Theft and fraud are perpetual issues in the retail industry, and Lowe’s Cos. Inc. has dedicated resources within its technology hub Lowe’s Innovation Labs to solve the problem with its pilot Project Unlock.

“Across the retail industry, brazen theft inside of stores has been increasing,” says Josh Shabtai, Lowe’s Innovation Labs senior director of ecosystem.

The hardware retail chain is piloting a program called “Project Unlock,” which would work to deter criminals from stealing products at stores and prevent criminals from trying to sell stolen goods online and at other locations.

Theft at stores grows at Lowe’s, across retail industry

For the past decade, Lowe’s has kept a portion of its store products, including pressure washers, outdoor powered equipment, chain saws and power tools, behind a locked gate. If shoppers wanted to purchase one of these items, they would need to find an employee to take it out.

Power tools are often the most stolen items at Lowe’s, Shabtai says, which is why the merchant keeps these products locked up. Power tools have high value and are easy to resell, which makes these items attractive to online marketplaces, Lowe’s says.

The National Retail Federation estimates that theft costs retailers an average of $700,000 for every $1 billion in sales, according to its 2020 organized crime survey of 61 retailers.

While locking products deters criminals from stealing, it also is a negative customer experience, Shabtai says. If a shopper wants to purchase these tools, she has to find an employee to unlock them before she can bring them to the register.

“Putting more of these hurdles in stores makes it harder to sell things, but it makes it difficult for customers to not feel like they are in a super-maximum prison area,” Shabtai says.

But these measures are necessary, as Lowe’s stores have had not only an uptick in theft, but also an uptick in “brazen theft,” Shabtai says. Thieves are not afraid of having a confrontation about stealing an item before walking out of the store, he says.

This is unsafe for Lowes’ employees and shoppers, and its stores challenged the Lowe’s Innovation Labs team to come up with a solution.

This dovetails with data from another NRF survey, in which 26.5% of retailers said they had an increase in organized retail crime in 2021. Plus, 81.2% said the violence and aggression associated with organized retail crime increased in the past year, according to the National Retail Federation’s 2022 National Retail Security Survey, based on a survey of 63 retailers.

Using technology to solve theft with Project Unlock

The two priorities for the theft solution were that it had to be invisible to shoppers, and it had to be low cost.

Lowe’s completed phase one of a pilot called Project Unlock that ticks those boxes with point-of-sale activation and transparent purchase records using blockchain technology. Many of Lowe’s Innovation Labs’ 50 employees have developed this program for about three years, Shabtai says. It piloted the program in six stores with more than 600 of its power tools.

Here’s how it works: Lowe’s is working with its tool manufacturers to embed Radio Frequency Identity (RFID) chips into its power tools. The RFID has the power tool’s unique serial number. This serial number is also on the product’s bar code. When a shopper goes to purchase a tool, the tool will not work until an associate scans that bar code at checkout. Once scanned, Lowe’s has an overhead RFID scanner that will read the serial number RFID chip in the power tool and activate it. The tool will not work unless this activation happens.

Project Unlock: Anti-Theft Technology from Lowe’s Innovation Labs on Vimeo.

This process achieves a few things. If the power tool does not work until it is activated at purchase, it is less valuable for a criminal to steal. In addition, a shopper is not aware that this process is happening, making this anti-theft solution “invisible.”

What’s more, RFID is on the lower-end of cost implementation than other solutions that could achieve the project’s goal, such as Bluetooth. RFID chips are less than $1 per chip compared with Bluetooth technology, which could be $3 to $6. This would considerably increase the cost of the product, Shabtai says, and it would not be a cost Lowe’s would want to absorb or pass on to manufacturers or consumers. RFID scanners, which would be needed in each Lowe’s store, could cost “a few thousands of dollars,” Shabtai says. But, RFID scanners typically have multiple applications, and could be used for other purposes in the store, he says.

RFID also is low-powered, whereas with Bluetooth, the retailer would have to worry about the battery running out, Shabtai says.

This anti-theft solution is similar to a gift card activation, in which shoppers can take gift cards off a shelf, but they do not have value until activated at the cash register.

