2. Stop trying to catch your way to lower shrink. It doesn’t work. “Catching” is simply insignificant. Research shows that only 36% of store shrink results from theft. Further, retailers only catch or stop about 8% of all theft. Excellent awareness and in-store practices can accomplish both (15%) better theft control and (22%) better store profit from operations from shrink control. And, one point cannot be denied: store teams do what they know how to do and what they are expected to do; no more, no less. If you want better shrink reduction and profit performance, you simply must train your teams in better practices proven to get you there. ^1,2

3. Avoid “QF” Training. Quick Fix, one-off training most often doesn’t “stick”. QF training makes us feel better because we’re doing something, but quality training must be bigger and better thought out than quick-fix or sporadic in nature and designed to impact beliefs and behaviors, both short and long term. Training must engage and inspire every store team member through curriculum-based, culture-impacting training to join you in your drive for profit through shrink reduction. We must educate, teach, train and pro-actively coach store teams to be able to see the many faces of shrink as profit loss. It’s an “evolution” that makes shrink training bigger than waste or damage or even theft. People are the real solution and cure when they are taught, coached, engaged and motivated properly.

4. Stop Relying on Technology. Technology assists people to do their job, but technology is not the cure. People using technology, people following best practices and people who understand the business of profit-making are at the beginning and end of the optimal profit equation. Technology can certainly provide quicker and more data, quicker (providing you don’t create a paper-glut) but people have to use that data. Technology can monitor activity and report it and even see it, but I’ve never met a camera or a computer that can tab a shoplifter on the shoulder and ask for your product back. Technology assists. People do.

5. Forget Your Budgets. Budgets are based on anticipated, accepted or expected shrink levels. We build-in historical profit loss because we don’t know what to do to eliminate it. Budgeted profit always builds-in a factor of your historical shrink level. I say: Stop It! In 2012, we can exceed expectations. Let’s calculate your optimal profit margins, determine your best case shrink loss based on your operating conditions and accept no less than optimal profit. This often requires a fresh look, an un-accepting or unbiased eye at your operations and practices and technology utilization.

6. It’s NOT About Shrink. Shift the paradigm. People get stuck thinking too much about shrink and not enough about optimal profit. The 2011 National Supermarket Shrink Survey reports that “average” shrink is 2.70% of retail sales and net profit is 1.47%. Top performing companies report 1.72% shrink and nearly 2.62% net, bottom line profit. If you are “average, your optimal profit (which combines improvements is shrink reduction, labor saving, sales increase and cash flow) has
potentially a 78% upside.

In any shrink reduction initiative or expenditure, we must couple every concept of shrink prevention with all related “profit” opportunities that can be achieved. In truth, loss prevention training should discuss shrink as an obstruction to profit. Shrink is about profit. We have to teach Store Manager’s and teams the business of profit-making and Supervisors must support and reinforce this thinking at every opportunity. What’s needed is a cultural thinking shift to get out of old expectations and into new ones.  

By now it should be obvious that I believe in “people”. Even in the toughest of hiring and retention environments, I believe that people are at the essence of retail sales and profit making. Avoiding these 6 mistakes and not allowing yourself to be sold a false hope or ill-founded expectation can and will lead you to higher profit.

When it comes to shrink control and prevention give me a well-trained store manager leading a well trained store team and supported by an excellent and well trained supervisor, and I’ll give you best-in-class shrink control and optimal profit.

¹ Numbers expressed in parenthesis may vary by company and implementation effectiveness.
² Numbers expressed not in parenthesis are from the 2011 National Supermarket Shrink Survey.

2011 research by FMI and The Retail Control Group into the ‘causes and cures’ of retail supermarket shrink indicates that 64% of store shrink is directly caused by a breakdown in or the absence of effective store operating best practices, while 36% of store shrink is cause by theft and/or misdeeds.  

With the evolving recognition of this condition, 47% of companies report a growing shift in the roll of Loss / Asset Protection departments to expanded focus into operationally centric “profit protection and realization”, and a more collaborative partnership with store operations.   

