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Feature
problem, there may be nothing they have received. But in a tough
inevitable about any increase in the commercial environment like the
costs of crime. present, where sales growth and
Just what are these retailers operating cost control are both
doing to fortify their organizations equally difficult to manage, loss
against shrink threats? First, it’s prevention and shrink management
important to understand that may prove to be one of the few
improvement doesn’t necessarily areas where improvements in net
require revolutionary change: As profitability can be made.
many commentators have pointed Cuts in loss prevention spending
out, LP is about doings lots of at a time when potential crime is
different things right rather than rising may well be extremely short-
doing one thing brilliantly. That sighted – particularly if the losses
said, a few best practices are from higher shrinkage and out-of-
emerging, based on the GRTB and stocks prove to be much greater
other data, and from conversations than the gains from reduced LP
with innovative retail leaders: budgets. Obviously every retailer
• Take a strategic view of shrink has to make its own decision.
management. Many retailers Smaller LP projects dealing with
respond to the threat of the discrete issues such as improving LP
moment, be it shoplifting or outcomes in the worst high-shrink
organized retail crime. But the retail outlets, new processes to
smartest companies see shrink reduce losses of high shrinkage
management as an inter-related lines, and investigating employee
set of business processes, theft can produce rapid payback.
facilitated by smart technology The Pareto 80:20 rule still has wide
investments. Shrink management applicability in loss prevention and
should be part of a retailer’s most Signs of an new employees from which to means that the discriminating LP
vital business operations from increase in choose. Even when considering executive who chooses his or her
both a planning and deployment violence local privacy laws, most companies projects carefully can have a
standpoint. can, and should, do more and considerable impact over
• Monitor and understand the better screening of new performance. This is even more
latest crime trends. This may seem employees. important now when the gains in
obvious, but we continue to be • Raise the profile of loss shrinkage reduction are under
surprised by the number of prevention inside your company. threat
retailers who don’t keep track of This is similar to the trend in Figure 1 shows the relationship
local crime patterns, or who don’t information technology between total shrinkage by country
meet regularly with local law- departments in the 1990s, when and total LP spending (both
enforcement agencies. Following chief information officers started expressed as logarithms). It shows
these trends, for instance, help to be viewed as strategic business that in spite of some fluctuations
retailers understand what kinds leaders, not technical personnel around the trend, there is a
of products are most at risk, and who kept computer systems relationship between losses from
what steps thieves are taking to running. Having loss prevention shrinkage and LP spending.
go after this merchandise. be seen as a strategic activity will Countries with higher shrinkage
• Make LP policy compliance a require new tools to measure its naturally spend more on security to
standard part of day-to-day effectiveness and demonstrate keep the problem under control. At
business activities. This is an area return on investment. a time when retailers are under
where many retailers can make • Stay up to date on your shrink threat, where world conditions are
quick, measurable and cost- management technology no longer benign, and crime and
effective improvements in their investments. Understand what’s shrinkage are likely to increase,
shrink management. Regular working for you and what needs businesses need to be sure that
audits of compliance activities to be updated, altered or they have taken care to combat the
and ongoing training are replaced. higher crime losses that they
essential, and not enough potentially face.
companies are actually making LOSS PREVENTION SPENDING Retailers spent $25.5 billion in
this a standard procedure. Every retailer is scrutinizing the 2008 on loss prevention and
• Do more thorough checks of new amount spent in each budget security, equivalent to 0.33 percent
hires. While nobody wants to turn category, including loss prevention. of retail sales. Of this total, more
into “Big Brother,” there’s no LP professionals are reporting this than one-half (54.8 percent) was
doubt that the economic year that the loss prevention spent on security personnel, both
downturn has created a much budget is very restricted and that in-house and hired from third-party
larger pool of potentially viable they have to make the best of what corporations. LP personnel are an
24 • RETAIL FRAUD
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