payments - Retail Systems

RS
28 RS June - July 2012
supplement loss prevention
Shrinking feeling
With the UK economy looking very much the worse for wear, shrinkage
(crime, waste and error) continues to threaten retailers’ ever tightening
margins. Dave Adams finds out what role technology plays in combating
this expensive problem
Shrinkage rose during 2011, to 1.37 per cent of sales,
according to the Centre for Retail Research, up from the
1.29 per cent recorded in 2010 but roughly level with the
figure for 2009. In 2011 customer theft cost UK retailers £2,146
million, employee theft cost £1,765 million, supplier fraud £191
million; and card fraud £120 million. It’s also important to bear in
mind that a huge amount of retail crime is not actually reported
or even recorded. The CRR estimates that total costs of retail
crime, including security costs, were £5,429 million in 2011, up
from £4,840 million in 2010.
But shrinkage as a proportion of sales has fallen in the
past ten years, having reached 1.77 per cent in 2002. Might
technology that was intended to tighten security and reduce
waste take some of the credit?
Security technologies are becoming more sophisticated, but
so is the way some retailers use them to address shrinkage at
a strategic level, says Jason Trigg, CEO at the Cardinal Group.
“There has been a change from a traditional ‘cops and robbers’
form of security to a drive to understand and analyse data.”
More UK retailers are considering using business intelligence
and analytics software supplied by companies like WeDo
Technologies. Its customers include Portuguese retailer Sonae,
which has stores across Europe, the Middle East and Latin
America. Sonae uses WeDo’s RAID Business Assurance solution
to drive more efficiency out of operational costs. Jorge Santos,
knowledge and supply chain solutions manager at Sonae, says
the solution has proved to be particularly useful for reducing
shrinkage in lines such as perishable foods.
Reducing crime
Another provider, Hicom, now hosts risk management
software for several major UK grocery retailers, helping to
reduce crime and fraud, including fraudulent ‘slip and fall’
compensation claims. Hicom has also been instrumental in
initiatives designed to share data gathered by retailers for
proactive risk reduction activity.
This data can help retailers to identify security threats. For
example, such data has helped to reveal the big rise in meat
theft in recent months. Research commissioned from the
Centre for Retail Research by the Financial Times earlier this
year revealed that supermarkets’ shrinkage rates for fresh meat
rose from 2.64 per cent in 2010 to 2.89 per cent in 2011, a
year-on-year rise of 9.5 per cent. Only analysis of the data can
show retailers this level of detail, so guiding their loss prevention