LPRC - CrimeScience Episode 40 – COVID-19 and Retail’s Forecast ft. Tony D’Onofrio

Episode Date: April 1, 2020

This episode will cover global retail lessons, how  COVID-19 affects LP/AP, transformational strategies, and the retail forecast for the rest of 2020. Also included are upcoming LPRC initiatives and the resources the research team will provide to help retailers and practitioners, hosted by Dr. Read Hayes (LPRC), featuring Tony D’onofrio (TD Insights). The post CrimeScience Episode 40 – COVID-19 and Retail’s Forecast ft. Tony D’Onofrio appeared first on Loss Prevention Research Council.

Hi, everyone. Welcome to Crime Science. In this podcast, we aim to explore the science of crime and the practical application of the science for loss prevention and asset protection practitioners, as well as other professionals. Co-host Dr. Reid Hayes of the Loss Prevention Research Council and Tom Meehan of ControlTech discuss a wide range of topics with industry experts, thought leaders, solution providers, and many more. This episode will cover global retail lessons from COVID-19, how it affects LPAP, transformational strategies, and the retail forecasts for the rest of 2020. Also included are upcoming LPRC initiatives and the resources the research team will provide to help retailers and practitioners during this time. We would like to thank Bosch for making this episode possible. Use Bosch Camera's onboard intelligent video analytics to quickly locate important recorded incidents or events. Bosch's forensic search saves video analytics to quickly locate important recorded incidents or events.

Bosch's forensic search saves you time and money by searching through hours or days of video within minutes to find and collect video evidence. Learn more about intelligent video analytics from Bosch in Zones 1 through 4 of LPRC's Zones of Influence by visiting Bosch online at boschsecurity.com. Welcome, everybody, to a special edition of Crime Science, the podcast brought to you from Gainesville, University of Florida, from LPRC. Today, I'm joined by our colleague and member of the LPRC Board of Advisors, Tony D'Onofrio. Tony, this is a special COVID-19, the pandemic episode. We wanted to kind of move somewhat quickly through a few topics here. But I wanted to kind of go to you first. What are you seeing globally as COVID-19 lessons learn that are transforming retail? And are there retailers that were already kind of ready because what they were doing or how do you look at that? So how is it transforming

retail? Well, Reid and team, thank you very much. Always a pleasure to be working with the Loss Prevention Research Council, a leader really in the industry moving forward. So I follow retail and technology very closely. And one of the markets that I follow is actually China. And to me, China really is already post-peak. So there are some good lessons to be learned by looking at the China market and how they went through it in the retail space. So, for example, during peak, China had nearly 760 million people that were in some form of lockdown. The way retail responded really is an example for the rest of the world. And I don't call it retail.

It's actually new retail. And new retail was a term that was coined by the founder of Alibaba, Jack Ma. And really what he was talking about is bridging the physical and the digital. And what you saw in China during the crisis is the online market really stepping up. And what people really don't really know is that China's market is already very huge. It's about online market is about $2 trillion already, roughly, or 35% of overall retail sales. And what you saw is Alibaba and JD.com really stepping up to things like aggressive rollout of contactless delivery

solutions in lockers and designated pickup areas. They even offered as part of the pickup, actually telling you what the temperature of the courier was and what the temperature of the restaurant worker that prepared the goods were to make sure you knew that they actually were safe. They deployed robots and drones to actually deliver goods, to also sanitize streets and to monitor streets. And then Alibaba was already aggressively opening stores, physical stores, which again tells you that stores are not going to go away and they're critical. And those stores are really a fulfillment center,

especially for fresh goods. So within 30 minutes, you can get your fresh goods from our Alibaba Fresh Hippo store. They charter buses. They did all kinds of things to aggressively, from a new retail point of view, respond. And as a result, they saw tremendous growth. So, for example,

JD.com had 3x the growth of their normal operation. And they benefited from one final technology, which is the ability to do mobile pay. So, for example, 577 million people in China already have mobile pay. So, they already had the ability to pay contactless. So all those were ways that a country like China was able to respond aggressively. Good stuff, Tony. And it is interesting. That's an example, not only a country, we know there are vast differences between what we can and probably cannot do in the United States versus China with some of the containment protocols that we saw in actual action.

