Total losses attributed to retail shrinkage hit $34.5 billion last year, “positioning retail crime as the largest form of property crime,” according to Dr. Richard Hollinger, professor of criminology, law and society, University of Florida, Gainesville, Fla. And it shows no signs of easing anytime soon. Indeed, the rate of shrink remains on a five-year climb, according to the Loss Prevention Research Council (LPRC), Gainesville, Fla.
But retail shrink is now challenging retailers in new ways. Traditionally, chains have focused their shrink reduction efforts on such internal and external loss factors as shoplifting, employee theft and, particularly in recent years, organized retail crime. Today, however, operational factors — including returns, gift cards, maintenance of raw materials and perishables — and merchandise movement across the supply chain are also viewed as contributing to shrink levels. And as retailers integrate more in-store digital touchpoints to support their customer engagement strategies, they are creating even more opportunities for loss (see related story).
Industry experts say the key to combating all these varied loss factors is to tightly integrate the loss prevention team into IT planning — especially as chains begin implementing more customer-facing digital solutions.
“LP needs to be at the table at the planning stages of any IT project,” said Joe LaRocca, VP loss prevention, National Retail Federation. “LP can look at these proposed technology solutions, and share thoughts on potential ways criminals will try to crack systems or intrude into software.”
Some retailers are already integrating the expertise of loss prevention teams into information technology planning. Gap Inc. is one company that is bullish on the value of aligning the two groups. By merging the expertise of the chain’s IT and LP teams, “Gap is improving returns management, exception reporting and source tagging order management processes,” according to Orlaith Murphy, senior director, loss prevention, Gap, San Francisco.
Apparel retailer bebe stores takes this strategy one step further. The company is leveraging its LP team’s operational expertise, a move that will create a cross-functional team that focuses on loss prevention, field marketing, inventory management and revenue as a whole.
“We need to work smarter, not harder, so we started tapping our team’s different skill sets,” explained Brent Hamlin, senior director of loss prevention, bebe stores. “In our case, one executive was taking financial courses; another was proficient in SQL coding. By discovering those specific tasks, you improve operations,” including loss prevention strategies and decisions.