Book a demo
Solink new logo
Book a demo
INSIGHTS

The $112B shrink problem: Why retailers need AI in 2025

October 20, 2025
Learn more

Table of Contents

Executive summary

The article highlights the importance of artificial intelligence (AI) in the retail industry, emphasizing how AI-powered video and data analytics solutions help retailers enhance security, improve operational efficiency, and gain actionable insights. By integrating AI technology, retailers can better detect theft, reduce losses, and optimize staffing and inventory management. The content targets retail business owners and managers seeking innovative tools to elevate store performance and customer experience.

Key takeaways

  • AI enhances loss prevention by quickly detecting suspicious activities and streamlining investigations.
  • AI-driven video analytics improve operational insights, helping retailers optimize store layout and staff allocation.
  • Integration of AI with other data sources enables a holistic view of retail operations for smarter decision-making.
  • AI adoption can reduce human error and free up employee time for more strategic tasks.
  • Retailers leveraging AI gain a competitive advantage by improving both security and customer service quality.
Every retailer knows shrink is a problem. In fact, it’s a $112 billion crisis draining the retail industry every year. The question isn’t if it’s happening, it’s how much time and energy your teams are wasting trying to uncover it.

Hours spent digging through video footage. Endless spreadsheets and exception reports. Investigations that take days instead of minutes. For retail teams, tracking down shrink has become a full-time job – and even then it probably feels like you’re only scratching the surface.

It’s not the people that are the problem. It’s the tools. Legacy DVR and NVR systems, siloed VMS platforms, and outdated exception reporting solutions weren’t built for today’s pace or scale. Instead of helping, these tools create blind spots, slow down investigations, and leave teams reacting to problems instead of preventing them. 

Artificial intelligence (AI) changes that script. It does the heavy lifting for you. By connecting video, transaction data, and store activity, AI reveals the patterns, anomalies, and opportunities hiding in plain sight. Instead of spending hours searching for loss, your team can spend that time preventing it.

Modern retail success starts with visibility. With AI-powered video and data analytics, retailers can finally transform their security systems into true business intelligence tools – protecting profits, improving efficiency, and uncovering the insights that were once impossible to see.

Benchmarking retail's AI adoption

To help shed light on where retail leaders stand with AI adoption in 2025, so you can compare with your peers, Solink partnered with a research firm to survey 150 retail leaders on where they stand with AI adoption. 

With the new The State of AI in Retail report, the goal is to understand who’s already adopting AI, what drives success, and how confident different teams feel about deploying it inside their function of the business. 

The results show a retail industry in transition – moving away from legacy tools and toward smarter platforms that don’t just record what happened, but help you understand why it happened, prevent it from happening again, and protect profitability at scale. 

In fact, nearly 70% of retail leaders said AI in video security is a “critical” or “high” priority.
Cover page titled "The state of AI in retail" with a top-down view of shoppers in a store aisle; published September 30, 2025, by Solink Corp.

The state of AI in retail

Cover page titled "The state of AI in retail" with a top-down view of shoppers in a store aisle; published September 30, 2025, by Solink Corp.
Solink partnered with a research firm to survey 150 retail leaders, with a goal of answering core questions around who is adopting AI in retail settings, what drives success or future adoption, and how confident are different teams when it comes to implementing AI within their function of the retail business.

  • How are different organization sizes adopting AI?
  • Strategic drivers by organization size.
  • How are different teams using AI?
  • AI use cases across retail functions
Download the state of AI in retail whitepaper
Download the state of AI in retail whitepaper

So, where do retail teams currently stand on AI adoption?

Across the four functions surveyed – loss prevention, operations, IT, and security – most retailers are beyond pilots and moving into scaling or full deployment of artificial intelligence. But the pace varies:

Asset protection and loss prevention

For loss prevention and asset protection teams, AI adoption is moving quickly, with 67% of leaders reporting they are already scaling deployments. The motivation is clear; these teams are laser-focused on reducing shrink and detecting fraud, and confidence levels are high at 7.6/10. 

