Organized retail crime (ORC) is no longer a problem only faced by retailers in North America. As the practice becomes prevalent overseas, retailers worldwide are deploying tactics that confront this cause of shrink.
Based on the economic downturn, all forms of theft — by employees, shoplifting and ORC included ― rose during a recent 12-month period as retailers’ implementations of loss prevention (LP) solutions could not keep up with shrink activity.
“Although ORC has been seen as a mainly American problem, retailers in other parts of the world also report that ORC is starting to have an impact on their businesses,” said Joshua Bamfield, Professor and Director of The Centre for Retail Research. “(On average) 47.5% of [these] retailers said they experienced increased losses or a greater impact from ORC this year.”
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Most retailers (52%) indicated LP as a key goal in implementing in-store radio frequency identification (RFID) solutions, while 35% considered the primary driver of RFID implementation to be improved inventory visibility and management. Despite the steady growth and lower costs of RFID for inventory and LP, the current product, source-tagging, has developed faster than RFID. “[RFID] will not develop very quickly; however, there are many retailers committed to it but waiting for the right product to come,” noted Bamfield.
According to a recent Centre for Retail Research survey titled “The Global Retail Theft Barometer,” global shrinkage has increased to $119.1 billion, representing 1.45% of total retail sales. “This shrink rate is the highest ever recorded by the annual survey, and reflects an annual increase of 6.6%,” according to the report. “The shrink rate increased the most in the two largest geographic markets — Europe, by 7.8%, and North America, by 6%.”
Because theft-related factors comprise nearly 80% of shrink, retailers must take the necessary steps to prevent future “five-finger” discounts. The steps to upgrading LP strategies to multi-layer programs designed to detect and prevent various types of shrinkage include:
- Increasing employee training and compliance audits;
- Improving analytics that help identify trends in shrink globally, regionally and locally; and
- Planning and deploying LP programs customized to local and even store-level requirements.
As retailers continue to experience losses due to shrink, the study noted significant regional differences among theft sources. For North America, employee theft (44%) ranked #1 while shoplifting took the lead role in Europe (48%) and Asia (53%). Segments that suffered the highest shrink levels were apparel, health/beauty and DIY/home improvement.
Across the board, the most vulnerable merchandise was small, expensive, “mobile” items such as electronics, cosmetics, alcohol/food, clothing and jewelry, of which 24% are not encased or have RFID devices attached. “Clothing accessories suffered a shrink rate of 3.6%, nearly double the overall apparel category average,” the study noted. “Among health and beauty products, shaving-related merchandise actually experienced shrink more than double the category average. In the food segment, such staples as cheese and meat were stolen or lost at rates far higher than the overall average for their categories. Rather than utilizing a one-size-fits-all method, retailers must streamline their LP strategies on an SKU-by-SKU basis.”
Retailers are aware of the impact of implementing the necessary LP program measures. As many as 84% of global retailers have audit programs in place (up from 70% three years ago) and 64% conduct audits at least three times per year, while a greater emphasis on employee training has been implemented by a majority (95%) of survey respondents. Although investments in LP equipment have increased, few retailers have committed resources to non-capital areas such as staffing and training.
