Retailers Increase Spending on Loss Prevention

To alleviate huge losses incurred from shoplifting, retailers are seeking better protection methods for "high-theft" merchandises, finds a study.


The latest Global Retail Theft Barometer, sponsored by an independent grant from Checkpoint Systems, monitored the costs of shrinkage (loss from shoplifting/employee crimes and administrative errors) in the global retail industry between July 2009 and June 2010, and found that shrinkage decreased in all regions surveyed. The biggest decrease was in North America. The proportion of global retailers that reported increased actual or attempted shoplifting in 2010 was 31.1% (23.1% in Asia-Pacific).


"Even with the shrinkage decrease, retail crime cost the average family in the 42 countries and regions surveyed an extra US$186 on their shopping bill," says Professor Joshua Bamfield, Director of the Centre for Retail Research and author of the study. "In Hong Kong the number was US$125 (HK$975), slightly higher than the Asia-Pacific average of US$117 (HK$913)."


The 2010 study also found that retailers increased their spending on loss prevention and security by 9.3% over 2009, to US$26.8 billion billion globally, whereas a 6.7% increase in loss prevention spending in Asia was recorded compared to last year.


"The correlation between increased security spending and a global 5.6% decrease in theft is very significant," notes Bamfield. "It highlights the importance of continued advancement and improvement of loss prevention programs, as reducing theft is key to the success and growth of retailers' businesses."


"In 2008 at the start of the economic downturn, the temptation for retailers was to reduce their loss prevention spending," comments Rob van der Merwe, chairman, president and chief executive officer, Checkpoint Systems. "This typically leads to an increase in shrink and that is what we saw with the 2009 Theft Barometer study. Retailers quickly realized the need to correct this trend and began to invest in smart deployments that could be quickly implemented with high ROIs, such as increased protection of high-theft merchandise, and more employee training and store audits. This resulted in a short-term win and a decrease in shrink.


Van der Merwe asserts that now is the right time to combat shrink with a more comprehensive path and begin looking to the merging technologies that will carry retailers through to the future. Examples he listed include the newest generation of EAS and also RFID technology to additionally provide better tracking and visibility of inventory across the supply chain, leading to the elimination of out-of-stocks and increased sales.


Global Retail Shrink Rates


Shrink cost retailers US$107.3 billion during the study period, representing 1.36% of global retail sales. This is down from 1.43% the previous year. The country/region with the highest rates of shrinkage as a percentage of sales was India (2.72% of retail sales). The lowest rate of shrink was found in Taiwan (0.87%). The Asia-Pacific rate was 1.16%.


While shrink is down overall, some of the most stolen items have suffered increased shrink since last year, including children's wear, outerwear, shaving products, luxury cooked meats and infant formula.


The study finds that shrink varies according to business type, vertical market and country. In 2010, some of the highest average shrink rates were found in apparel/clothing and fashion/accessories (1.72%), and cosmetics/perfume/beauty supply/pharmacy (1.70%).


Origins of Shrink


Customer theft, including shoplifting and organised retail crime caused the greatest shrink loss in most countries at 42.4% of shrink, followed by employee theft at 35.3%.


"Although retailers have made considerable progress in introducing new anti-shrink policies, more than 25% of the retail 'top fifty' most-stolen product lines still have no specific protection," says van der Merwe. "So our industry needs to accelerate innovation to help better protect retailers and consumers."


Loss prevention costs in Hong Kong (0.23% of sales) ranks number 3 in Asia Pacific, just behind Australia (0.37%) and Singapore (0.24%); it is above the Asia Pacific average (0.19%) but still far behind global average (0.34%).




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