Speaker 1: Bloomberg Audio Studios, podcasts, radio news. It's ninety degrees outside,
Speaker 1: you're sweating from your morning commute and almost late for
Speaker 1: a meeting, so you pop into a Walgreens or a
Speaker 1: CVS to grab a seltzer and just to be safe,
Speaker 1: a little emergency deodorant. But you get slowed down because
Speaker 1: that deodorant is locked up. Trying to get some deodorant,
Speaker 1: I've been waiting three minutes ish.
Speaker 2: You can't even get socks because it's locked Since when
Speaker 2: are soft caramels a controlled substance?
Speaker 1: This is the plight of the modern shopper. If you've
Speaker 1: tried to buy something in person at a retailer like
Speaker 1: Target or CVS in the past few years, you've probably
Speaker 1: noticed that more and more everyday, items from deodorant to
Speaker 1: soft caramels seem to be barricaded behind plastic shields.
Speaker 2: If you're in a location where corporate leadership has decided
Speaker 2: that stuff needs to be locked up in those stores,
Speaker 2: it can be almost anything that you find behind lock
Speaker 2: and key.
Speaker 1: Bloomberg's Amanda Mole has been closely following this retail trend.
Speaker 1: She says it's been around for a while, but it
Speaker 1: really took off in the US in the aftermath of
Speaker 1: the COVID pandemic, But four years later, Amanda says, there's
Speaker 1: little evidence that locking up essentials has done retailers any good.
Speaker 1: And now there's more and more evidence that the practice
Speaker 1: might be backfiring.
Speaker 2: Because when you lock things up, for example, you don't
Speaker 2: sell as any of them. We've kind of proven that
Speaker 2: pretty conclusively.
Speaker 1: That was Walgreen's CEO, Tim Wentworth on an earnings call
Speaker 1: in January. It was a surprising admission because locking up
Speaker 1: items started off as a move that a lot of
Speaker 1: companies adopted as part of a broader fight against shoplifting,
Speaker 1: and now.
Speaker 2: He acknowledged that locking stuff up has hurt the retailer.
Speaker 2: It has reduced sales, It has annoyed customers, it has
Speaker 2: driven people to shop elsewhere.
Speaker 1: So where does that leave shoppers on a busy day?
Speaker 1: Will your body wash stay behind lock and key? Will
Speaker 1: that olay ever see the light of day?
Speaker 2: I had to keep pressing the button of like assistants
Speaker 2: needed for people who's not bad and over and over
Speaker 2: and no one ever came. No one ever came.
Speaker 1: What this is the big take from Bloomberg News. I'm
Speaker 1: Sarah Holder today on the show The Consequences of the
Speaker 1: Retail lock up Era, how the trend caught on, what
Speaker 1: it would take for it to end, and how it's
Speaker 1: already changed the way we shop. When did you first
Speaker 1: start to see items locked up on store shelves?
Speaker 2: Locking up certain types of things in certain types of
Speaker 2: stores goes back to like when I was working at
Speaker 2: best Buy in college in the mid two thousands. There
Speaker 2: has for a really long time been like very particular
Speaker 2: products that are like a high theft risk because they're small,
Speaker 2: they're valuable, they're in high demand. Like what when I
Speaker 2: was there, it was a lot of like PlayStation games.
Speaker 2: Now you see a lot of expensive cell phone accessories,
Speaker 2: sometimes phone chargers, things that are easy to conceal, it
Speaker 2: would be easy to flip these days.
Speaker 1: Amanda covers retail and writes a column about consumer culture
Speaker 1: for Business Week. Since our college days at best Buy
Speaker 1: stores have changed pretty significantly, Amanda says, they're not just
Speaker 1: locking up small expensive electronic products. They're locking up everything.
Speaker 2: At a particular target. I found men's underwear, men's socks,
Speaker 2: all kinds of cleaning products, laundry, dechargent, mops, shampoo, body wash.
Speaker 2: I've seen like shower puffs locked up, which costs like
Speaker 2: a dollar. Sometimes you walk down a certain aisle and
Speaker 2: the entire aisle on both sides is fully encased in
Speaker 2: plexiglass and locked. So the average value of stuff being
Speaker 2: locked up is on a lot of these aisles less
Speaker 2: than ten dollars.