But there are a lot of lessons learned that we can or that we can adjust and adapt to. And the same thing, of course, with the retailing and what Ma and others have been doing. Let me go to another question here. Are there any USA retailers that you can point to that have adopted some similar transformational strategies? What does that look like? Well, actually, I can give you two to start, but I'm sure there are a lot more. But what you see right now, and we can talk about later if there is time, what you see is certain sectors of retail actually are doing well, and there are certain sectors that are not. And I'm not giving an example of each.

For example, the sector that is not doing as well is really apparel. In the apparel space, you have a retailer like Nike. And just to give you an idea of what Nike did in China and how it's transformational, Nike in China was forced to close all stores. But what they did is they ramped up their Nike expert training online apps, which allowed consumers to stay engaged with the brand. And they saw that actually activity during the lockdown on the apps went up 80%.

Well, that activity on the apps for training led to more engagement on the commerce side of online apps. And as a result, they saw their digital business in China go up 30%. And that really momentum continues as China went through its peak. And then on the other side, they started reopening stores. So right now, which tells you that there is good news out of all this, 80% of all Nike stores have been reopened in China and more are coming online every day.

So that's an example of a retailer, global retailer that's based out of the US really succeeding with a digital strategy. The other to me is Walmart. You look at Walmart really was positioned well because they had made that transition to the buy online, pick up in stores aggressively, which again is ideal during the crisis to be able to the buy online, pick up in stores aggressively, which again is ideal

during the crisis to be able to provide those goods, both from a services point of view, and also if you wanted to go to the physical stores. But the buy online, pick up in store was really an advanced change that was required with COVID-19. And I think those are just two examples, and there are many more. That's interesting. I heard a podcast the other day on China, and they were talking about how China certainly seems to be rapidly recovering. People are back to work. Part of it were so many were state-owned enterprises that ordered people not to be laid off. So they're back. They're buying, they're doing things. But what they're finding is they can churn out a thousand shoes a minute or whatever their productivity is post COVID-19? And maybe what's that going to do to impact the LPAP field? So actually, this is one that's been on my mind a lot. And I've been actually studying this

closely. And I've actually started doing some videos and some blogs about it. But to me, the new normal is going to be transformational. I think this pandemic is a really once-in-a-lifetime moment in time where things are not going to look the same when it's over because it's so dramatic, the changes. And I'll give you one example. Prior to this crisis, we were all thinking about the millennials and the Gen Xers as being the digital first,

and they were going to drive the future of retail through the smartphones and so on. Well, you saw my 90-year-old father in Italy ordering groceries and having them delivered. So what you're seeing is cross-generational changes being adopted in terms of how retail commerce gets done. So what you're going to see out of this is people are going to really rethink how we shop, how we travel, how we study, how we get entertained. There's all kinds of changes already. And so what that's going to really do is accelerate this whole digital to physical transformation, really demonstrated by the examples that we just talked about,

about Nike and normal, Nike and Walmart. So to me, really retail is going to continue to change with this digital to physical. In terms of loss prevention, I think this is really an ideal time for loss prevention. I think they're going to become much more important. The reason they're going to become much more important is because really digital retail is designed to decrease friction. Loss prevention has to find ways to increase friction, increasingly using new technologies. And I think if they step up to that, it's really the golden era for the function. It's also very, very important for groups like the Loss Prevention Research Council to stay engaged and really leverage to figure out which

technologies really can be optimized to do fast fail experiments. So the science-based approach that loss prevention deliver is critical. In terms of the, in general, I think the loss prevention folks really need to focus on both open and closed stores. They need to leverage more automation where possible. So have, for example, things like GPS track assets and let the assets tell you when there's an issue, use artificial intelligence, computer vision to identify problem areas and escalate. So there's different ways that loss prevention can respond. But leveraging loss prevention counsel to me is critical because that gives you the knowledge and the information to actually move where retail is going next and be ready for it.

Good insights, Tony. I really appreciate it. We'll talk a little bit about LPRC Innovate. And fortunately, it's been a year in planning and then now a year in bringing up the capability to speed. But it looks like most of those four clusters we'll talk about might overlay where you're talking about. You talked about frictionless, but we're talking about digital. We're talking about omni-channel. We're talking about. You talked about frictionless, but we're talking about digital. We're talking about omni-channel. We're talking a lot more about different transactions, pickups and deliveries and how returns work and things like that, even paying without touching anything and so forth. So these things seem to play well. One more thing.

