Crime at retail pharmacies has made headlines for several years. Stories of armed robberies and overnight break-ins driven by the need for cash, substance abuse, or the desire for profit from black-market sales of prescription narcotics appear at a steady pace across every region of the country.
Whether the financial losses come from organized retail crime, petty shoplifters or dishonest employees, pharmacies are having to strategize on how to minimize losses. And while crime at pharmacies, known for their expensive over-the-counter drugs and high-value consumer goods, is no new phenomenon, inventory shrinkage—or the amount of product that cannot be accounted for due to clerical error, damage or theft—is at an all-time high.
According to the 2020 National Retail Security Survey, which covers 2019 data for retailers in all categories, inclusive of pharmacies, inventory shrinkage hit an all-time high of 1.62%, up from 1.38% in 2018. That translated to $61.7 billion in losses to retailers, compared to $50.6 billion in 2018.
For pharmacy owners, the danger from violence and the threat of liability claims and property loss have caused many to increase security training and loss prevention staffing. But even the most sophisticated security measures cannot fully address the concern without inconveniencing, and sometimes irritating, honest shoppers.
New data and analytics tools are paving the way for pharmacies to contend with the financial implications of theft. One of the tools making waves with insurers and retail pharmacy owners is hyper-local crime data that pairs criminal activity with spatial data to generate a better understanding of the risk, at a micro level, that a specific property faces.
Depending on the provider, the data may reveal past, current, and future crime risk, including organized retail crime activity in the surrounding area. For example, CoreLogic Neighborhood Scout enables retailers to see a location-specific picture of overall crime risk, with drill-down capabilities into crime categories that include robbery, assault, homicide, rape, burglary, theft, motor vehicle theft, and vandalism.
The risk scores recalculate every 30 feet to provide a precise view of risk that changes as you move to a new address, even within the same block. Analyzing trends over several years helps users visualize a larger and evolving picture over time, showing the ebb and flow of crime risk in a region.
And commercial insurance companies are adopting these tools to better support the specific needs of the industry. Insurers get a much clearer understanding of the risk related to each store location. By aligning insurance rates to the relative level of risk in an area, insurance companies can improve their underwriting margins while pharmacies receive the benefit of minimized premiums and financial support in the event of a loss.
In short, insurers are better able to set rates by having a clearer understanding of crime data and trends around pharmacy locations, and insured pharmacies tracking the same crime data and trends are more equipped to take actions that lower exposure to crime and help keep their insurance rates from rising.
Retail pharmacy owners can also benefit from this intelligence. By pairing internal loss data with an understanding of the frequency and nature of crime risk surrounding a location, owners can make informed decisions, including:
Crime data and trends can also offer owners insights into siting new stores and determining which stores to close or repurpose.
Looking forward, the effects of the COVID-19 pandemic in 2020 may have reversed inventory shrinkage across the retail industry. With many businesses forcibly closed in the course of lockdowns, and the volume of online shopping up, the rates of unaccounted for inventory may dip—but how this changes loss amounts for drugstores, deemed essential businesses, remains to be seen.
Still, the incidence of inventory shrinkage will never be completely eliminated. As the United States begins to open back up and vaccination rates increase, it will be interesting to see how consumer behavior—and consequently, the incidence of crime—has shifted. Crime risk tools will be able to spot the trends and offer quantifiable insights that can help pharmacy owners make informed decisions ahead of time.
Reducing risk to employees and customers is the overriding reason for understanding crime risk, but having access to crime risk data can also provide pharmacy owners actionable insights on how to minimize payments, employ the right tactics to reduce inventory shrinkage and even identify opportunities for new stores.
©2021 CoreLogic, Inc., All rights reserved.