Five Questions With...

Few people have as unique a vantage point on the global shrink challenge as Joshua Bamfield. As executive director of the Centre for Retail Research, Professor Bamfield has led that organization’s work in quantifying the problem of retail shrink. Among the most prominent examples of his work is the Centre’s annual Global Retail Theft Barometer, an exhaustive and authoritative work the measures shrink across industries and countries.

Q: What’s the most important thing people should take away from the new Global Retail Theft Barometer?

A: Retailers have largely recovered from last year’s sharp increase in shrink, mostly by focusing on the causes of shoplifting and solutions to prevent it. The study also points out that retailers are spending more time dealing with non-theft shrinkage, such as handling errors or administrative mistakes. The common point is that the most successful retailers have good management, which is committed to thinking through the nature of their shrink-related problems and exploring new solutions.

Q: What are the best return-on-investment (ROI) opportunities for LP spending?

A: Certainly that will vary from retailer to retailer, depending upon their strategy and their problems. But in general, LP systems seem to generate a better ROI than non-equipment spending, such as contract employees. It makes sense to focus first on the most-stolen items, since reducing theft there will pay immediate dividends. But thieves are smart: As soon as you protect your most-stolen lines, chances are they will begin to attack other lines. So, you have to stay a step ahead to ensure that the money you’re investing is doing the most for you.

Q: Is there a correlation between retailers’ capital investments in LP and their shrink rates?

A: This is a consistent challenge for LP managers – how you justify spending on loss prevention. In the GRTB, we do see evidence that there is a link between capital investment and reducing shrink, although that has to be weighed against a company’s overall approach to shrink. Some companies may invest properly in shrink management, but they don’t necessarily see the full benefit because their processes for preventing or dealing with shrink are flawed.

Q: Which industries are at risk for higher shrink in the coming years, and why?

A: Last year, all industries saw higher risk, due to the weakened economy. Certainly, larger retailers with bigger stores will do better as the economy improves simply because their LP budgets are larger and will be increasing. Of course, stores in urban areas are at higher risk because crime, in general, is higher there. Another potential problem area is online retailing, where fraud is going through the roof. But one industry that may continue to be susceptible to higher shrink is hardware, auto and DIY (do-it-yourself) stores, because they sell a wide variety of merchandise. These are the kinds of stores that attract a wide variety of people, and provide plenty of “targets” for thieves because of the product diversity. This industry is beginning to invest more heavily in shrink management, but they haven’t made enough progress yet.

Q: What should a smart retailer do to create better collaboration with their suppliers to help reduce shrink?

A: For the past several years, retailers have seen an increase in shrink in areas other than their stores and warehouses. Their supply chains have become targets for shrink, so retailers need to increase their partnerships with suppliers to find innovative ways to protect their products, such as new packaging options. EAS source tagging also is on the rise, and that’s likely to continue as RFID becomes more widespread as a method to tag more products at an earlier stage in the process.