Shoplifting and internal fraud is now at its highest level since the BRC's current recording system began in 2004.
Theft by organised criminal gangs has become a huge challenge, targeting more expensive items and in greater volume.
While organised criminal activity is of course a concern, customer theft still makes up the majority of losses.
Let's not overlook fraud, up 12% with 135,000 incidents in the past year according to the BRC.
Supplier and warehouse fraud was up nearly 30% on a year before.
Retail Knowledge estimates employee fraud or theft accounts for a third of losses.
Just one more statistic from the BRC, there were 698,184 reported offences resulting in loss or damage to property in 2013-14, but it is estimated the true figure is more like 3 million.
The bottom line, according to the Centre of Retail Research (2012-13), is crime costs UK retailers £4,699 million based on data from 150 large retailers, responsible for 28% of UK sales. Retail Knowledge’s 2014 survey estimates £5 billion losses.
Shrinkage: just part of a retailers' lot?
Shrinkage was generally accepted and losses written off by the retail sector: an overhead that was routinely factored into accounts.
The Centre for Retail Research (2012-2013) states that a 1.32% average loss of a retail business' turnover occurs through shrinkage.
This is no longer tolerable to many in the retail sector.
The recession has helped change retail minds.
The market has also changed. Discount retailers have arrived in mass and prospered: Lidl, Aldi, B &M Bargains, Costco. The margins they work to means that shrinkage is intolerable to generate the returns they demand.
The discount stores affect more upmarket supermarkets, which have had to take notice of their rivals and so look to reduce unnecessary losses to compete with more price conscious customers.
The discount outlets compete across a broad product range that also affects independent retailers across specialities such as toys, clothes, home decorations and stationary. It all makes a retail landscape that is more vigilant to reduce unwarranted losses.
Moreover, retailers are finding it harder to source products at the prices they want to pay and the public expect. In order to source stock more competitively many retailers are paying within shorter time periods, which ties up cash and affects liquidity. Shorter payment terms seem to becoming more common. So, losses in warehouse and logistics facilities are coming under more scrutiny – the weak, vulnerable to shrinkage, parts of the chain are being targeted by security professionals.
Looking for a competitive advantage
If a retail business can reduce shrinkage substantially it creates a competitive advantage in a tough industry. Simply by using technology in a smarter, more effective way will have a significant impact on the bottom line.
There are, perhaps unbelievably, retailers which still don't believe they have an issue: “our staff would not steal.” Unfortunately, while many employees are honest and do their best to make the business a success, there is always a small minority that abuse the trust of their employers.
Technology can confront both the internal fraud and theft as well as the external criminal activity.
The surveillance monitoring solutions
The Police have increasingly shifted the onus back on to the retailer in seeking arrests and prosecutions. Unfortunately, many retailers, often top names in the industry, are not using their systems effectively.
The technology is often simply not good enough to take meaningful action.
Image quality lacks the evidential quality required. It is not always watermarked with the time and date and it also needs to be completely secure from any possibility of tampering. Also, systems are not properly maintained and trained operators are in short supply.
Cheaper options are sometimes sought, which can compromise effectiveness for a short-term gain. It is a situation that many BSIA members will recognise and are trying to change: quality solutions, not cut price systems, generates Return On Investment.
Surveillance monitoring, done well, can lead to increased levels of prosecution. At present, successful convictions are at dismally low rates. The Centre For Retailing Research 2013 calculates that globally 3.6% of staff committing theft are caught and just 2% of shoplifters, and this is before we look at prosecutions.
Higher prosecution rates would act as a deterrent for shoplifters and well as internal fraud. Word spreads fast. Simply having effective surveillance monitoring solutions can make staff and potential external offenders think again before being tempted to engage in illegal activities.
I mentioned effective surveillance solutions and this is key. Having a system is not enough, it has to deliver for the entire estate. Weaknesses anywhere in the process, from the supplier to the outlet will be exploited if not addressed.
CCTV systems are becoming more sophisticated leading to better effectiveness against shrinkage: enhanced HD images, completely secure and backed up by tiers of storage with the option to scale up to meet the requirements of all stores.
Moreover our surveillance monitoring solutions can integrate alarm triggers such as with transaction data to show when sweetheart sales are taking place as well as monitoring barcode scanners and stock movement as well as transcoding for reviewing high resolution footage from remote locations.
Take action this day
The solutions are now here to make their contribution to reducing shrinkage, which doesn't need to be routinely accepted any longer as part of the retail industry.
Using HD IP cameras is one option that should certainly be considered to provide evidential quality images to fight internal and external criminal activity.
Just using technology as a deterrent to combat internal fraud and making sure staff are fully aware of its capabilities, including enhanced image quality, can make a difference.
What cannot be tolerated is a retail crime situation that is getting worse year by year as the evidence so desperately shows.
Jamie Horastead works for AD Network Video
, which alongside its sister company Dedicated Micros
is part of AD Group
, which has been developing security surveillance solutions for more than 30 years. Jamie oversees a range of solutions including the recently introduced enhanced HD IP Video surveillance solution, the Virtual NVR.
If you want to discuss anything in this article contact Jamie on firstname.lastname@example.org or 01928 706422