Burdened with rising cotton and labour costs, international rivals snatching market share and competition from online retailing, it’s no secret that Australia’s fashion retail sector has been doing it tough lately.
However, the recent results of the fifth annual Global Theft Barometer have identified a more silent threat which has been steadily increasing over the past few years.
The menace is shrinkage, often stemming from employee theft, shoplifting, administrative errors and vendor fraud. Results show shrinkage has now had its most significant increase in three years, rising 2.9 per cent over 2010/11, which translates to a $1.94 billion loss for Australian retailers. Clothing and accessories were identified as the second most stolen items (3.6 per cent) in Australia. Outerwear came in at 2.9 per cent with perfume at 2.8 per cent.
According to local shrinkage management vendors, fashion is indeed one of the only categories to experience a rise in theft from year to year. So says Checkpoint managing director Mark Gentle.
“There’s a lot of money in the apparel side of things and unfortunately it’s one sector which keeps increasing in terms of percentage each year, since 2007,” he says.
While the sharp and continuous rise in shrinkage can be pinned on a combination of factors, Gentle says there are a few main culprits which have accelerated the increase, particularly where fashion retail is concerned.
“I think there are a few key contributing factors to the sharp increase in shrinkage,” he says. “First, I think in Australia, we are starting to see an increase in organised crime, we are also seeing an increase in internal theft, particularly on branded and ‘hot’ products, that have wide public appeal that can be expensive and easily stolen; and at the same time we are also seeing products which are more necessities stolen, indicating that in some areas people are doing it tough and struggling.”
Exacerbating the problem are improvements in technology, social networking sites and online shopping, including online auctions, which have also made it easier for potential thieves to find product, steal it and sell it off.
“We’re also seeing groups begin to target particular brands or particular areas within retail, where they are stealing to order and they are then using the internet or other outlets to move those products on. And this in particular is quite high on the apparel side, in terms of branded products in the apparel industry,” Gentle says.
For smaller operators, the inability to identify shrinkage and combat asset loss could eventually lead to business collapse. Asset Shrinkage Solutions director Phil Hutchines says the most obvious point of stress is a fall in profit due to theft.
“It’s a huge problem because shrinkage basically equates to a shrinkage of your profits. If you can’t identify that then obviously it’s going to be an issue and it will hurt your business. If you have evidence of shrinkage – empty packets, hangers left in change rooms without clothing – and you don’t address it, then obviously it will result in not making a profit and business collapsing.”
Now, as the Christmas period begins – bringing with it more seasonal/casual staff, more foot traffic and a higher risk of shoplifting, employee theft and administrative errors – experts are beginning to sound alarm bells for retailers to take action and implement or improve their asset protection strategies.
The plan of attack for fashion retailer can be varied, although for fashion retailers Electronic Article Surveillance (EAS) is considered to be one of the most successful and effective anti-shoplifting systems available.
Secure displays, for items such as jewellery, and gate detection systems – such as those used in larger department store exits – are also popular, however, Gentle says a simple focus on customer service and a holistic approach to training and recruitment is usually the best form of defence.
“Retailers who recognise that loss prevention is not one single issue have the best results in reducing their shrink. There is a need to work collaboratively to combat shoplifting, employee theft, vendor loss and administrative/process error all at the same time,” he says.
“Our economy has also been quite robust in recent times, which means a high turnover of staff in general for retail – but if you ask how many of them actually undertake police checks before hiring, you may be surprised by the responses. Some bother, many don’t. Many retailers also don’t talk to their staff about the impact of the losses caused by shrinkage and the importance of good customer service.”
Making sure shop staff are reliable and genuine becomes all the more essential, given that the Global Retail Theft Barometer also recorded that internal employee theft remains the biggest cause of shrinkage at 40 per cent and continues to outweigh that of shoplifters at 37.3 per cent.
However, barring internal precautions, retailers now also have the option to hire external assistance, by outsourcing to an independently owned specialist retail loss prevention provider. Contracted on request, these companies can provide services such as loss prevention officers (LPO) store detectives, retail security officers, and asset protection officers or floor walkers for an extended or specific period of time.
Asset Shrinkage Solutions, which counts Kmart, Target and Coles as some of its key clients, is one such company, although director, Phil Hutchines admits it is difficult to determine when his services are most effective.
“There’s not really a particular time when our services are most used, it really depends on the retailer, although for some Christmas is a busy period. For other businesses the most vulnerable times are Thursday and Saturday, because they’ve got the casuals in and less customer service, and that makes it harder to prevent theft.”
Despite having made 6,300 apprehensions to the value of $387,000 for the year ending September 30, 2011, Hutchines echoes Gentle’s sentiment and says that ultimately, while his services can help, it’s up to retailers to educate and train their staff.
“The reality is, that the best loss prevention strategy is customer service – and particularly in clothing shops. Because if the staff member is vigilant and provides good customer service by assisting the customer at all times, and being onto them in terms of customer service, they are not allowing a potential thief to steal.”
