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Amazon Briefing: Why locked-up merchandise in stores may be good news for Amazon 

This is the latest installment of the Amazon Briefing, a weekly Modern Retail+ column about the ever-changing Amazon ecosystem. More from the series →

For the past year or so, a bevy of retailers have sounded the alarm on theft in their stores. 

The word “shrink” — an industry term referring to the overall loss of inventory for a variety of reasons, including shoplifting — dominated earnings calls. Executives at companies like Target, Ulta and Home Depot blamed organized theft at their stores for ballooning shrink levels and weaker earnings. Retailers responded with beefed-up security, investments in anti-theft technology, locked-up merchandise and in extreme cases, store closures. 

But in doing so, retailers may have unintentionally driven up sales at their biggest rival: Amazon.

In the first four months of the year, American consumers have increasingly shopped online, with internet sales rising 7% to about $331 billion compared to last year, according to a report from Adobe. The same report found that online grocery sales were up nearly 16% year-over-year, a sign that frustrated shoppers are turning to delivery services to circumvent pesky security glass. Online sales for cosmetics, a category that accounts for a large chunk of locked-up merchandise, helped bolster growth, as well, rising 8% over the same period a year ago.

Meanwhile, Amazon’s e-commerce businesses saw sales of more than $54 billion in the most recent quarter, a 7% jump from the same period a year ago.

Meanwhile, major retailers put up safeguards to prevent in-store theft.

If this latest earnings season is any indication, executives on conference calls are striking a more positive chord than they did a few quarters ago when it comes to shrink, with several touting various anti-theft strategies. 

Home Depot, which locked up some merchandise and invested heavily in anti-theft technology, said it’s “thrilled with the early results,” even though retail shrink is “still a problem.” Target said it expects shrink rates to “plateau” this year after it estimated that crime-related losses would jump by $500 million last year. More negatively, Walgreens said shrink continues to be a “systemic issue across the retail industry” after the company saw retail sales fall 6% in the first quarter. Ulta locked up some goods last year and later said that the strategy curbed theft.

All told, tighter security in stores seems like a win for brick-and-mortar retailers plagued by theft. But while anti-theft measures may deter dishonest shoppers, consumers who don’t want to wait for employees at understaffed stores to unlock item after item may turn to online shopping instead, including Amazon, retail experts told Modern Retail. That could come at a steep cost to retailers that lack robust e-commerce operations. And even if they do have an online web store, that doesn’t mean price-conscious shoppers will pony up. As stubborn inflation motivates consumers to compare prices, shoppers may find a cheaper product elsewhere and take their business there instead. 

Anti-theft maneuvers such as locked merchandise is nothing new. It’s typical to find pricier items like electronics behind security glass. But these days, it’s much more widespread, as retailers increasingly put everyday, inexpensive items like shampoo and toothpaste under lock and key.

“It becomes a major headache to have to go around asking for everything to be unlocked,” said Neil Saunders, managing director of GlobalData. “Most people will just say, ‘You know what, that’s too much of a hassle. I can go online, order these things, and have them delivered to me at home.’” 

Indeed, retail giant Target, which has previously discussed investments in numerous anti-theft strategies, including locked merchandise, recently saw a drop in brick-and-mortar store sales as foot traffic declined, according to the retailer’s latest earnings. Meanwhile, digital sales rose. 

Target isn’t alone. In addition to locking items up, Home Depot has invested in technology to combat retail theft, including shopping carts that lock when customers haven’t paid and license-plate-recognition cameras in parking lots. Earlier this month, Home Depot posted first-quarter earnings results that saw sales fall for the sixth consecutive quarter. Convenience stores Walgreens and CVS have likewise put more items behind security glass amid falling sales.

To be sure, there are other drivers behind lagging retail revenues. Inflation has shoppers trading down to cheaper goods and spending less on discretionary products, according to executives on earnings calls. Higher interest rates also makes financing bigger purchases more costly.

“It’s not all because of locking things up, but it’s part and parcel of making the store experience difficult for customers,” said Saunders. 

Sky Canaves, an analyst at eMarketer, said online sales of personal health and beauty products, in particular, have been growing at a rapid clip in recent years. On Amazon, sales of such products are rising even more quickly. In 2023, eMarketer forecasts showed Amazon’s sales of personal care products rising about 28%, outpacing the growth of overall e-commerce personal care sales, which climbed 17%. In 2024, personal health and beauty product sales should rise another 15% on Amazon. 

“This is a category that Amazon has really focused and prioritized growth for,” said Canaves. On top of that, the e-commerce giant is delivering goods faster than ever before, making it an increasingly attractive option for consumers, she added. 

Indeed, Amazon has courted more personal care brands to its platform. For example, Kiehl’s Since 1851 announced last week that it would start selling on Amazon’s online marketplace, joining other brands like Clinique and Coach that also expanded into Amazon. Kiehl’s products are sold in specialty stores like Ulta, which said a year ago that it would lock up some merchandise to curb theft. 

The top five best-selling product categories for Amazon’s U.S. sellers last year included health, personal care, beauty and grocery, according to a report published by Amazon earlier this month. In an interview, Dharmesh Mehta, vice president of worldwide selling partner services at Amazon, said a few factors – competitive prices, assortment and delivery times – give Amazon a competitive edge over brick-and-mortar retail, buoying the growing popularity of such products on its online marketplace. He said he hadn’t seen anything that “explicitly” connected the dots between anti-theft measures and stores and heightened online sales. 

“That combination of pricing, selection and speed is quite powerful,” said Mehta. “We’ve made big investments in those areas that customers are seeing over the last few years.”

Amazon news to know

  • Returning products on Amazon have “gone to hell,” according to The Atlantic.
  • Amazon Fresh is slashing its prices, following in the footsteps of Target and Walmart.
  • A U.S. judge has denied Amazon’s request to dismiss the FTC’s case against it.

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