It's sort of like in college football sometimes talk about way too early polls, but how about retail forecasts for the COVID-19 impact on global retail? What's that look like? What are those dynamics, do you think? Well, actually, I'm glad you asked that question because very timely to this podcast, that question because very timely to this podcast. It was a new survey issue last week in terms of retail and where retail ends up. It was an issue that March 25th, a new forecast. And what the forecast said is that, first of all, there is going to be a dramatic impact because of this. Worldwide, based on the previous forecast, retail is projected to drop by $711 billion. Against actuals of 2019, the drop is really going to be $171 billion. But a lot of that is because what you have now as a result of COVID-19 is the have and the have-nots. And by that, I mean,

is there are certain sectors in retail that actually are going to continue to do well because they are providing vital goods to the consumers. And then there are sectors that are going to struggle. So I'll pivot to North America. And for example, in North America,

the four sectors that are going to do really well to this crisis short term are food and grocery, drugstores, super centers, and mass merchandisers. As an example, grocery initially had a growth forecast for the year of 3%. As a result of this crisis, they're going to go up 11%. So they're going to go up 11%. And you can see that across the board for those four sectors. The ones that are going to struggle the most are especially soft goods. They're going to drop from a forecast about 18%. Department stores are going to drop 20%. And bars and restaurants are going to drop 13%. So what you'll have is, again, retail sectors really on the food

and the necessity sides and the drugs really doing the best, and then you're going to have the soft goods struggling. This forecast was based on really COVID-19 lasting about three months, still uncertain how long it really lasts, but there is going to be uncertainty out there. The other good news, I think, for North America is that North America and Asia are best positioned to recover much more quickly. Europe is actually the region that will struggle to actually come back. In fact, they have the largest loss across the board of all the other regions, followed by Latin America. So good news from Asia and North America point of view. You can see some of that again in China, where those sectors are coming back aggressively.

Good insights again. I appreciate that, Tony. And what I want to do for the LPRC membership and other listeners out there is a quick update. And we'll start doing more frequent updates via podcast and webinars. And by the way, we've got a webinar today, which is March 31st, a Tuesday. And Kenna Carlson, our research team leader, is presenting on how these types of crises provide cover and opportunity for fraudsters in different ways and some of the research that her and others on our team have been conducting. But we've got a few really interesting research projects that continue. We're looking at the impression of control from the home residents through community travel,

of course, as you approach a parking lot, enter it, approach a store front or door entry and so on. We're using eye trackers. We're excited about that because we can use two types of eye trackers, one that are mobile, that also we can leverage our shimmer that records other body responses. So now we don't just watch or listen for responses to our questions. We can also observe what we're looking at, what our subjects or participants are looking at, what their emotions are telling us and things like that to triangulate. We're using VR pretty heavily,

so we've got another set of eye trackers that work inside of our Vive or in other VR goggles or units. Our simulation lab, same thing. We've stood up more capability. We have all kinds of 3D imagery. You can be inside the Sim Lab where it's moving in that environment. And because the camera we're using is so tiny, the same thing with microphones,

that it doesn't really interfere with normal process in there. And it's really, really fascinating to be in the middle of all that going on, as well as other high-res imagery in there. And then what we can do in stores. So you can see this kind of pathway where we can use screens, we can go and use virtual reality, we can use the simulation or immersion cave space, and then we can refine what we're working on and how it's creating impressions on the green shopper, those that we want there working and purchasing, and the red shopper, those we don't want there, and transition out into the normal environment, parking lots, stores, distribution centers, or offices. Right now, we're, of course,

confined to research in parking lots. We're not inside of stores or offices right now or DCs. You'll see that we'll talk a little bit about Innovate in a minute. The LPRC website, starting this Thursday, April 2nd, please look for, when you go to lpresearch.org, lpresearch.org, you will see a COVID-19 landing page that Kevin Tran and team have stood up. That'll be, I think, a pretty strong resource for everybody to go to for links to all types of things, as well as participate in our surveys, find what they need through LPRC and the research team here. Look for other webinars beyond the fraud webinar that's coming up right now. We've got a few of those planned, more crime science, short episodes like the one that Tony and I are doing right now

that are 10 to 20 minute podcasts where you'll be seeing, we'll be talking about, again, the fraud issues, other theft and violence or intimidation issues. We're debriefing people on line queuing and spacing and how this pandemic is affecting all kinds of dynamics. You'll see we're going to be putting some tours out there via webinars where you can at least visually go through and look at and explore our LPRC Innovate 4 labs that we now have. The ideation lab, the simulation lab, the activation lab, and then finally, and just as critically, the engagement lab. And so that's a little bit about what LPRC is doing. We also have conducted our first retailer cluster call. We had a call

