A new study, sponsored in part by ADT and its Sensormatic Retail Solutions group , reveals the need for retailers to focus on technology solutions that enhance their current operational goals and combat theft without adding labor costs. The study “Loss Prevention 2010: Retailers Battling Shrink in Tough Times,” found that during these challenging economic times, retailers face increased pressure to identify better business intelligence, improve inventory accuracy and embrace more innovative uses of existing investments to improve profitability and conserve working capital.
Retailers are focused on getting the most value from their existing investments in both high and low-tech tools without having to add people to review detailed data, according to Paula Rosenblum, an Analyst and Managing Partner for Retail Systems Research (RSR) and co-author of the report.
The online survey including 83 small-to-large multinational retailers was conducted by RSR in the fall of 2009. Retailers identified their top three sources of shrink as employee theft of merchandise, shoplifting and employee theft of cash.
Over the past year, RSR reports that 44 percent of retailers have experienced a rise in theft, likely due to challenging economic conditions. Findings indicate that top retail performers – those whose sales growth outpaced the 3 percent industry average – place an even higher priority on loss prevention (LP): 78 percent report an increase in year-over-year LP's priority, compared to 43 percent of underperformers.
"Given the challenging conditions retailers will face in the near future, any technology enhancements must help to reduce labor costs while delivering better business intelligence," Rosenblum said. "Tools such as video surveillance, returns and void management, exception analysis reporting and cash management are crucial for retailers to be more profitable. Retailers are also paying more attention to managing their item level perpetual inventory systems to gain better insight into lost sales."
Some more detailed information finds:
* Retailers report employee theft of cash has increased from 32 to 45 percent of total losses. This appears related to challenging economic conditions and has prompted retailers to recognize the need for better business intelligence to analyze results, rather than more staff to examine report details.
* When it comes to roadblocks impeding retailers from progressing in their loss prevention efforts, 86 percent say they are challenged for capital, 41 percent lack staff to review LP and audit data (compared to 29 percent in 2008) and 36 percent have extremely inaccurate inventory systems unable to quantify areas of loss.
* Retailers identified top technology solutions that help them overcome organizational inefficiencies including:
- 63 percent cited better business intelligence to analyze all their data.
- 40 percent cited more accurate inventory tracking to identify the items being stolen.
- 39 percent cited more creative uses of existing technologies.
The report further identified areas where retailers have seen a more direct effect from the economy, most importantly, a faster rise in external theft versus internal:
* Individual customer theft of merchandise with 28-percent increase
* Organized gangs stealing merchandise accounting for 25-percent increase
* Employee theft of cash with 19-percent increase
Additional study findings reveal top retail performers use business intelligence tools more frequently such as exception analysis reporting at 68 percent and returns/void management at 65 percent. To enhance the value of existing investments without adding staff to review detailed data, 31 percent of respondents report using inventory tracking systems.
"The information revealed in the research indicates the methods of retail theft are shifting. As a result, loss prevention tools must adapt to those changes," said to Kelvin Lam, VP of Retail and Security Products, ADT Security, Asia Pacific. "In a tough economy, resourceful retailers are looking beyond traditional tagging and stand-alone surveillance to include software-based analytic tools, integration and better inventory management systems."