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ACCEPTING LOSS OR
PROTECTING PROFIT?
RETAILERS CONTINUE TO STATE THAT SHRINKAGE IS
UNAVOIDABLE BUT HUW THOMAS, COO AT PMC SAYS
RETAILERS SHOULDN’T ACCEPT THE INEVITABLE.
Huw Thomas
THE retail industry is having a ‘criminal’ element, and the costs, once they’re in place weeks to build a case. Data is
tough time. Retailers majority somewhere in the business costs reduce. often inaccessible or ‘lost’,
constantly search for ways to middle. Leaving aside Retailers that have making it difficult to revise
deliver a profitable business. deliberate theft or fraud, implemented loss prevention procedures or find sufficient
Yet few adequately tackle employees do things because solutions experience payback case-value to prosecute. Loss
‘shrinkage’ or more accurately they can. People take the line periods of between three and prevention tools enable
‘loss’. Many see loss as an of least resistance, so if six months. And most of that retailers to isolate poor
inevitable cost of doing systems allow employees to comes from controlling theft. processes or develop an
business. Why? The key skip processes they will. If it’s Once they start dealing with effective prosecution. In turn,
question is: “If you’re losing easy for them to ignore a 28- their business processes and employees understand what
20% of your profits to loss day refund policy, they will. If procedures larger paybacks processes to follow and
why don’t you do something it’s quicker and easier to give arrive. offenders are more likely to
about it?” a refund in cash rather than Consider a retailer with a receive a large fine and a
Much of the problem stems to a credit card, which the turnover of £1 billion and a criminal record.
from the word ‘shrinkage’. It is customer may not have with loss of 1.5% – that’s £15
a comfortable word; it brings them, they will. million vanishing off the ‘MY TEAM JUST DON’T DO
to mind a natural process such This is not employees bottom line. Assume 20% due THAT’
as evaporation. Loss is an stealing; it’s the retailer to poor processes, 30% Many retailers argue: “Our
uncomfortable word, but it’s allowing loss to happen. If external theft and 50% team does not steal from our
more accurate. Although many retailers neglect to provide caused by internal theft. So team.” These are laudable
retailers migrate from employees with clear the retailer loses £7.5 million sentiments but largely
‘shrinkage’ to ‘loss’ the more responsibilities and through employees inaccurate. Retailers also
astute now see ‘profit procedures, or these are too unilaterally giving themselves develop cultures that
protection’. This is a better ambiguous to understand – pay rises, retailers allow a everyone shares the same
description as it focuses loss is the result. further £3 million to team spirit and ‘lives the
retailers on anything that leads Rather than retailers disappear because of poor brand’ unfortunately this is
to falling profit. More than complaining about loss hitting processes. Even if retailers too much belief in you own
theft; it also covers policies, their business they should be control only 10% they can mission statement.
processes and compliance. saying: “We’re allowing loss save over a million pounds in
to happen.” a year. That’s the business case CHANGING THE CULTURE
“A WAY OF DOING BUSINESS There are loss prevention for implementing a loss When questioned, employees
AND IMPOSSIBLE TO STOP” solutions available; however prevention system. involved in process-driven loss
That’s the point – it isn’t. Most there is resistance to making The traditional business or direct theft rarely see that
retailers place shrinkage the initial investment. position of loss prevention is they’re hurting anyone;
between 1% and 2%, which Retailers look at the ‘cost-of- part of the problem. It’s either neither do they see it as
many consider tolerable. The loss’ against the ‘cost-of- an audit issue or the committing a crime. Many
justification is: “Our loss level prevention’, and see a capital responsibility of an ex- practices have been going on
is not that bad compared to cost spike – so many retailers policeman reporting into for so long they have become
the average, so why should live with loss rather than the operations or finance. Loss is ‘the way it’s always been’.
we focus on it? Besides it’s solution. integral to the business but This is not a tough business
endemic in the industry.” The Because retailers focus retailers need effective loss decision. Up to 20% of profits
point is measure how and capital on opening more prevention systems to see disappear to loss. A sizeable
where that loss occurs – and stores or increasing ranges, what’s happening. element of this can be
then do something about it. they close the door on loss Many loss investigators and controlled and prevented. All
In any human environment relegating it to ‘out of mind’. auditors work on the premise it requires is the correct mix of
there are those ‘on the side of Although implementing loss that ‘something doesn’t feel systems, people, procedures
the angels’, then there’s the prevention solutions impact right’, however, it can take and policy. RF
10 • RETAIL FRAUD
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