54% of responding companies said they do not have formal LP training for District Managers, Store Managers, cashiers and/or employees. When loss prevention and shrink control budgets are examined, evidence suggests a disproportionate allocation of budget dollars when comparing company investments in technologies to catch theft versus budget dollars allocated to training of store personnel in effective store operating practices known to prevent shrink loss.

Survey respondents reported overall store shrink at 2.70% of retail sales, with the low average of 1.76% of retail sales and the high average of 3.10% of retail sales.

Three (3) emerging key factors:

1. Technology: Certain technologies have become ubiquitous in stores today. Over 82% have Automated DSD, POS Monitoring and CCTV, yet shrink loss remains at 2.70% of retail sales. Emerging Technologies include Store Task Management, Advanced Data Mining Systems and business intelligence analytics. Companies’ further report plans to slow technology investments
in coming years.

2 Integration & Collaboration: Companies that report lower than average shrink utilize cross-functional training of loss prevention, audit and store operations personnel to implement coordinated profit improvement through traditional loss prevention combined with operational Best Practices.

Throughout this survey evidence persists that consistent and on-going store manager and store team operational Best Practices and Loss Prevention training is the number 1 factor in controlling store shrink. Operational controls and
processes form the foundation for all sales and profit optimization efforts.   

3. Control Conditions: Extensive cross-tabbing and ‘cause & effect’ correlation analysis revealed when certain operational “conditions” are present, they had an effect of systemically and significantly restraining shrink loss.

Most evident among these control conditions are 6 influencers:

(1) Formal “Known Loss” Control

(2) Strict ‘Ordering Controls’

(3) Inventory Management and Turnover’ controls

(4) “Connected Store Manager’ with ‘Clear Standards of Operation’

(5) Organizational Best Practices

(6) Measurable Accountability 

When store teams are trained and held accountable to execute these “6 Control Conditions” with discipline the affect is a systemic reduction in store shrink of up to 15%.

Where’s the shrink?

Shrink Fast Facts:

• Companies’ report 66% of stores are of conventional supermarket format and 34% of their stores followed the super-store format.
• 43% of survey respondents reporting using the COST accounting method while 57% reported using the RETAIL method of accounting.
• 29% of respondents reported that stores can ‘positively’ affect their reported shrink loss in 5 primary ways: Forward buying (most common), execute prices early, deal buy, break open quantity packs for inflated price single item sales and writing- off product for credit all practices that serve to mask actual shrink loss.
• 80% of respondents expect shoplifting will increase in the coming 1-2 years.
• 74% of respondents have self-checkout lanes in Super Store format stores with an average of 4.43 self-checkout lanes per store. 58% of respondents have self-checkout lanes in Conventional format stores with an average of 3.25 self-checkout lanes per store.
• Stores reported average net cash shortages of -$6.00 in conventional Store format and -$21.15 in their Super Store format.

Summary:

Significant in the survey findings for 2011 where x primary points:

1. The reveal that 64% of all shrink was caused by the breakdown of Operational practices at the store exposing significant new focus on operational practices to prevent shrink and disrupt shrink causing conditions.
2. The expanded focus of Loss Prevention into a more collaborative partnership with store operations.
3. Certain core technologies are now present in most companies, but shrink remains essentially flat at 2.70%.
4. Continuous training of all operational personnel in the operational best practices to reduce and control store shrink has the most significant impact potential. 

Tips for controlling Backdoor Receiving Fraud, Vendor Theft and Errors by Vendors and Dishonest Employees in supermarket and convenience store retail loss prevention.

·        72% report a medium-to-high confidence level in their physical inventory results – up from 56% in 2006. <read more>
·        Companies with best in class backroom stock level controls reported 60% fewer inventory count “bounce” results and 70% smaller “bounces” than companies with weak stock level controls.

