With the holiday season fast approaching, a study report reveals that retailers in Australia will experience both their highest sales and shrink distributions during this period.
According to the 2016 Retail Holiday Season Global Forecast, 35% of the losses Australian retailers incur due to internal and external theft will come during the holiday season.
Theft from internal sources (primarily via employee theft and other sales reducing activities) and external factors (primarily via shoplifting/organised retail crime), which is referred to as shrink by retailers, is at its peak during the holiday season, which also sees 29% of annual retail sales.
75% of surveyed Australian retailers said external theft had increased in Q4 2015 versus Q4 2014.
Most stolen items during the holiday season are items that are easily concealed (batteries, razors), easily removed from packaging (skincare, cosmetics) or required for entertaining during the Christmas season (liquor, fresh meat).
Other items that were reported as most stolen include children’s toys, nappies and quilt covers.
The study, underwritten by an independent grant from Checkpoint Systems, Inc., was carried out by Ernie Deyle, a retail loss prevention analyst, and provides an analytical view of business risks that major retailers face during this holiday season.
The 13 markets covered in the report include North America, Europe and Asia, and include the U.S., Belgium, France, Germany, Italy, Netherlands, Portugal, Spain, UK, Australia, mainland China, Hong Kong and Japan.
Checkpoint Systems Asia Pacific executive Mark Gentle said retailers can take precautionary measures.
“Building holiday inventories earlier and specifically for high-risk items may lead to increased sales reduction pressures, such as markdowns and shrink throughout the fourth-quarter.
"The report reveals that nearly 30% of sales reducing activities are incurred during this time period.
"This leads to increased shrink, and puts additional strains on brick-and-mortar retailers already reeling from an ongoing inhospitable retail market.”
According to the study, Australia is expected to record the highest shrink loss for this holiday season among all the Asia Pacific markets surveyed at 35%, followed by Japan (31%), mainland China (30%) and Hong Kong (30%).
The rate is more than 30% higher than the first two quarters of the year.
In Australia, the cost of retail loss to shoppers in 2016, as absorbed or passed on from retailers, is expected to be US$61 per person on average, of which 58% will be incurred during the holiday season.
These increases in losses place an enormous burden on retailers and, ultimately, on honest consumers who pay for it in higher prices.
“For most retailers, wholesalers and distributors, inventory -- including the space to store it -- is the largest single cost of doing business.
"While reducing inventory means lower costs, insufficient inventory leads to out of stock situations, lost sales and unhappy customers. Therefore balancing these two factors is critical to profitability and growth, particularly in omni-channel environments,” said Gentle.
“The use of advanced data analytic tools, inventory management strategies, along with technologies such as RFID will provide retailers with enhanced visibility to track merchandise as it moves through the supply chain to distribution centers, retail backrooms and store shelves, helping retailers reduce losses due to shrink and other causes, ultimately increasing the financial contribution of each item.”
The report recommended that retailers take the following actions to address the issues:
- Update planning and financial performance models to properly account for advance deliveries of seasonal products, since the seasonal build starts earlier now than in the past. Enhance oversight of seasonal/holiday merchandise.
- Employ point of sale data analytic technology to stabilise inventory loss and ensure on-shelf availability while enhancing product protection counter-measures.
- Properly train seasonal help to manage the increasing complexities of the season.