Speaker 1: Amanda says this age of retail lockups, where anything and
Speaker 1: everything is fair game, took off in earnest coming out
Speaker 1: of the pandemic.
Speaker 2: In twenty twenty one, I wrote about what I called
Speaker 2: at the time the Great Shoplifting freak Out, which was
Speaker 2: this sort of like generalized media panic about what they
Speaker 2: termed as like increased rates of theft from retail stores.
Speaker 2: There were like a couple of videos that went viral showing,
Speaker 2: you know, groups of people rushing into there was a
Speaker 2: nordstream in California. There are a couple like famous videos
Speaker 2: of this, and that all got sort of spun into
Speaker 2: this idea that retailers are at the mercy of the
Speaker 2: sort of lawless public. And if you think about what
Speaker 2: twenty twenty one was like in the US, there was
Speaker 2: like a real sense of general unease coming out of
Speaker 2: the pandemic, and people being nervous about going out again,
Speaker 2: and a lot of people got really used to shopping online,
Speaker 2: so it tapped into this like generalized anxiety about the
Speaker 2: outside world.
Speaker 1: Whether this shoplifting panic was backed up by concrete evidence
Speaker 1: Amandas says is another story.
Speaker 2: There's not a lot of good data available on theft rates.
Speaker 2: Often these numbers are released by industry lobby groups and
Speaker 2: people who are trying to demonstrate a phenomenon that they
Speaker 2: believe is happening. From surveys that ask retail management how
Speaker 2: they feel about shoplifting, how they feel about certain types
Speaker 2: of product loss as a threat to their business, it
Speaker 2: is very squishy.
Speaker 1: Feelings are a lot different than numbers.
Speaker 2: Yes, they're asking about perception instead of asking for proof.
Speaker 1: These stores do keep tabs on what they call shrinkage.
Speaker 2: Which is the industry term for inventory that's lost and
Speaker 2: cannot be sold for any cause. And that can be
Speaker 2: cargo theft, it can be employee theft, it can be shoplifting.
Speaker 2: It can be checkout errors, it can be paperwork errors.
Speaker 2: It can be missed delivery. You get spoilage damage kind
Speaker 2: of like the cost of doing business right. You can
Speaker 2: lose inventory in like a zillion ways. But like over
Speaker 2: the past like fifteen or twenty years, the shrink rate
Speaker 2: in US retail is like pretty stable. That generally hovers
Speaker 2: at about one point five percent. So if you are
Speaker 2: a retailer, on average, you're going to lose about one
Speaker 2: and a half percent of your sellable inventory to something
Speaker 2: that is like sort of beyond your control.
Speaker 1: So that shrink rate hasn't changed much. It's a similar
Speaker 1: amount of inventory lost over the last few decades. But
Speaker 1: Amanda says, what has changed is the number of employees
Speaker 1: stocking the shelves.
Speaker 2: Something that's really important to understand about retail stores in
Speaker 2: the US, especially retailers that sell sort of like low dollar,
Speaker 2: everyday essential types of things, drug stores, big box stores,
Speaker 2: is that they are almost entirely, like woefully understaffed. It
Speaker 2: is really hard to staff these stores because the jobs
Speaker 2: themselves just aren't very good. They don't pay very well,
Speaker 2: their hours are not predictable, you're on your feet all day,
Speaker 2: you may or may not get benefits. So retailers are understaffed,
Speaker 2: and over the years, retailers have cut staffing even further,
Speaker 2: and that is like sort of an ideological thing, like
Speaker 2: retailers really love to reduce labor costs, and that after
Speaker 2: a certain point just means having fewer workers. So when
Speaker 2: you get to that point, it becomes really hard to
Speaker 2: manage a store.
Speaker 1: Well.
Speaker 2: So what retailers have done is sort of retrofit stores
Speaker 2: with systems that mean in their minds that they can
Speaker 2: run a store with fewer employees. That's what self checkout is,
Speaker 2: and that's what these locked up shelves.
Speaker 1: Are, and that great shoplifting freak out of twenty twenty one.
Speaker 1: Amanda says, it just helped justify these sorts of measures.
