that do this, and the level of like grudge holding

0:15:06.200 --> 0:15:09.040
<v Speaker 2>that people will do against these retailers, I think has

0:15:09.080 --> 0:15:12.240
<v Speaker 2>been instructive for other retailers to say, all right, we

0:15:12.320 --> 0:15:13.120
<v Speaker 2>know what not to do.

0:15:16.600 --> 0:15:19.520
<v Speaker 1>This is the Big Take from Bloomberg News. I'm Sarah Holder.

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