A number of major retailers have complained about increased theft and have been taking increasingly severe steps to deal with the issue.
Walgreens, for example, has been testing stores where most items are behind security counters. Customers essentially order what they want via tablets or their phones and store personnel bring them their orders.
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That's a sort of extreme version of the locked cases you see to varying degrees at most pharmacy chains. Target (TGT) -) and Walmart (WMT) -) use variations of that tactic at many stores while Walmart is taking the extreme step of literally putting a police station in a new Atlanta store.
Increased theft has also been a side effect of many chains moving to self-checkout as the dominant form of checkout. Not having staffers check out customers has generally led to a rise in both intentional theft and accidental loss.
Broadly, theft — or shrinkage as the industry calls it — has even led to some retailers considering pulling out of certain markets.
Lowe's (LOW) -) Chief Executive Marvin Ellison proposes, however, a simple solution to the retail-theft problem.
Image source: Scott Olson/Getty Images
Lowe's offers a simple solution to theft
Speaking at the 30th annual Goldman Sachs Global Retailing Conference, Ellison said his company had not faced the same shrinkage/theft issues as many other retailers had been complaining about. The CEO was asked directly about shrink toward the end of his question-and-answer session.
"It's one of the areas of the business that we're most pleased with. As a major big-box retailer, you're right, we're one of the few who've not flagged shrink as something that is having a material impact on gross margin or operating profit," Ellison said.
That success, he declared, did not come by accident.
"We've invested quite a bit of technology at different parts of the business in front of the customer and behind the scenes to help us to manage this, and we take a unique and differentiated way," he said.
Ellison shared that technology and security are not what is keeping Lowe's theft rates down.
"Having spent my entire adult life in retail, at every level, the one thing that I understand clearly is that the greatest deterrent for any theft activity is effective customer service and making sure that you have the right type of merchandising display," he said.
Lowe's "from a margin rate standpoint" saw no major negative impact from theft, the executive said.
Lowe's CEO Ellison says service prevents theft
While Lowe's uses technology to prevent theft, Ellison made clear that having people on its store floors helping customers leads to less theft. Lowe's had a roughly 1% shrink rate in its most recent quarter, which is below industry averages.
"Our margin rate was up year-over-year, and we had very strong operating-margin performance. And we don't anticipate that shrink is going to be a material negative impact to our business for the balance of this year," Ellison added.
The CEO called his company's results "a differentiated performance relative to the other major retailers." But he also quietly placed blame on retailers like Target, Walmart and Walgreens (WBA) -) for simply not investing in the people needed to serve customers.
Simply paying workers well -- Lowe's is a the higher end of the wage scale for retailers in many markets -- and training them leads to lower levels of shrink, according to Ellison. Fewer people trying to steal also enable the company's security team to operate more efficiently.
"We have a dedicated asset-protection team that I think is best-in-class in retail," Ellison said. "They have great partnerships with law-enforcement communities and the like. And we spend a lot of time on associate training."
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