Theft Hits Retail in the Bottom Line

By GMDC

Whether your business is as a retailer, wholesaler or manufacturer, it is more than likely you will experience some degree of retail theft. The list of items that are stolen is endless and spreads across all product categories in general merchandise, health and beauty. The risk of theft has only grown with the introduction of higher priced items in categories such as smoking cessation, OTC analgesics and allergy, electronics, razors, cosmetics and perfumes. The percentage product loss between manufacture and point of sale, or shrinkage, is about two percent of sales and higher. While that may sound low, it means the loss of $31 billion due to theft, according to the National Retail Security Survey.

The number one source of shrinkage for a retail business is internal theft from employees, including discount abuse, refund abuse an even credit card abuse. Coming in a close second is shoplifting, costing retailers about $10 billion annually.

The National Association for Shoplifting Prevention indicates that 25 percent of shoplifters are kids and 75 percent are adults. Of the adults shoplifters, about three percent are "professionals" who steal solely to profit from the theft. These shoplifters are responsible for more that 10 percent of total retail dollar losses tied to theft.

There are a vast number of tips on how to deter shrink. These include adjustments to store layout and the arrangement of fixtures and products to minimize blind spots. Items that are particularly high on shoplifters' lists can be placed behind counters or locked away. Proper placement of electronic article surveillance (EAS) tags, the use of camera domes and proper employee training all can help to minimize shrink.

There are also new security programs on the way. MIT-Andrews has introduced a "Smart-Key" programmable encrypted key and switch system that maximizes access to products but allows store employees the ability to disarm a merchandising display's security alarm for a designated period of time before the system automatically rearms itself.

With retail self-service sales increases predicated on allowing consumers to touch and feel products through shelf availability, unique display and merchandising concepts, what can retailers and manufacturers do to help control retail theft?

Some product categories have been restricted to consumers by placing products behind counters, in locked cabinets or, in some cases, delisting products or categories completely. With more and more high price and/or highly sought after products being introduced, both retailers and manufacturers must work together to address the issue of retail theft.

The advent of EAS tags, clamp shell packaging and unique shelf merchandisers that prohibit shelf sweeps have been introduced by various manufacturers and retailers in an effort to prevent retail theft. The National Retail Federation is working with the FBI in an effort to track and prosecute "professional" shoplifters. Are these efforts enough, or what further steps does the industry need to take in the effort against retail theft?

Discussion Questions: What products or categories are being most affected at retail due to increased theft? What can retailers and manufacturers do to address retail theft?