ECR Retail Loss
Enabling the Retail Sector to Sell More and Lose Less
It’s boom time for online shopping: a meteoric rise accelerated by the global pandemic. As a result, the industry saw five years of growth compressed into just 24 months. However, the rapid expansion of e-Commerce brings new challenges as retailers invest in capabilities to take payments and fulfil orders accurately and on time.. And with upwards of 30% of online sales coming back—a significantly higher rate than for physical retail—managing reverse logistics can be tough. That’s why ECR Retail Loss is delighted to announce the Top 30 for our 2023 e-Commerce Loss Innovation Challenge. These initiatives have the power to tackle some of the most stubborn problems in retail today and chosen by a panel of retail digital loss prevention experts representing more than 15 international brands, including A&F, Best Buy, Bol.com, Desigual, Frasers and Next. The judges identified the innovations with the most promise to make an impact on day-to-day e-Commerce operations. Their shortlist is the culmination of a six-month scouting search that led to a long list of more than 125 innovations, against the problems the judges identified as the most pressing and illustrated in the word chart below. Click here to see full list of the Top 30 innovations Retailers, brand owners and academics are invited to join ECR on October 25 to our online finale, and to hear short five minute pitches from ten of the top 30 to the panel of retailer judges at e-Commerce Loss Innovation Challenge finale.
Our new report investigates the impact of high inflation on retail losses, and makes recommendations for retailers on how best to measure shrink when both costs and prices are rising (but often at different rates). Professor of Accounting Lisa Jack, from the University of Portsmouth concludes that there is no evidence to suggest that the rate of inflation is directly responsible for increases in retail loss. Instead, it is the human behaviours that occur because of an inflationary environment - including trading down and higher levels of theft. The report recommends that the traditional retail loss percentage (RL%) is inadequate as a tool for management. And any average will mask the true losses. Lisa Jack concludes: “It’s pretty obvious why RL% is used, but when both the cost and price goalposts are moving, I conclude that looking at total losses in UNITS can be a much more accurate way of tracking exactly what is going on. “And in fact, price fluctuations are yet one more reason to consider a business case for investing in specific inventory control and big data analysis, e.g. with RFID technology.” In the words of John Fonteijn, Chair of ECR Retail Loss, “Inflation has risen to levels not seen in many countries for more than 40 years. At the same time, retailers have also been reporting considerable increases in their levels of retail loss.” “While there is no evidence to suggest inflation is directly responsible for increases in retail loss, the consequences of inflation in society more generally is likely to be having an impact on the scale of losses experienced by retailers.
We are living in a new era of high inflation, stores are now having to change retail price labels more frequently than in recent times, with the retail value of losses climbing, leading to the research question, does inflation increase shrink? To answer that question, and explore how retailers could account for inflation when it comes to losses over time, when costs and prices are fluctuating, ECR Retail Loss commissioned Professor of Accounting, Lisa Jack from the University of Portsmouth, to provide answers to these questions. The report (click to download) shows that there is no evidence to suggest that inflation is directly responsible for increases in retail loss. However, the report goes on to describe how inflation does have a significant impact on how losses are calculated. The report concludes that The traditional retail loss percentage (RL%) is inadequate as a tool for management. And that any average will mask the true losses. Unknown loss over total sales in UNITS provides a more 'like for like’ comparison and meaningful measure of losses. A combination of unknown loss (Units)% and Unknown Loss Rate of Change% could usefully replace the RL% The report questions whether RL% should be killed off as a metric, and if so how it should be replaced? It also advocates for increased use of advanced technologies, such as RFID and data analytics, to better detect and prevent theft, fraud, and operational errors “Inflation has risen to levels not seen in many countries for more than 40 years. At the same time, retailers have also been reporting considerable increases in their levels of retail loss,” says John Fonteijn, Chair of ECR Retail Loss. “While there is no evidence to suggest inflation is directly responsible for increases in retail loss, the consequences of inflation in society more generally is likely to be having an impact on the scale of losses experienced by retailers. The research has also highlighted the many challenges of measuring ‘loss’ in a retail environment and how different accounting practices can significantly influence the size of the number and the rate of change. “For those with responsibility for loss prevention, and the financial teams that support their work, I highly recommend that you read this report, and reflect upon the relevance of the findings for your own business.” To download the report, click below.
ECR Retail Loss recently hosted a benchmarking research session between loss prevention and finance leaders from ten top UK retailers, with a combined turnover of £192 billion, provided insights into the changing risk landscape, with shop theft an area of considerable concern. The session saw each of the industry leaders share anonymised details of their shrinkage run rate expressed as an index compared to 2018. Also included in the research session was commentary and insights from the retailers as to what’s driving the losses and their responses to it. The key finding was that, compared to the pre-pandemic levels of 2018, on average losses have gone up by one-third., and for some, it was more than a 50% increase. Inevitably, the discussion then turned to the question of what's driving the increase, where retailers agreed that a lot of the increase could be explained by external theft, with all retailers agreeing that that more people are stealing from them, The reasons for this are complex, but Professor Beck, the academic advisor to ECR Retail Loss, identifies ten key drivers of increased theft from supermarkets today: • Violent criminal gangs targeting retail stores, believing it’s low risk for high reward. • Adverse economic conditions and inflation leading some to steal everyday items. • A legal framework downplaying significance and penalties associated with retail theft. • Police and the courts overwhelmed by a lack of resources and a backlog of cases. • Not enough staff monitoring self-checkout terminals to deter opportunist theft. • Retail ‘non-engagement with thieves’ policies designed to protect store staff. • Lack of clarity around training, equipment, and backup for in-store security guards. • Increase in social media posts of retail crime sprees inspiring copycat behaviour. • More open-plan store designs make theft/looting easier to do and harder to stop. • More opportunities to sell on stolen goods, especially via online platforms. The discussion in the group also covered how each of the business's were looking to combat the alarming rise in losses and actively adopting various strategies to safeguard their business and prevent further price rises being passed on to consumers. Measures include increased use of technology, such as video surveillance, locking trolleys, product tagging, and improving store design to create "zones of control. ECR Retail Loss will bring together this panel of industry experts again in November to track progress on whether retailers are being successful in reversing this disturbing trend in retail losses.
The research priorities are determined by its members – they drive the agenda to ensure ECR delivers research that meets the need of the industry bringing new insights, tools and techniques that enables retailers to sell more and lose less.
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