By Carla Bridge, Inside Retailing Magazine
Rising unemployment and belt tightening spell the season for ‘sticky fingers’. How can retailers stem shrinkage?
With belts tightening across the country the risk of ‘sticky fingers’ grows in-store - highlighting the importance for all retail operators to ensure security measures are effectively matched to their business needs.
While the issue of external theft is something that has been widely addressed by Australian retailers, last year’s Global Theft Retail Barometer indicated that the majority of Australia’s shrinkage woes were the direct result of internal theft.
Mark Gentle, MD of Checkpoint Systems and a sponsor of the survey, said that Australian retailers had done a tremendous job of looking at the issues of external theft.
He described the problem of eliminating shrinkage as an evolution. “Australia has improved its rate of external theft so what now comes under the radar is internal theft. Once we’ve resolved the internal, we’ll look to supply chain - so for me it’s a continuous improvement.”
Pro Active Strategies MD Renata Ringin said that often when retailers referred to shrinkage, they talked about shop stealing, but overlooked the host of factors that contribute to not having product available when it comes to stocktake.
“Shrinkage encompasses external theft, internal theft, error at any inventory point when receiving stock or sending it out, wastage and not accounting for product that is perishable, out of date or damaged.
“I would say focus on all of those things instead of just putting in technology for external theft and thinking you’re done.”
Phil Brown said that while apprehensions in store had recently increased, retailer reports were that shrinkage had not, indicating that retailers were going about security in the right fashion, using the right technologies.
“Economic downturns increase people’s methodology to shoplift, and as unemployment continues to rise you will see people trying to shoplift more. There’s also a tendency for retailers to cut back staff hours, so you lose more eyes and ears on the shop floor.
“If you’re doing that, you need to replace them with an investment in technology to give you some assurances.”
Gentle said there were common denominators across the globe, with certain products going missing at high rates everywhere.
These include razor blades and newly launched DVD titles as well as cosmetics, apparel, video games and software -items easily on-sold to shoplifters’ peers.
“All the statistics say that open merchandising means higher sales, but you also have higher rates of theft, so it’s a fine line and you need to have the right protection in place.
“A lot of retailers are looking at their inventory and losses at the moment because when sales are dropping you cannot afford to have theft or pilferage.”
He said having a good understanding of the global drivers was helpful in combating shrinkage. “Quite often having the ability to understand the issues in the US or Europe is important because there is a good chance they may come here.
“Collaboration and talking about it is also a good idea, because it is not just an individual retailer’s problem, it’s everyone’s problem.
External theft the minority
External theft accounts for just one third of all retail shrinkage in Australia. However, it is the most talked about and most widely addressed of all the shrinkage causes.
When it comes to technology, Electronic Article Surveillance (EAS) systems and Closed Circuit Television (CCTV) are the most widely used across Australian retailers.
ADT Security provides EAS systems under its Sensormatic brand to more than 75,000 retailers worldwide, and is a pioneer of ‘acoustomagnetic technology’, which boasts a 95% detection rate.
ADT national retail manager Phil Brown said there was no question that EAS, used in conjunction with training procedures was paramount to any retail environment.
“There’s lots of things happening in the EAS environment in terms of technology, from the pedestals outside the stores to the tags on the garments.
“Technology in the acoustomagnetic space is continually evolving and we’re spending a lot of money on research and development to bring the technology faster to market,” Brown said.
Renata Ringin, MD of Pro Active Strategies, said that while EAS was a good choice to protect individual items, there was often a cost benefit analysis of the tag itself - the labour to put the tag on the article, and deactivate it at point of sale.
“If the item is low value EAS is not really suitable, but it’s still very effective.
“If a tag does go off at a gate, always respond. You see it time and time again where retailers don’t respond or wave a customer through and you are sending a message that it doesn’t really matter,” she said.
One of the newest technologies available is Radio Frequency Identification (RFID) and source tagging - creating an identity for individual products to allow them to be tracked.
According to Ringin source tagging is the main direction for new technology developments, knocking out the labour component of applying and removing tags at the point of purchase.
“Wage percentage wise it’s one thing you don’t have to look after at store level. The most effective use of EAS is when you can get the manufacturer to tag the product, which means the manufacturer wears the cost of the tag and the labour.
“It also means you can conceal the tag in the product or packaging.”
Mark Gentle, MD of Checkpoint Systems said his company prided itself on being one of the only suppliers to implement a true RFID system for retail.
“People never know what product had a radio frequency tag embedded in it.
“You could embed it in 40 of your hottest items, and in five months time it could be another 40. You keep rotating it and you do your analysis by that,” he said.
CCTV is increasingly being used by retailers and can operate effectively when integrated with an EAS system, so that when an alarm does go off, the cameras are focused to ensure it is recording whatever is taking place.
Ringin recommends that if a camera system is to be used within a retail business, that it be positioned obviously to act as a deterrent.
“There’s no point in hiding cameras because most of the value with CCTV is in knowing you may be monitored. But retailers thinking they can resolve something after the fact because they have it on tape is a real long shot.
“Having a bit of footage of someone doing something doesn’t lead you to actually resolving that, identifying a person, or getting product back. The best value of CCTV is as a deterrent.”
There is varying legislation around CCTV use across the Australian states, so while some states are not required to display signage, Ringin recommends everyone advertise the use of cameras as a further deterrent.
While technology makes up a large proportion of external theft deterrents, other factors include customer service and store layout.
Making sure staff are comfortable approaching consumers and asking if they would like help will foster a positive environment within a store.
Brightly lit stores, with no areas to hide result in fewer shoplifting incidents, as do clever store merchandising, low shelving and racks, and tidy displays.
Store layouts should always consider the POS point, allowing staff to supervise the floor without turning their back to it and acting as a hub for customer activity.
Staff should also know their product and what’s available so that when there is a gap, it is noticeable.
Ringin said being alerted to theft when it happened as opposed to realising at stocktake was most advisable.
“If you are monitoring your stock, you are able to pick up that you’re restocking that you’re not selling and that allows you to make a decision on if you are going to further protect it or merchandise it at another location.
“It’s about the visual and thinking about the risk potential of certain categories of product and treating them accordingly.”
Placing a greeter on the door can not only add theatre to a store, but will also act as a deterrent.
“Having someone on the door can impact on the decisions people make in-store by knowing there is going to be someone there when you go out. It also means that if the system does beep, there’s someone there to react.”
Gentle said there were always new scams in the market and the key for system providers was continuously innovate. “Just because we sold something three years ago doesn’t mean it’s the same today.
“Technology evolves and people’s expectations change, so it’s about building products that retailers want, not what we think they need.”
This feature first
appeared in Inside Retailing Magazine. Click here to subscribe.