with some of the leading fuel and convenience store chain LPAP leaders. Amazing call. A lot of sensitive information, a lot of sharing about what they're confronted with, what they're dealing with, how they're dealing with it, what they're seeing as a response, their partnerships with law enforcement and others, their partnerships within their own organizations, and now with each other. Look for four more cluster calls coming up next week, food and drug. We've got a ton of chains as members here, over 60, almost 70 retail chains. So we've got a lot of food and drug. We've got a lot of department store masks. We've got a lot of department store masks. We've got the third call will be small box and mall specialty retailers. And then the fourth

will be the big box specialty retailers. So those cluster calls, if they go anything like the first one that we had, the fuel and C-store cluster call will be pretty amazing. So if you're an LPRC member, please reach out to Kevin at lpresearch.org or Diego at lpresearch.org or come to our website and find out more. A little bit on LPRC Innovate, the four research and development clusters have been established with our LPRC Innovate advisory panel, especially the core team there, but they are connected community. All the sensors, computing power, and decision advantage we can create for the leaders at places and spaces online or physical to make better decisions. Connected store, similar concept, but how do we completely wire in all the information

that that store leader and his or her team need in that place to provide a lot better service as well as better protection. You'll see also we're working heavily on smart transaction, we call it. That's where we're looking at buy online, pick up in store, buy online, return in store, smart checkout, self-checkout, different ways, including mobile. And then finally, secure experience or safe and secure. How do we make sure that and do a better job as retailers in providing a much safer, more secure, healthier workplace and shopping environment? So those are the four R&D cluster areas. And as Tony mentioned before, huge opportunity to leverage AI deep learning concepts, particularly with computer vision. That's going on here and now. We're remotely

connected, for example, and studying as part of smart transaction, working with Bosch and AI on the Edge at a giant store, looking at as you move the buy online return or pickup in store, what kind of dynamics is that creating? How can we leverage that? So look forward to sharing a lot more about LPRC Innovate with Logan Brown on our team and then with some of the core team members, including Tony. Strategy at, which is for the LPR, excuse me, the LPAP leaders out there. This will be our third year. Right now, LPRC strategy at and impact are scheduled for the first week in October. for the first week in October. As of now, physically, we are now moving full steam ahead.

We've got nine exciting learning lab breakouts based on research. We've got all kind of main stage activity and so forth, but we are fully prepared and moving in parallel that all are part of LPRC impact and even strategy at could be online and virtual. We're experimenting with some different platforms right now to deliver a lot of learning in a distributed way, given the complete unknowns about retailing, travel, budgets, and everything else, even going into this fall 2020. So, but we're all over that. We've got an amazing LPRC impact planning committee that's put together four in a row now. Just really, really, really, really exciting and I think impactful impact. So more to come on that. Finally, the LPRC's Knowledge Center and our app that you can get on the Apple iTunes or other app platforms, the LPRC app, are, of course, up functional in a lot of neat ways, tying in content from LP Magazine and D&D Daily and other partners, but also have incredible capability.

And the new redesign is coming out very shortly. and the new redesign is coming out very shortly. Finally, last but not least, on the LPRC landing page for the COVID-19, for this SARS-2 virus and the pandemic, we're going to be collecting data and already have started that, looking at how this type of event that is not focused on a storm or riots or other very localized events, but is indeed globally. But what is that doing to affect the theft, fraud, and violence attempts and movements and changes there and offending as you're victimized out there? What are the responses that you all are doing with your team, partnering with others? What do those changes look like? So that's it from the LPRC front as we are completely mobilized and working with you all, our team members. Tony, on behalf of LPRC, Kevin Tran, our producer, I want to thank you for your always incredible insight.

We look forward to coordinating with you on a couple more podcasts coming up here. To the rest of you out there, stay safe, secure, healthy, and please reach out to us at the LPRC at any time. Thank you. Thank you very much. Thank you very much. Pleasure. Thanks for listening to the Crime Science Podcast presented by the Laws Prevention Research Council and sponsored by Bosch Security. If you enjoyed today's episode, you can find more crime science episodes and valuable information at lpresearch.org.

The content provided in the Crime Science Podcast is for informational purposes only and is not a substitute for legal, financial, or other advice. Views expressed by guests of the Crime Science Podcast are those of the authors and do not reflect the opinions or positions of the Laws Prevention Research Council.