Speaker 2: If retailers can't and won't hire more people, then what
Speaker 2: they're going to have to do is justify the sort
Speaker 2: of externalities of these staffing choices. So you lose the
Speaker 2: essential functions of the store, and more of the labor
Speaker 2: of running the store is put on the customer. And
Speaker 2: it's really convenient to have sort of an external threat
Speaker 2: that has forced you to do these things rather than
Speaker 2: your own management decisions that has forced you to do
Speaker 2: these things.
Speaker 1: That's so interesting. So basically stores stopped hiring people at
Speaker 1: the same rate to do the work of actually staffing
Speaker 1: these stores, helping people with check out and keeping an
Speaker 1: eye on things, making sure people weren't stealing goods. And
Speaker 1: so instead of hiring more people, they installed more plexiglass.
Speaker 2: Yes, and when you do that, you get some.
Speaker 1: Externalities, externalities that you're probably familiar with.
Speaker 2: You press the button, nobody comes. She pressed the button again.
Speaker 2: You know, it's been five minutes, ten minutes. You got
Speaker 2: to go back to work. You're on your launch break.
Speaker 2: You just leave.
Speaker 1: Social media is filled with angry customers complaining that locked
Speaker 1: shells have ruined their shopping experience.
Speaker 2: It took me fifteen minutes to get somebody to come
Speaker 2: over to like get some laundry soap.
Speaker 1: This turned into like a thirty minute or deal just
Speaker 1: to get facial cleanser.
Speaker 2: It is one of the fundamental building blocks of like
Speaker 2: modern life in the United States that these stores work,
Speaker 2: and when they stop working, people get really mad because.
Speaker 1: You want to hop in, get your toothpaste and leave right.
Speaker 2: It is a situation in which something that should be easy,
Speaker 2: something that has been easy for decades, becomes totally unworkable.
Speaker 1: How have shoppers reacted to these changes.
Speaker 2: They've reacted by moving their consumption of these items to
Speaker 2: a different retailer. So it's been a boon for grocery
Speaker 2: stores because a lot of them carry these same goods,
Speaker 2: and it's been a big boon for online retailers.
Speaker 1: It's hurting retail employees too. We are good at reducing
Speaker 1: all kinds of shrink, not just elusive shoplifters, but self
Speaker 1: checkout issues and paperworkers, tracking shipments that arrive with only
Speaker 1: nineteen bars of soap instead of twenty.
Speaker 2: The retail employees that I've talked to sort of uniformly
Speaker 2: hate this system. Your employer is making you run around
Speaker 2: like a chicken with your head cut off to unlock
Speaker 2: cabinets of moisturizer or whatever. So you're forcing out people
Speaker 2: who are your best workers in most cases, and you're
Speaker 2: just going to lose product in like so many different ways.
Speaker 2: The store is going to leak like a sieve.
Speaker 1: So customers aren't happy, employees aren't happy, and company's bottom
Speaker 1: lines are taking a hit too. More on that and
Speaker 1: what they're doing about it after the break. On top
Speaker 1: of alienating customers and annoying employees, locked up shelves at
Speaker 1: retail stores have not exactly been good for business.
Speaker 2: I think Walgreens and CBS in particular, If you look
Speaker 2: at their financial results over the past few years, like
Speaker 2: it's not been great. They are two companies in a
Speaker 2: situation where they really do need to figure out how
Speaker 2: to gain back some customer loyalty and encourage more foot
Speaker 2: traffic into their stores and things like that.
Speaker 1: Amanda says the first domino to fall was Walgreen's CEO
Speaker 1: Tim Wentworth's submission on an earnings call that this policy
Speaker 1: had hurt sales, that locking things up made them harder to.
Speaker 2: Buy, because when you lock things up, for example, you
Speaker 2: don't sell as many of them. We've kind of proven
Speaker 2: that pretty conclusively.
Speaker 1: How big was that to hear that from him?
Speaker 2: It was huge. This is a topic that retailers do
Speaker 2: not want to talk about because they know that the
Speaker 2: general public hates this, and so hearing a CEO of
Speaker 2: one of the main culprits in this phenomenon say like, hey,
Speaker 2: we understand that this is bad, that this is not
Speaker 2: a benefit to customers, that something's got to give here,
Speaker 2: that we are turning away shoppers, it was one of
Speaker 2: the few rare public acknowledgments that, like, this system is bad,
Speaker 2: we got to figure out something else to do here.
