In 2014, retail shrinkage cost German retailers approximately 5 billion Euros. This is one conclusion made by the "Global Retail Theft Barometer 2014/2015", the world’s largest study on causes and costs of retail shrinkage in the retail industry. iXtenso.com has spoken with retail shrinkage expert Hans-Jürgen Nausch about the reasons for retail shrinkage and seasonal shoplifting peak levels.
Mr. Nausch, what is currently the main reason for retail shrinkage in the German retail industry and how big are these losses for retailers?
Overall, retailers lose approximately 1.08 percent of retail sales. Shoplifters are still responsible for the biggest percentage of retail shrinkage. According to the current Retail Theft Barometer that was published in early November, this represents 65 percent of losses in Germany. One particular problem here is organized retail crime, meaning professional shoplifters who intend to turn the stolen merchandise into cash. According to the study, the upcoming Christmas shopping season proves to be a peak time for retail shrinkage.
Approximately 11 percent of losses are caused by dishonest employees – most frequently due to stealing cash at the point of sale. Crooked vendors and manufacturers are responsible for 5 percent of losses while 19 percent are attributed to administrative errors.
How did the situation change compared to the previous editions of the “Global Retail Theft Barometer“?
Germany is looking at quite a steady trend; retail shrinkage has slightly declined in the rest of Europe. However, global analysis of participants who have participated multiple times in the study has shown a significant increase in retail shrinkage from 0.94 percent of retail sales to 1.23 percent. Overall you could, therefore, say that retail shrinkage continues to be a serious problem that puts additional pressure on the margins of brick-and-mortar retailers.
Which products are stolen most frequently?
All-time favorites primarily include branded merchandise that is expensive yet small and can be easily concealed. The spectrum ranges from classic shoplifted items like razor blades to trendy electronics, smartphones, power tools, fashion accessories and clothing articles all the way to premium foods and spirits. We know from experience that it is essential to not damage the packaging when you steal the merchandise. The items can only be resold on the Internet or other channels if the products are in immaculate condition and the original packaging.
What current security solutions help with theft prevention?
There are a number of solutions that also address the needs of individual industry sectors in the electronic article surveillance arena. Aside from basic security solutions such as adhesive backed labels, for example, many retailers rely on special security devices to protect theft-prone items. For example, 3 alarm active tags will also sound an alarm if someone merely tries to manipulate them. Bottle security tags also prevent bottles from being opened at the store. Special security tags for power tools also protect detachable parts like the battery for example.
The objective of all of these measures is to provide a high level of protection – also by deterring shoplifters. On the other hand, an honest customer is not supposed to be affected in his/her buying behavior and should be able to access the product without the assistance of sales associates.
After all, the product and shopping experience in the store, as in being able to touch and- where applicable- try out an item, is an essential competitive advantage for brick-and-mortar businesses over online retail.
Other security solutions are aimed at exposing professional thieves before they shoplift. Booster bags and jammers can already be detected by using innovative antennas if the person enters the store with this type of equipment. Ideally, this prevents the actual theft from happening.
Of course, we should not forget how important it is to raise the awareness of employees and provide routine training. Ultimately, the best technology is not effective if it is not applied properly and its full potential is not being utilized. This is why we recommend training employees at least once a year.
Why is prevention more important for retailers than identifying and catching shoplifters after the actual theft?
Every thief caught costs additional time and money. It is far better if employees are able to focus on sales and service versus having to deal with shoplifters.
However, what’s perhaps even more important is ensuring inventory availability and accuracy. A stolen item does not just create an immediate loss. If theft causes a void on the shelf and a disappointed customer chooses to visit a competitor instead, the retailer also loses out on the follow-up business. Those who rely on omnichannel strategies also face problems with inventory accuracy, when an article only shows in the system but does no longer physically exist.
Proven and tested RFID applications provide a solution in this case. The same tag used for asset tracking can also be utilized for loss prevention. If a theft occurs, the retailer knows immediately which exact article was stolen and is subsequently able to take respective measures to quickly fill the inventory void.
