Wednesday, November 11, 2009

IS HIGHER SHRINK INEVITABLE IN A GLOBAL RECESSION?

Centre for Retail Research, Nottingham UK
Outstanding article on retail crime trends as they present themselves to retailers today. Much more reliable and less filled with moral panic button propaganda than the numerous posts below on this blog--nearly all of which refrence the same source as credible and worthy of serious consideration.

A couple telling quotes from the article are instructive:
It is probable that recession, unemployment, uncertainty, lower incomes and fear of the future may make some people more willing to steal or overcome their reservations about buying stolen goods. Without seeking to minimize their crimes, others may feel that the business, national and international failures which permitted the banking crisis and created a global recession devalues honesty and gives them some entitlement or justification to commit retail theft.

Every retailer is scrutinizing the amount spent in each budget category, including loss prevention. LP professionals are reporting this year that the loss prevention budget is very restricted and that they have to make the best of what they have received. But in a tough commercial environment like the present, where sales growth and operating cost control are both equally difficult to manage, loss prevention and shrink management may prove to be one of the few areas where improvements in net profitability can be made.

Cuts in loss prevention spending at a time when potential crime is rising may well be extremely short-sighted - particularly if the losses from higher shrinkage and out-of-stocks prove to be much greater than the gains from reduced LP budgets. Obviously every retailer has to make its own decision. Smaller LP projects dealing with discrete issues such as improving LP outcomes in the worst high-shrink retail outlets, new processes to reduce losses of high shrinkage lines, and investigating employee theft can produce rapid payback. The Pareto 80:20 rule still has wide applicability in loss prevention and means that the discriminating LP executive who chooses his or her projects carefully can have a considerable impact over performance. This is even more important now when the gains in shrinkage reduction are under threat

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