The economy in the United States started going south in 2007. Since then, most retailers have seen same store sales decrease. Now, sales comparisons are against down performance and – although it may appear that sales are increasing - the reality is sales may be lower than what they were before the economic downturn.
In the face of these tough economic times, many retailers chose to protect their bottom lines by reducing staff, including sales floor and loss prevention personnel. Now, according to the January 2010 RILA Current Crime Trends Survey, retailers are reporting an increase in theft. Organized Retail Crime (ORC), impulsive amateur theft and internal theft are trending up. The reported increase in internal theft is particularly worrisome because during periods of high unemployment, retailers can typically attract better caliber applicants. I believe that any increase in internal theft results from the employees’ desire to maintain the lifestyle to which they were accustomed prior to the recession which they are unable to do on wages alone.
Over the next eighteen months, I expect shrink to increase significantly. Shoplifters and organized theft groups will undoubtedly seize the opportunity presented by leaner loss prevention staffs watching the store and fewer sales personnel on the floor. Instinctively, we may blame a spike in shrink entirely on external theft. In my opinion, this is a mistake that could have significant financial consequences. Indeed, internal theft and non-theft incidences (e.g. operational deficiencies) will cause shrink to increase in the short-term.
In order to minimize losses, retailers should work to immediately identify effective loss prevention tools and technology that identify and prevent theft and that identify operational and other deficiencies causing shrink. Retailers would be smart to apply these tools and technology to their operations faster than a speeding bullet.
Deterrence works well with impulsive, amateur thieves. EAS, public view cameras and monitors, locking hardware, benefit denial systems, etc. can be used effectively to minimize shoplifting. However, boosters engaging in ORC are not so easily deterred and stopping them requires a comprehensive program using special loss prevention teams and initiatives and a trained sales floor staff. There are some new systems which produce intelligence from retail operations business data, some of which are integrated with video, which look promising as a means to deter internal theft and ORC. Business intelligence tools which mine data resident within retail operations are also effective in uncovering operational errors that cause loss. Retailers can then apply proven solutions to those causes and monitor the solutions to ensure success. A long time ago, I worked for a great store operations executive who frequently used two terms in delivering his message to the store teams: “Retail Is Detail” and “Inspect What You Expect.” That is exactly what retail operations business intelligence is all about. Business intelligence gleaned through data mining can provide intimate details into business operations and enable the retailer to measure the success of implemented solutions. That means if a particular problem is causing shrink, it is quickly and permanently addressed and fixed.
Many of us grew up in the retail business being very hands on and believing we always knew everything that was happening in our stores all of the time. How naïve we were! I wish the tools and technology which is available today existed then. If you are interested in hearing more about some of the tools and technology at your disposal, feel free to reach out to me directly.