But they also know that legacy DVRs and siloed VMS systems aren’t up to the task. Outdated tools flood teams with false alarms and leave them drowning in noise, making it difficult to separate genuine risks from everyday activity.

AI-powered video analytics changes that equation. By surfacing only the most relevant anomalies and tying alerts directly to video evidence, LP teams can prioritize real incidents, act faster, and stop theft at scale. Instead of chasing hundreds of false alerts, they can focus on what truly moves the needle, protecting margins and recovering losses.

Highlights include:

  • Shoplifting cases dropped 32% with AI-powered video analytics.
  • Fraud detection accuracy improved 35%, cutting chargebacks and theft losses.
  • Vendor disputes and write-offs reduced 17% with video-linked delivery verification.

IT

Among the four functions surveyed, IT is the most confident in its ability to adopt and scale AI, scoring a 7.8/10. 

Nearly 80% of IT leaders report they are already scaling AI initiatives, and it’s easy to see why. For IT, legacy DVR and NVR systems create endless manual work, from patching outdated software to troubleshooting constant system failures. These inefficiencies pull valuable team resources away from higher-impact projects.

With AI, IT leaders are streamlining ticket handling, reducing manual system checks, and stabilizing system performance. Automation is eliminating repetitive tasks, predictive monitoring is preventing outages before they happen, and centralized platforms are helping IT manage security systems more efficiently. 

For IT leaders, AI isn’t just about innovation, it’s about reducing complexity, controlling costs, and giving their teams the time back to focus on strategic projects.

Highlights include:

  • AI chatbots and self-service cut support hours by 20%.
  • Centralized VMS reduced manual system checks, improving productivity by 25%.
  • Predictive monitoring cut cloud storage costs by 18% and reduced outages.

Operations

Operations leaders are adopting AI at a slower pace compared to other functions, with 30% still in pilots and 57% scaling. But the value is clear, operations teams are responsible for efficiency and speed of service, and legacy exception reports don’t provide the real-time visibility they need. Reports only show what happened yesterday, too late to make adjustments that impact today’s performance.

AI-powered tools allow operations leaders to act in the moment. They’re using real-time analytics for forecasting, queue management, and labor optimization, ensuring the right number of staff are in place when and where they’re needed. 

Instead of relying on backward-looking reports, they’re turning to predictive insights that help them move faster, optimize resources, and capture more revenue opportunities. The result is measurable gains in efficiency, profitability, and customer experience.

Highlights include:

  • Shelf-scanning + replenishment systems boosted on-shelf availability by 28%.
  • Forecasting accuracy rose 30–40%, driving a 9% revenue lift in six months.
  • Automated scheduling cut labor costs by 12–20%.

Security

Security leaders stand out as the most advanced in AI adoption, with 90% reporting full deployment and the highest confidence levels across functions (8.0/10). 

Their focus is clear, situational awareness, rapid incident response, and liability reduction. Traditional alarm systems are notorious for generating false positives, wasting staff time and diverting attention away from genuine threats.

AI-powered video analytics, paired with professional monitoring, eliminates much of that inefficiency by reducing false alarms by up to 70% and verifying incidents in real time. Security teams can respond faster, focus on actual risks, and improve both safety and outcomes. 

The ROI here is immediate- safer stores, faster closure rates, and fewer wasted resources. For security teams, AI isn’t just a future investment, it’s already a daily operational advantage.

Highlights include:

  • Incident response times cut 40%, improving arrest/closure rates.
  • False alarms reduced by 60–70%, letting guards focus on verified incidents.
What can you learn from the report? The message is clear, yesterday’s tools simply aren’t cutting it and AI-powered video analytics is becoming the new standard. 

Want to benchmark your AI adoption against peers? Download our State of AI in Retail report today. Alternatively, book a demo and see first-hand how Solink can help you cut shrink and drive profits. 
Tackle shrinkage with AI in 2025
Discover how AI can help retailers reduce the $112B loss problem.
Book a demo