A purchase record using blockchain to verify product legitimacy

The other piece of this solution is the transparent purchase records.

Although the power tool is deactivated until it is purchased, a criminal could still steal it. While this does make it less valuable to a criminal, the thief could still resell it and hope that the purchaser does not know the tool is deactivated until it’s too late.

To combat this, Lowe’s will put the purchased product’s serial number on a blockchain-encrypted record. Blockchain is an open, distributed internet ledger that can record transactions between two or more parties in a verifiable and permanent way. The purchase is anonymous, and no data is recorded other than the serial number, Lowe’s says.

This record is a consumer-facing website that marketplaces, retailers, manufactures, law enforcement and consumers could use to validate if the product is authentic and not stolen by verifying if it is on this list.

For example, if a marketplace wanted to validate its power tools were authentic, it could verify the product was on this list before allowing the seller to post the product.

Thieves selling stolen goods on marketplaces

While this is a good idea in concept, it may not stop the problem, says Gene Zelek, senior council at law firm at Taft Law. Zelek specializes in antitrust and pricing litigation.

“It’s a nice effort, but it’s cumbersome,” Zelek says. “You are ultimately going to have upset customers who can’t figure out why their tool doesn’t work that they paid for, and they will go back to the marketplace or the manufacturer with a warranty claim.”

It would be nice if marketplaces would verify if their goods are authentic, but many don’t, or only do so on an ad-hoc basis or for a fee, Zelek says.

Based on working with his clients that sell on Amazon.com Inc., Zelek explains how this technology may break down in practice: If a marketplace seller sells a drill and uses Amazon’s Fulfillment by Amazon services, and another marketplace merchant using FBA also sells that same exact drill, all of those products are comingled at the warehouse. This is called random stow, Amazon says. Amazon says once its warehouse receives a product its gives that item a unique barcode that links the product to the seller, even if they are stored together. When a customer purchases an item, the employee will pick and scan the item’s barcode to ensure it is correct product to ship. Zelek says that this is not always done in practice based on issues he has had with clients. If a shopper purchases a legitimate drill from a legitimate seller, an Amazon warehouse worker could pick, pack and ship any one of the drills to the customer, including a stolen drill with the same SKU that a criminal is selling on the marketplace, Zelek says.

If that product is stolen or counterfeit, and the drill has not been activated and it doesn’t work, that shopper is going to call Amazon.com or the manufacturer of the drill. While the product’s barcode could be used to trace which seller the product came from, likely the manufacturer or the marketplace is the one bearing the brunt of the customer service issue, and it will be on them to make the situation right, Zelek says.

Because of this, it may be hard to get manufacturers on board with this concept of product activation, Zelek says. While manufacturers don’t want to encourage stolen goods, this problem is on the retailer to secure their own merchandise, Zelek says.

Project Unlock is a long-term, tech-forward plan to counter an ongoing theft problem

Lowe’s has not announced any tool manufacturers that have officially signed onto this project with embedding RFID chips into products, Shabtai says.

Even with allowing consumers to look up if their product is legitimate before purchase, it sounds too complex, Zelek says.

Right now, Project Unlock is still in testing mode. Lowe’s knows it may not be the perfect solution to solve theft at stores and fraud. But it knows that there are likely better options than locking products up. Lowe’s hopes that other retailers will be open to a technology-led solution, Shabtai says.

“The aim is to have larger industry conversation,” Shabtai says. “If we develop it, we have something we can make available. It’s a lot easier to have a conversation when you have the technology product, not a theory.”

Blockchain is a good solution, Shabtai says, as it’s not owned by one retailer, but all products could be registered in this way, he says.

“We wanted to prove it could be done. If we can do it, other retailers can do it,” Shabtai says.

Lowe’s is No. 11 in the Digital Commerce 360 Top 1000.

Sign up

Stay on top of the latest developments in the ecommerce industry. Sign up for a complimentary subscription to Digital Commerce 360 Retail News.

Follow us on LinkedIn, Twitter and Facebook. Be the first to know when Digital Commerce 360 publishes news content.