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Retail Comment: Cut your losses


Crime is still costing retailers millions of pounds even though huge investment has been made in preventative measures. John Bailey, Retail Industry Director EMEA, at retail technology solutions provider RedPrairie, says it is now time for businesses to address the problem head on to avoid further barriers to profitability.

Despite retailers investing more than £210 million in crime prevention in 2010, according to the British Retail Consortium’s most recent Retail Crime Survey, shoplifting cost retailers more than £137 million last year with thieves stealing goods worth almost £400,000 every day.

Whilst the number of offences affecting retailers dropped by 11 per cent year-on-year, thieves increasingly targeted higher value products. The average value of goods stolen rose to £70 from £45 the previous year.

A recent survey by Martec International, released at the Retail Fraud Conference in April, shows that coalition government cuts mean more retailers fear the worst for their shrinkage figures, with increased concerns over the link between unemployment and shop theft.

However, although logic would suggest that retail theft will continue to increase as shrinking disposable incomes cause more people to steal for ‘need rather than greed’, just like regular shoppers, the sky-rocketing price of fuel may well act as a deterrent to shoplifters visiting large out-of-town stores.

According to Martec, at 0.3 per cent of sales, online fraud prevention spending is much lower than in store although some costs may be hidden for retailers new to online trading as these functions are carried out by other departments such as finance and e-commerce. However, as internet trading becomes a higher proportion of sales for most retailers (it is 10.9 per cent for the leading 100 UK retailers currently), then it is expected that online loss prevention spend will increase.

Retailers have long focused their loss prevention efforts on customer merchandise theft. Big budgets have been spent on expensive in-store closed circuit television, digital recording, electronic security tagging, and alarms to prevent and monitor customer theft.

There are also lower-tech solutions, for example, ‘zone-staffing’ whereby customers are always visible to a staff member, wherever they are in a store. The meet and greet function at the store entrance has also been shown to drive down theft.

Theft is only one side of the story though, and according to the Martec research shoplifting accounts for just 34 per cent of shrinkage, with almost two-thirds relating to losses in other areas, including waste, process error and embezzlement.

So, as a retailer where are you going to spend money to cut your losses?

Clearly the larger area of return will be achieved by improving your store systems and processes - and you can go to any number of retail solutions providers that will show you the error of your ways and how their systems will save you money.

Common areas in which shrinkage occurs are with incorrectly applied markdowns, damaged goods, receiving errors and incorrect processing of returns which can be reduced through scanning, cycle counts, perpetual inventory and, simply by knowing exactly what stock should be in store through joined up back office, distribution and point of sale systems.

The hottest technology out there also combats both customer and employee theft through the use of data mining to identify patterns that identify cash theft, fraud, and process errors and by using video processing and surveillance technology connected to IP cameras.

However, this does not address the issue of stolen time - otherwise know as ‘pirated hours’ or ‘undertime’.

A huge amount of theft from employees comes from stealing time - for example so- called buddy punching (getting someone to clock in for you), falsifying time sheets, checking social networking sites while at work, employing company resources for personal use and productivity losses associated with smokers (and the effect on non-smokers).

Once again, technology can help retailers to manage attendance, to schedule the optimum number and mix of staff in line with customer demand and to monitor and manage the performance of the workforce in order to maximise productivity.

In order to maximise their effectiveness, control of these systems and processes should be given to the store manager. Make him or her responsible and accountable for their store’s profit and loss. After all, in these times of flat like-for-like retail sales, loss reduction is a critical source of improved profitability.

Bailey is RedPrairie’s EMEA Retail Industry Director and has been an acknowledged thought leader in the field of workforce management solutions for over 20 years.

Note: The views expressed here are those of John Bailey and do not necessarily represent the views of Retail Gazette.

Published on Tuesday 10 May by Editorial Assistant

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