Backroom Organization and Inventory Control. Effective organization and backroom discipline creates a condition that breeds organization throughout a store. Companies that report using strict back-room controls achieve better than average shrink control, cash flow management, labor productivity, sanitation and organizational discipline. Surveyed companies report that optimal shrink and organizational control is achieved when backroom stock levels are kept to no more than  8 – 10% of total non-perishable inventory and further produce to inventory turnover of approximately 15 turns per year. Except as part of an organized forward buying program, surveyed companies reported that excessive back stock negatively contributes to store shrink.

More than spirits are being lifted this holiday season.

During the four weeks leading up to Christmas this year, an estimated $1.8 billion in merchandise will be shoplifted from U.S. retailers, according to The Global Retail Theft Barometer, a survey of retailers worldwide. That’s up about 6 percent from $1.7 billion during the same period last year.

“They shoplift for Christmas gifts, they steal for themselves, for their family,” says Joshua Bamfield, executive director of the Centre for Retail Research and author of the survey.

Sticky fingers are common during the holidays. The crowded stores and harried clerks make it easier to slip a tablet computer into a purse or stuff a sweater under a coat undetected. But higher joblessness and falling wages have contributed to an even bigger rise this year. People steal everything from necessities (think food) to luxuries they can no longer afford (think electronics or Gucci purse).

“It’s really a question of need versus greed,” says Joseph LaRocca, senior adviser of asset protection for the National Retail Federation trade group. “People will rationalize what they are stealing: ‘Oh, I’m feeling the economy. I lost my job.’ But it’s hard to make the argument you need a $900 handbag.”

Experts say the economy’s influence is largely a cop-out. They say shoplifters are stealing for myriad reasons this holiday season that have nothing to do with economic turmoil. Some do it for a rush or thrill. For others, it’s about filling a void. Still others are trying to relieve anxiety, boredom or depression — all emotions that are particularly common during the holidays.

“Shoplifting is generally a crime of opportunity— and opportunities abound at the holiday,” says Barbara Staib, a spokeswoman for the National Association for Shoplifting Prevention, a nonprofit that provides shoplifting prevention education programs. “The stressors that come with the holiday will certainly help them rationalize their need for bad behavior.”

Shoplifting is surprisingly common. An estimated one in 11 Americans shoplift, according to the National Association for Shoplifting Prevention. It bases its information on academic research and information from those who are ordered or choose to enter its counseling programs for shoplifters.

About 75 percent of shoplifters are adults — equally men and women — while kids make up about 25 percent of them. More than 70 percent of shoplifters say they did not plan ahead to steal and they acted spontaneously.

A report from the Justice Department and Federal Bureau of Investigation showed that there were 1.06 million shoplifting offenses in 2010 known to law enforcement nationwide, up from 875,191 such offenses in 2006.

It adds up to billions of dollars in losses for retailers.

Theft of all kinds — including shop lifting, organized retail crime, employee theft and vendor fraud — cost retailers more than $119 billion worldwide in the 12 months ending in June, up nearly 7 percent from the same a year earlier. That’s the biggest increase recorded by the Global Retail Theft Barometer since it began the survey in 2007.

In the four weeks leading up to Christmas, retailers in the U.S. are expected to lose $5 billion in theft and other crimes. About 36 percent of those losses come from shoplifting. Employee theft represents about 44 percent. Vendor theft and administrative error make up the remainder.

Several major chains declined to discuss their efforts to thwart the growing theft in stores by shoppers and employees. But the National Retail Federation says big merchants are spending about $11.5 billion a year to fend off losses.

They’re trying to improve their technology, such as surveillance methods and tagging of merchandise with security devices. They also are working with competitors and law enforcement agencies more than ever by sharing more information, such as what criminals are taking and how they are targeting individual merchants.

Retailers’ efforts are important, prevention experts say, because theft not only costs them, but society as a whole. Theft drives up retailers’ costs and those are often passed on to consumers in the form of higher prices on everything from blueberries to blouses.

