A recession is no time to cut risk management budgets, yet retailers are so busy chasing new business, they risk being distracted from whats creeping out the back door, says Richard Paterson, Business Development Manager at Hicom.
Large retailers have recently been seen to keenly embrace big new ideas from their staff, in the belief that the best inspiration can come from out-of-the-ordinary sources. Willing to pilot a few out-there ideas, some of these retailers are taking on board staff suggestions on how to maximise store sales and then measuring the results to see if a wider roll-out might be effective.
When it comes to new ways of capturing customers, boosting sales and growing loyalty, executive boards tend to be all ears to new ideas and approaches. Its a shame the same doesnt apply when innovative strategies for risk management are mooted because of concerns with quantifiable ROI, particularly where these relate to crime reduction.
The problem is no secret. Every year, the average bricks-and-mortar retail business loses between 1% and 3% to shrinkage (stock theft, loss and breakage), which is a fairly hefty financial burden for retailers to bear, especially in the current climate.
Yet many do. Even those retailers which pride themselves on innovation, and on doing all of the data crunching, cant put their hands on their hearts and say theyre doing all they can to bring those numbers down. Theyre so busy bringing in new business that loosening their grip on risk management doesnt seem such a big deal.
In the meantime, the British Retail Consortium's annual Retail Crime Survey found last year that a shoplifting crime is being committed every 90 seconds in British stores a problem that was expected to get worse with the onset of the current recession. Shoplifting is now the most costly crime for shops, according to the BRC, accounting for 64% of all retail crime losses.
Slackness now means problems later
The danger of complacency, and this is particularly acute where retailers are freezing or cutting security budgets, is that stores that lose their edge in preventing crime soon become known as a soft touch. Building a reputation back up can take a lot of time and money.
Standing still on shrinkage containment is the thin end of the wedge. Before long, crime prevention, or risk management, becomes an uphill battle that retailers just cannot contain. Being known to criminal networks as lacking strategies to curb crime is attractive in itself, often escalating this problem even more.
Part of the problem is that the discipline of crime prevention and risk management is often lumped in with security, something thats seen as a non-core support activity that should be outsourced and controlled for costs. With a recession in full force, such costs are under greater pressure than ever. Ironic really, given that crime figures are surging upwards, as an increasingly desperate public looks for easy ways to maintain their standard of living.
The statistics confirm that opportunistic thefts are on the rise, from forgotten drinks placed under the shopping trolley, to clothing slipped under a jacket, or lipsticks, batteries and razorblades into a pocket. Professional gangs look for high-value items that are easy to resell easy pickings such as DVDs, toiletries and the like. The hard-pressed parent may home in on nappies, clothing and food. Thefts of clothing are up 20% this year. Exclusions (repeat offenders being banned from particular shops) are up 40% on last year.
Acting on intelligence
The challenge is to spot the problems in the first place. Crime containment in retail is about good management practice. All of the facilities and technology solutions are there now to make identifying, reporting and addressing areas of vulnerability quick and easy, even for those with few or no IT skills.
Some retailers are capturing the data the products that go missing most often, suspicious patterns of behaviour, including those among their own staff but are failing to use it i.e. to report and act on it effectively. Perhaps this is because the systems used are old, take too long to yield meaningful data, or have difficulty differentiating between data on serious robberies versus single thefts, preventing actionable conclusions from being drawn.
Too often, retailers prefer to do as theyve always done. If an incident is recorded, a box is ticked, and a report will be filed sometime in the future, for supervisors to mull over. But does this lead to a review of current practices, or innovation and change? Rarely.
And why? Because the powers that be are too busy poring over customer loyalty innovations and new marketing promotions which top up the purse. If theyre leaking a small percentage of that new revenue from the bottom, they can live with it. Or, more likely, they have to, because risk management isnt an integral enough part of the business for them to be able to do anything else. But in fact it should just form part of the ongoing process contributing to driving sales, increasing efficiency, and impacting on profits.
Crime is a tricky problem to manage effectively, in any case. Appear too threatening to customers, and it could send out the wrong message, deterring them from choosing the store for their primary purchasing.
But this is exactly why monitoring and intelligence is so crucial. Only by profiling the problem can retailers act proactively, discreetly and effectively.
As well as looking backwards at data and being able to report that Store X suffered Y number of thefts during the last quarter, retailers will also benefit from capturing data that spots trends as theyre happening; enabling store managers to optimise the store layout, and the use of cabinets and cameras, so that the temptation is removed from potentially wayward customers.
Another important strategy must be to pool trend data, comparing it with findings from other stores in the area, so that gangs of known shoplifters can be tracked, or a rise in the theft of certain items can be deftly addressed.
Systems have now been adopted in large shopping districts such as Londons West End, and across entire counties like Kent, to monitor and pre-emptively address retail crime across a designated geographical area, through intelligence gathering and sharing.
By sharing knowledge and costs, retailers can achieve more with less. Statistics show that a good crime prevention partnership can reduce robberies and thefts by 20-30%.
Retail is an unforgiving, fiercely competitive business environment, where the 1-3% really does matter, especially as stores continue to slash prices to entice recession-weary consumers to spend again. Maintaining margins can only be achieved if costs are reduced in line with prices, and risk management is one of the more obvious routes to do this without harming the customer experience.
Dare to be different
This is particularly the case with the rise in creative new solutions and services which can be hosted and managed remotely, by specialist third parties. Capturing, processing and interpreting the trends on a retailers behalf, such services remove the burden while improving a stores focus and speed of response to new problems.
But, whatever the approach taken, innovating now is vital. Tough trading conditions or not, this is no time to be complacent. However modest your crime prevention resources may be this year, the pot could be even smaller next year. Slip backwards, and youll have to spend a lot more to get back to the same point - and in the meantime crime will rise, profits will be eaten into, and opportunists will gain the advantage.
Can your business really live with that?