Speaker 1: In March, Walgreens agreed to a sale. It will go
Speaker 1: private after years of shrinking profit margins and a volatile
Speaker 1: stock price. Slumping retail sales didn't help. It's not the
Speaker 1: only company that's looking closer at its lock up strategy.
Speaker 1: A few weeks after that Walgreen's earnings call came news
Speaker 1: from CBS.
Speaker 2: CBS announced that it was expanding a pilot program that
Speaker 2: it had been running quietly in a couple of New
Speaker 2: York City stores. What it does is allow people the
Speaker 2: CVS Health app on their phones to unlock certain cabinets themselves.
Speaker 2: Do you think it'll work well? I think that the
Speaker 2: theory is that they're going to have your name, your information,
Speaker 2: like you're a known quantity to them, So it takes
Speaker 2: an element of anonymity out of opening those shelves and
Speaker 2: could potentially be a way to move the middleman, which
Speaker 2: is the employee with the big key ring, out of
Speaker 2: these transactions in a way that like helps the store
Speaker 2: run a little bit more smoothly.
Speaker 1: It's not quite removing the locked shells altogether, but Amanda
Speaker 1: says it's essentially a way to walk back the policy
Speaker 1: and put more control in consumers' hands.
Speaker 2: I think that they understand that they have like overcorrected
Speaker 2: or gone too far in like how these programs were
Speaker 2: implemented and they can't like fully walk them back.
Speaker 1: Because it's just too expensive to rip up your work.
Speaker 2: It's too expensive, and also it signals failure, like you
Speaker 2: have to sort of present to the investing public, like
Speaker 2: the idea that like, oh, like the numbers aren't great,
Speaker 2: but this is working, because if you rip all that
Speaker 2: stuff out, then people have other questions.
Speaker 1: CBS appears to be doubling down on its app based
Speaker 1: unlocked system. A company spokesperson told us they plan to
Speaker 1: introduce it in other communities this year. On social media,
Speaker 1: people have raised privacy concerns about the data the app
Speaker 1: collects because it requires customers to sign in to use it.
Speaker 1: CBS said it quote complies with all applicable regulations to
Speaker 1: protect customer information. For customers who prefer not to scan
Speaker 1: the app, assistance is available to unlock the merchandise. So
Speaker 1: we're not necessarily going to see our locked up socks
Speaker 1: unleashed overnight, but not because keeping them behind plexiglass is
Speaker 1: the best way to deter theft.
Speaker 2: The best way to deter theft like this has been
Speaker 2: studied is to properly staff your stores to make people
Speaker 2: who might be thinking about stealing something feel like they're
Speaker 2: going to be seen, They're going to be caught, that
Speaker 2: they cannot go in there undetected and walk out with
Speaker 2: whatever they want.
Speaker 1: What do you think the future of shopping might look like?
Speaker 1: At places where these lockups have been so central.
Speaker 2: Stores in that arena are probably going to feel more
Speaker 2: and more like vending machines. I went to a retail
Speaker 2: conference recently where like there was a lot of exhibitors
Speaker 2: with third party vendors that sell like technology solutions for
Speaker 2: automating more things within stores that make it possible for
Speaker 2: a customer to unlock something themselves, that makes it easier
Speaker 2: to track customers in stores and identify people that do
Speaker 2: all of the stuff. That seems to be bent toward
Speaker 2: automating a lot of these things or putting more things
Speaker 2: on the customer's plate to do themselves. I think there's
Speaker 2: been like a re estimation of the value of like
Speaker 2: a good in store experience and a lot of other
Speaker 2: types of retailers, and I think this has been a
Speaker 2: pretty effective cautionary tale because like the level of ire
Speaker 2: and the level of anger that is directed toward retailers
Speaker 2: that do this, and the level of like grudge holding
Speaker 2: that people will do against these retailers, I think has
Speaker 2: been instructive for other retailers to say, all right, we
Speaker 2: know what not to do.
Speaker 1: This is the Big Take from Bloomberg News. I'm Sarah Holder.
Speaker 1: The show is hosted by Me, David gera Wan Ha
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