“I think one of the things we have to remember is shoplifting is a crime,” says Staib, with the prevention group. “Shoplifting is not just an economic issue, it’s a social issue.”

Shop owner Travis Maynard, who has been on both sides of the shoplifting fence, agrees.

As a teenager running with a bad crowd, he used to steal regularly — Visine to cover up his drug use, condiments to finish off his sandwich and even a flowering tree as a gift for his mother. Then he got caught stealing a Misfits CD at age 16 and changed his ways.

Maynard, 31, now watches for shoplifters at Lime Tiger Studio, a shop in Murfreesboro, Tenn., where he sells antiques, vintage clothing and other items. He says he knows the tricks and is on high alert when someone is lingering too long in a certain spot.

“For someone to come in and pretend to be a patron of my business and steal, to me it’s the most disgusting thing someone could do,” Maynard says. “It’s one of the highest levels of dishonesty.”

___

Sarah Skidmore reported from Portland, Ore.

OVERVIEW

Backdoor receiving is a cornerstone business function that must include consistent and disciplined shrink loss control and store operations practices. Every supermarket has supplier groups delivering goods that must be received. These include: the main or central wholesaler that supplies the majority of product needs, secondary suppliers and Direct Store Delivery (DSD) vendor companies that supply direct delivered products.  Each of these suppliers cause their own unique shrink loss opportunities that must be addressed.

FACTS AND FINDINGS

• Vendor Theft accounted for 3% of total store shrink. Vendor theft as defined includes any incident of intentional fraud or theft or misdeed by a vendor.
• 44% of survey respondents reported that they used the “piece count method” to check-in  warehouse deliveries,  22% reported only checking pallet counts, 17% stated they performed random spot checks and 13% did not specify any receiving method for primary supplier deliveries.
• 68% of this year’s survey respondents reported that they are involved in various stages of Scanned Based Trading (SBT) use. This is up significantly from 2006 when only 5% of respondents reported engagement with SBT.

Many of us have been shopping for a turkey this week, but a few have been grabbing some extra “stuffing.”

As supermarkets security cameras across the country have captured, there usually a sudden 25 percent spike of people stealing groceries, according to Larry Miller, the president of The Retail Control Group & The National Supermarket Research Group based in Scottsdale, Ariz.

Retail theft happens so often year-round that it cost the industry an astounding $35.3 billion last year, up nearly $2 billion from 2009, according to the National Retail Federation. American supermarkets alone had almost $6 billion in losses from theft. That can translate into rising food costs for the rest of us who do pay, according to Maureen Fuller, the loss prevention field manager of BIG Y supermarkets in Massachusetts.

“When there is any kind of theft, it results in things including increased prices,” she said. “Of course, it we aren’t profitable, we have to charge more for what we are selling.”

But the real surprise here is that the biggest source of thievery in the supermarket industry comes from within. Nearly 40 percent of supermarket thefts are carried out by employees, where sometimes the thief is the cashier, who skips the scanner when bagging food, and the customer is in on the heist. It’s called sweethearting.

“The reason it’s called sweethearting is if a cashier, you’re my friend, my family, fellow employee, i.e., my sweetheart — I’ll give you things for free by not scanning them and again it’s because you’re my friend,” said Malay Kundu, founder of StopLift Checkout Vision Systems, a software company whose programs are in thousands of supermarkets and retailers.

Kundu said his system captures an 80 percent increase in supermarket thefts around the holidays. Turkey heists happen four times more often in November and December than the rest of the year combined. It’s probably no surprise that pumpkins and candy are high on the list of stolen items around Halloween.

The StopLift program uses security camera video combined with computer vision technology to scrutinize how the cashier handles each item to determine whether it is actually being scanned at the checkout counter. When a cashier doesn’t properly scan an item, a red target icon appears over it on the computer screen where the security camera video is being fed into.

According to the National Retail Federation, employee theft accounts for nearly 40 percent of all supermarket losses. For all retailers, that’s a total of $16 billion in lost profits. Given those statistics, Kundu said it didn’t take long for supermarkets to jump on his product.

