A new study has revealed the need for retailers to focus on technology solutions that will combat theft without adding labour costs.
The report, ‘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 as a means 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.
Over the past year, RSR reports that 44 per cent of retailers have experienced a rise in theft, likely due to challenging economic conditions. Retailers identified their top three sources of shrink as employee theft of merchandise, shoplifting and employee theft of cash.
"Given the challenging conditions retailers will face in the near future, any technology enhancements must help to reduce labour costs while delivering better business intelligence," said Rosenblum.
"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."
Retailers report employee theft of cash has increased from 32 per cent to 45 per cent of total losses. This appears related to challenging economic conditions and has prompted retailers to recognise the need for better business intelligence to analyse results, rather than more staff to examine report details.
However, 86 per cent say they are challenged for capital, 41 per cent lack staff to review loss prevention and audit data (compared to 29 per cent in 2008) and 36 per cent have extremely inaccurate inventory systems unable to quantify areas of loss.
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 has risen by 28 per cent, organised gangs stealing merchandise increased 25 per cent and employee theft of cash rose 19 per cent.
"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 Kelvin Lam, vice president 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,” he said.
The online survey of 83 small to large multinational retailers was conducted by RSR in the fall of 2009.