Retail loss is on the rise worldwide, reaching $119 billion in 2011, and accounting for 1.45 percent of retail sales—the highest shrink rate yet recorded. The pace of increase across the globe averages about 6.6% with Europe (7.8 %) and the U.S. (6.
0%) showing the highest spike.
In the U.S., shoplifting, employee and supplier fraud, organized retail crime and administrative errors cost retailers $41.7 in 2011, representing 1.6% in sales.
The really big losers in 2011? Apparel retailers. Overall apparel loss was 1.87% of sales, with clothing and accessories averaging 3.6%. The number one source of Retail Loss continues to be Internal Theft/Fraud.
According to the 2011 Global Retail Theft Barometer, released by the Center for Retail Research (CRR), the $119 billion in retail loss breaks down like this:
- $18.4 billion attributed to employee theft
- $14.9 billion to shoplifters
- $6.6 billion to internal error
- $1.8 billion supplier error/fraud
Looking at internal shrink, the CRR study shows that in 2011, 697,000 employees were caught in stealing incidents that averaged $1,764.76 per incident. This is a significant amount. Although more external shoplifters (customers) were nabbed in 2011 — 1.7 million – the average consumer theft reflected a much lower per incident value; just $373.64.
The Challenge for Retailers
Retailers are aggressively seeking new ways to stem retail loss. In 2011, investments in “loss prevention” measures went up by 5.6 % for a total of $28.3 billion. This figure includes security personnel as well as security equipment, including armored cars. Interestingly, while retailers
increased their overall spending on “loss prevention” and security by 5.6% over 2010 to $28.3 billion in 2011, the amount invested in equipment declined.
In my view, “Loss Prevention” is inaccurate terminology. In actually, there is no methodology or equipment for “Loss
Prevention”—only loss reduction. Effective loss reduction is the true goal of the industry, and success in reducing loss, or shrink, is dependent on quality Loss Intelligence (LI), an inherent functionality and capability of item-level RFID.
RFID for Loss Intelligence
The high degree of visibility enabled by item-level RFID provides a clear, 360-degree view of what is happening with your merchandise as it moves throughout the supply chain. Item-level RFID data shows you the When, Where and What of loss, leading you to the Who and How, all the while keeping the inventory highly accurate by making the appropriate adjustment.
There are two things that RFID does, which no other technology can do: Provide the intelligence to identify shrink and as important, identify what has been lost in order to maintain high accuracy at every level of the supply chain, which triggers the proper ordering/forecasting/replenishment tools to continue to function efficiently even though shrink in occurring. So, until you have put a stop to all theft, RFID will keep you up and running smoothly.
When American Apparel implemented RFID in its retail stores, internal theft dropped by 55 to 75%. Macy’s and other retailers who are deploying RFID to improve inventory visibility are finding that in addition to a reduction in Out-of-Stock items, increased revenues and a decrease in inventory-related expenses, RFID is proving invaluable for identifying when and where shrink is occurring within their supply chains. In a recent survey by the Center for Retail Research, 52% of retailers surveyed say that the Loss Intelligence captured by RFID is a critical factor in minimizing shrink. In fact, leading retailers now include “source tagging” and tracking by individual SKU in their best practice recommendations for reducing loss.
If you are considering RFID for inventory visibility, or loss mitigation, the time is now. To learn more about RFID for Loss Intelligence, visit http://www.truecount.com or call us (1.800.403-7118) to schedule a complimentary consultation.