Personal care and sweetness products under lock and key?

That’s becoming increasingly common place in mass merchandisers and specialty beauty retailers across the country, with on a regular basis items like body wash, shampoo and toothpaste safeguarded securely behind locked plexiglass windows in lots of stores and the likes of Ulta Beauty preparing to lock fragrance in cabinets in 70 percent of stores by the top of the 12 months.

That’s because some retailers are reporting that inventory shrink — the difference between a balance-sheet inventory and actual stock that is commonly blamed on organized retail crime — is putting increased pressure on operating margins, with beauty being one of the affected categories, along with electronics, video games, smart phone accessories, and power tools, in line with UBS.

Most recently, Ulta cut its forecast for its operating margin from 14.7 to fifteen percent to 14.5 to 14.8 percent, with chief executive officer Dave Kimbell telling analysts that “just like what other retailers have shared, we continued to see pressure from inventory shrink this quarter and we’ve updated our full-year guidance to reflect the persistence of this trend.”

Goal Corp., which is home to tons of of Ulta’s shops-in-shop, has also highlighted the difficulty. In May, it said it expects inventory shrink will reduce this 12 months’s profitability by greater than $500 million compared with last 12 months, while a lot of other firms, including Walmart Inc., Walgreens and CVS, have highlighted the difficulty, too.

But as retailers grapple with easy methods to cope with inventory shrinkage, it seems there’s multiple root cause.

Each Ulta and Goal stressed that while shrink could be a results of a lot of aspects, they consider organized retail crime and theft are increasingly concerning challenges, with Ulta stating that it has seen “a rise in violence and aggression during these incidents.”

Then, in a recent note by UBS analysts based on their conversation with an anonymous former manager of asset protection and risk mitigation at a significant retailer, the expert stressed that while an increase in organized retail crime, or ORC, has been a significant driver of shrink, excessive deal with this “risks underestimating the magnitude of loss through the availability chain and in operations.”

In response to the note, shrink was relatively stable pre-pandemic, but supply chain bottlenecks and redirected staffing over the previous couple of years created an ideal storm for shrink to rise.

Although its figures haven’t been updated recently, the National Retail Federation’s 2022 National Retail Security Survey showed that while ORC was the most important component of shrink in 2021, there have been a lot of reasons behind the trend.

When taken as a percentage of total retail sales in 2021, inventory shrinkage accounted for $94.5 billion in losses last 12 months, up from $90.8 billion in 2020. External theft, including ORC, accounted for 37 percent; worker/internal theft 28.5 percent; process/control failures 25.7 percent; unknown loss 7.7 percent, and other sources 1.2 percent.

“The difficult piece could be very few firms are supplying you with actual explicit figures,” said Olivia Tong, an analyst at Raymond James, noting the exception of Goal which has provided more detailed numbers. “However it’s [shrink] becoming an even bigger issue and it’s more violent.”

In relation to organized retail crime, retailers have been tackling the difficulty in other ways. Kimbell, for one, has stated that “given the complexity, it should take collaboration across retail, manufacturing, law enforcement and legislative levels to resolve these problems.” As a part of its strategy, in addition to the aforementioned locking up of fragrance, Ulta can also be investing in security guards, and partnering with landlords to seek out solutions.

Goal has stressed that it’s investing to guard its team and guests, in addition to installing fixtures to guard merchandise and adjusting its assortment in affected stores.

Walgreens, meanwhile, recently unveiled a newly designed store in downtown Chicago where aside from two aisles, all goods are accessed via a kiosk, although a spokeswoman stressed that this was more about testing technology.

“We’re testing a latest experience at this store with latest concepts, technologies and practices to reinforce the experiences of our customers and team members. It can proceed to supply retail products and pharmacy services, just with a latest appear and feel that focuses on shopping digitally for convenience,” she said.

What’s more, during an earnings call in January, Walgreens’ global chief financial officer James Kehoe said the corporate could have previously overstated the situation.

“Possibly we cried an excessive amount of last 12 months once we were hitting numbers that were 3.5 percent of sales. We’re down within the lower twos, call it, the mid-2.5, 2.6 sort of range now,” he said. “And we’re stabilized. But we’ve spent a good amount, and that may very well be one in all the disconnects in SG&A. We’ve put in incremental security within the stores in the primary quarter.”

He even stated that it could have done an excessive amount of, but from the actions it has taken, it could see that law enforcement has been way more effective than employing security firms.

Regardless of the reasons behind this trend, as retailers across the U.S. proceed to face the difficulty to various degrees, the usnote suggested that AI ought to be a part of the long-term solution.

“The expert believes that retailers must make substantial investments moderately than spending minimally on solutions equivalent to padlocks and off-duty officers which have already been in place for many years, and work with third-party providers which are on the forefront of leveraging AI and existing surveillance infrastructure to deploy revolutionary technologies that mitigate pain points and flag shrink risks,” the usnote said. It added that RFID is a vital technology that affords true item visibility that may address supply chain-related shrink.

Human intervention is important, too, and increased staffing is required as shrink monitoring technologies are only effective insofar as they flag risk, it said, but with reports of accelerating violent incidents, that is a sophisticated issue for retailers.

Tong agreed it was a tricky needle to string in stores. “You are attempting to attenuate a disruption to the patron experience while also protecting them and your product.”