Grape nibbling the tip of a $2b theft mountain

One grocer is charging 20 cents a grape for customers who want to try before they buy. Photo: Erin JonassonLike many produce retailers, my local Coles at Maroubra in suburban Sydney is generous to a fault with its giveaways. My weekly visit there invariably begins with a spectacle that I watch with fascination: shoppers filing through the fruit and veg department plundering the merchandise. They paw it, they lift it up and hold it to their noses, they bite into it and all too often they straight out gorge themselves on it. All in the spirit of “try before you buy” of course.

One recent Saturday I decided to try to interest a couple of the Coles floor staff in how much shoplifting of produce was going on right under their noses, and how little I felt like buying the stuff after it had been mauled and picked over by other shoppers. I received an indifferent, even frosty, response, as though it was un-Australian of me to be bothered what other customers were doing.

Unfortunately, staff are a large part of the shoplifting problem worldwide. In many instances they are the only problem.

According to the most recent Global Retail Theft Barometer (GRTB) put out by the Centre for Retail Research in the UK, employee theft accounted for 35 per cent, or $41.7 billion, of worldwide shrinkage at retail stores in 2011.

Customer theft was responsible for 43 per cent, or $51.5 billion of the shrinkage. The remaining 22 per cent was attributable to internal error (e.g. incorrect price-tagging) and vendor fraud.

The Centre for Retail Research estimates that Australia’s retail shrinkage amounted to just over $2 billion in 2011, equivalent to 1.4 per cent of all retail sales. This placed Australia 18th in the international shrinking rankings and fourth of the developed countries behind only the US, Canada and Belgium.

Globally, department stores, auto parts and clothing retailers have the highest rates of shrinkage but no category is immune.

Grocery stores are are not just a target for shoplifters but also particularly susceptible to spoilage in their fresh departments. Coles itself has made significant inroads into the latter problem by better managing its inventory in recent years.

To their credit, some other Australian retail chains have tackled shrinkage aggressively, but overall it is a problem that is growing, not shrinking, according to the Centre for Retail Research data.

How to combat shrinkage

In a small green grocery I’ve seen a little sign above the grapes bin informing consumers that trying one from the bunch will cost them 20¢ each. Good luck enforcing that.

Larger retailers are employing a combination of human security and technology solutions. Some of these solutions are very conspicuous, such as the security guards minding the exits of JB Hi-Fi stores, a retailer that has been notably successful in keeping down shrinkage in a sector that is naturally predisposed to it.

Technological fixes are also one way. Foremost among these is Radio Frequency Identification (RFID) technology, which is being extensively trialled by global retailers such as Walmart and Macy’s, and is likely to become universal over the next few years. RFID’s principal use is for improving inventory management and accuracy. This also makes it a key enabler of omnichannel retailing because when retailers actually know what their store inventory is they can systematically use them for fulfilment of online orders.

Preventing shrinkage is only an incidental benefit of RFID

RFID involves attaching a small chip or “tag” to each item of merchandise that acts as the item’s unique identifier. These tags are readable from hand-held or fixed scanners using radio frequencies.

The RFID chips are analogous to barcodes but work better because they can be read from a distance and do not need to be lined up precisely with the reading device. As stolen merchandise leaves the store, RFID can make the retailer aware of it in real time. This makes it useful to combat direct theft by employees as well as by customers.

The widespread deployment of RFID has so far been held back largely by of the cost of the chips themselves, which have now come down to less than 10¢.

Until RFID becomes universal, more down-to-earth measures are necessary and staff training and personal integrity are key components. The people on the selling floor have to be encouraged to take an interest. Yet with store employees currently ripping off about 80¢ worth of merchandise for every dollar’s worth that customers grab, that isn’t as straightforward as it seems.

Of course, if it’s all just too hard you could always try out the loyalty-building practices of Floyd Hall, former chief executive of US retailer Kmart as cited in the satirical publication Economy of Errors. In the spoof, Hall institutes a policy to “tap the hidden value of the retailer-shoplifter relationship” by allowing shoplifters to return stolen goods in exchange for other merchandise or cash if they are dissatisfied.

“Many shoplifters are young or low-income individuals who at some point may be able to pay for merchandise. When they can, we want them to think Kmart,” says Hall.

Michael Baker is principal of Baker Consulting and can be reached at [email protected]杭州夜网m and www.mbaker-retail杭州夜网m

The original release of this article first appeared on the website of Hangzhou Night Net.

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