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Industry Spotlight: ‘Pigeon-holing’ potential reason behind rising shrink losses…

Mass merchants and department stores have experienced an alarming 58 per cent increase in shrinkage rates since last year, which, according to the 2016 UK Retail Fraud Survey, is no surprise due to retailers continuing to treat online and store loss prevention separately.

The survey, published by Retail Knowledge and sponsored by the outsourced inventory data collection provider, WIS International — for the second consecutive year –also details the expensive systems, processes and strategies presently in place at some of the UK’s top retailers.

Research has indicated that retailers are increasingly taking a ‘joined up’ approach to store and online loss prevention by implementing a holistic approach to risk across all channels. However, somewhat contradicting this, the same survey a few years ago concluded that just a small percentage of retailers took this stance. This year, only 30.3 per cent of retailers continue to operate in silos across channels; a significant shift in how risk is managed and, in this respect, the report considers mass merchants and ‘large format speciality’ to be lagging behind; with 60 per cent and 40 per cent respectively still treating channels separately.

In addition, retailers who have decided to take a holistic approach to loss prevention across all channels have seen a decrease in shrinkage rates, compared to those opting for the separate avenues have seen a substantial increase in the 12 months; contributing to the calculated £2.34 billion loss to shrink.

Paul Bessant of Retail Knowledge said: “Today departments work together across the broad range of disciplines necessary to support the multiple channels through which business is conducted. This inter-departmental approach typifies the operations of leading retailers and is reflected in this survey which, inter alia, documents the change from a silo approach to online and offline, to a holistic one.”

He continued: “Only 36.6 per cent of retailers treat online and offline separately, compared with figures going back to 2013 when the figure was closer to 100 per cent. This is really great news, considering shrink has fallen again this year, it really shows that working collaboratively is the most effective way of beating retail crime. Those retailers that do treat online and offline separately need to rethink their approach if they are to effectively lower shrink year on year.”

Further highlights of the survey include the decrease in credit card fraud; down from 55 per cent in 2015 to 51 per cent in 2016; return fraud has dropped from last year’s figure of 0.5 per cent to 0.33 per cent of sales; and store loss prevention spends has jumped to 1.06 per cent from 0.6 per cent of sales.

The US is also currently dealing with retail shrink losses, as the University of Florida’s 2016 National Retail Security Survey, retail shrink has remained at ‘historically’ low levels with losses from shrink increasing from $44 billion in 2014 to $45.2 billion last year; and inventory shrink as a percentage of retail sales still at the same rate as the year before.