“When you see that turkey being stolen, they have to sell 50 more turkeys to make up for the one that they gave away for free and no one realizes it,” he said.

Tuesday, Wednesday or Thursday (11/22, 11/23, 11/24) this week at 10 am or 3pm

Register now at http://ez.com/shrinkcontrol

Trend #1 – Theft. Theft is always a topic of concern when it comes to shrink, with 29% of all shrink coming from theft (amateur, pro & ORC). With companies reporting that 33% of shrink from theft as being preventable, companies are turning attentions to shrink from operations where 57% of shrink is believed to be preventable. Two primary areas of shrink loss occurred from theft were shoplifting of Meat ($21,485) and at the check-out by dishonest cashiers in companies not utilizing a pro-active, disruptive cashier performance monitoring system. This trends are causing a broadening the scope of engagement loss prevention and deeper integration and collaboration between Loss Operations. Prevention and Store Operations.

Trend #2 – Operations. With 64% of all store shrink occurring as a result of the absence of, or breakdowns in, store operations control best practices, still 74% of surveyed companies have not materially changed their key operating disciplines, standards or practices in the past 5 years. These companies report total store shrink of 2.47-2.85% (Av. 2.70%). 26% have developed new disciplines, standards and practice and thereby changed their expectations for shrink control and profit growth. These companies report total store shrink of 2.18-2.33%. Within these trends, there were 9 specific areas of operational control wherein the 64% of shrink loss occurred. With full implementation of assimilated best practices, up to 57% of shrink from operations was reported as controllable yielding (on average) over $187,000 per year profit opportunity per store with $425,000 in weekly sales.

Trend #3 – Perishables. With 65% of all store shrink occurring in perishable depts, we see only best-in-class (top 25%) companies employing new emphasis on implementing industry proven Best Practices. These companies are demonstrating an average 22% less perishable dept shrink than the remaining 75% of companies. As part of best-in-class important as shrink loss control is the inseparable connection between shrink loss and customer satisfaction, and therefore sales.

Trend #4 – Technology. There continues to be movement toward technology based LP, but with DVRs, DSD, POS and EAS reaching near critical mass, survey companies are reporting significant movement toward LP impacting technology that also has specific operational impact in addition to LP. An example of this would include: Table PC-based CBO systems, Scan-based Trading, Mobile device based store training programs, and intranet-based best practices communications and training (like SharePoint). This movement is notable in that it again highlights a cross-functional merging of business priorities between Operations and Loss Prevention. Caution is growing as retailers to strip-away technologies marketing hype and messages and commentaries and examine systemic results from technology expenditures. Executives are cautious of efforts without clear and consistent results. Technology value and effectiveness is dependent on implementation effectiveness and the average surveyed company reports IE at approx 55% and shrink reduction from technology at 8-9%. But when companies implement the use of LPX technology with Operational values, we see IE at 72% and targeted shrink reduction at 16%. Clearly, technology can help retailers to be more efficient, provide ever more information and control shrink, but technology without excellent implementation effectiveness over time remains a challenge for retailers.

Trend #5 – Implementation is Key. Best in class companies are examining and challenging their Standards of Operation in all store areas to streamline and improve operations while optimizing sales and profit. This movement is not centric to reducing labor expense as much as it is to improve profitable selling. These companies are reviewing their loss prevention organizations and reporting structures, technology effectiveness, store operations practices, store management and supervisor habits and practices and the role of internal audit as key areas for improvement.

Trend #6 – #1 leading BP = Inter-departmental “collaboration” emerging as the #1 best practice for companies working to reduce shrink and grow profit with consistent results, measurable impact and sustainable profit gains and shared/mutual and cross-functional accountability. Best-in-class retailers are evolving to this evolution as it touches day-to-day business practices, technology utilization, all ops standards, and employee and management training and garners consistency, break-out thinking for sales & profit improvement.