A report released today by the Retail Industry Leaders Association (RILA) outlines the important role that retail buyers, also known as merchants, can play in reducing shrink. Shrink is defined as the total product lost from the moment it is purchased from suppliers to the point of sale.
While shrink reduction is traditionally viewed as the sole responsibility of asset protection professionals, the first-of-its-kind report finds that the retail professionals responsible for inventory decisions have an important and under-utilized role to play in reducing shrink.
The report, "Opportunities and Challenges for Engaging Merchants in the Protection of Retail Assets" was commissioned by RILA's Asset Protection Leaders Council (APLC) in partnership with Nicole DeHoratius of the University of Chicago Booth School Of Business. Checkpoint Systems and EY provided valued sponsorship of the research project. RILA's APLC is comprised of asset protection pyramid heads from among RILA member companies and is at the forefront of leading-edge industry research.
"Shrink reduction is a team effort," said Lisa LaBruno, RILA's senior vice president for retail operations. "By building relationships across the business retailers can harness the organization's combined influence and have a substantial effect on shrink losses."
According to the report, merchants can contribute to shrink reduction by:
- Leveraging supplier relationships to identify challenges with products and to address issues that could affect shrink, such as packaging design.
- Considering security needs, such as security tags, keepers, locked pegs, spider wrap when selecting products.
- Limiting presentation quantities, offer testers, and determine product placement on the floor.
- Ensuring the integrity of the process and data used for new product introductions and resets.
- Considering shrink risk when determining product flow (e.g., direct store delivery, full case pack shipment, break pack shipment, etc.).
"Much of our research and R&D development revolves around helping retailers improve on-shelf availability of their merchandise," stated Farrokh Abadi, Chief Strategy Officer for Checkpoint. "Technology is just an enabler that works best when incorporated into the thought-process of the merchants all the way to the store associates, with the end-goal of providing a pleasant shopping experience to customers."
The report recommends a series of actions that asset protection professionals should consider in the short term, such as education, training and the adoption of a common language such as "Inventory Accuracy" that could enhance engagement with merchants.
"EY is again pleased to join RILA and Checkpoint in supporting this important research," said Daniel Valerio, Partner, Americas Director, Retail & Wholesale Sector at EY. "Retail shrink continues to be a significant source of lost revenues for retailers and we believe this research will help multi-disciplined teams within the industry stay ahead of the curve in asset protection."
This year-long research project entailed a survey of over 300 buyers and in‐depth interviews with one or more individuals representing 31 retailers that collectively account for over $1 trillion in US retail sales, or approximately 23% of all US retail sales. The report includes detailed case studies from several retailers that illustrate their approach to enhanced collaboration and provides a step by step road map to help asset protection teams improve their collaboration with merchants.
Key Report Excerpts:
"Today, the term inventory shrink is synonymous with inventory theft – or stock loss2. Thus, retailers commonly seek to prevent inventory shrink through the adoption of theft prevention techniques within the store, techniques that include video surveillance, putting products behind glass or devising special tags for specific merchandise, and investing in alarms at store entry and exit ways."
"Not surprisingly, we found only 32% of the buyers surveyed viewed the asset protection team as a partner in efforts to drive sales. In other words, the vast majority of buyers surveyed perceive the asset protection team to be an obstacle to retail sales performance."
"With this research, we want to offer an alternative perspective, namely, a perspective in which shrink is viewed not merely as the result of inventory theft but rather the accumulation of daily process errors within the retail store and its supply chain."
"Unlike the term shrink which is analogous to theft and specific theft solutions, this broader definition of shrink – inventory discrepancies that arise from poor operational execution ‐ can be a more effective way to engage buyers and others organizations within the retail chain. This broader definition can be tied directly to measures that matter to buyers such as sales and product availability and may enhance their willingness to collaborate on asset protection efforts. The prevention and correction of process errors requires a collaborative solution within the retail organization and across firm boundaries. Asset protection experts need to better understand how such process errors arise and help educate other members of the retail organization, including buyers, how their actions ultimately influence the likelihood of such errors occurring."
RILA is the trade association of the world's largest and most innovative retail companies. RILA members include more than 200 retailers, product manufacturers, and service suppliers, which together account for more than $1.5 trillion in annual sales, millions of American jobs and more than 100,000 stores, manufacturing facilities and distribution centers domestically and abroad.