ECR Retail Loss

Enabling the Retail Sector to Sell More and Lose Less

Staff Dishonesty: Exploring the Impact of Advertising

Staff dishonesty, also known as internal theft, is hard for retailers to monitor and quantify, hard to detect and hard to prevent. For example, one of the main “tools” available to detect internal theft is staff searching, but this is highly problematic to execute well and consistently at the store. At the same time, it can be far easier for retail loss prevention leaders to prioritise the more visible problem of external theft, and to target their investments at this problem. However, when loss prevention leaders are asked to estimate the contribution of staff dishonesty to the total unknown loss number, they consistently suggest that a third of those losses can be explained by staff dishonesty, which includes collusion. Previous ECR research (click here) and working group meetings have looked to explain why staff steal, the role of technologies that might detect internal theft, Exception Based Reporting (EBR) on POS, scanner tunnels, etc, and discussions around policy, do retailers prosecute always, do staff dishonesty numbers [and names?] get regularly communicated, and then the reporting systems themselves. In this meeting, we turned our attention to the power of advertising [the risk of being caught] and lessons learnt from the deployment of advertising campaigns. To start the meeting, one of the group members shared their experiences and some highlights from their PHD dissertation. The group then discussed his presentation and then their own learnings. Below are three key takeaways. #1: Culture matters: Some of the retailers in the meeting shared that for their business, the problem of internal theft was one that they preferred to NOT communicate. This policy decision came from the very top of the business rather than the loss prevention team. It was informed by those at the top of the organisation intent on building a culture of honesty and integrity. A sense that this was NOT a major problem for their business and an implicit belief that their employees would not steal from their business. For those loss prevention teams working for retailers where the top management were opposed to such communications, any campaign ideas were thwarted. However, there was at least one retailer in the meeting who took away an action to gain approval for a blitz campaign over a 12 week period. Maybe at our next meeting we will get to see the results from that campaign #2: The Detection Gap Given the many retailers sensitivity on the advertising and communication of the internal theft problem, the investigation of the possible incidents of internal theft, using EBR, has become the foundation of retailers staff dishonesty prevention programmes. However, as the retailer presenter shared, if they were able to investigate and close just one internal case per week, valued at €2,500, then a retailer losing €2.6 million per year to internal theft, would only be able to successful detect just 5% of the internal theft problem! This is not to suggest that EBR and the work of investigations should now be de-prioritised, more that there needs to be in place additional approaches to reduce the other 95% of the internal theft problem. This then bought us to the question as to the role of advertising the risk and consequences of staff dishonesty. #3: Advertising works! While we hold an ambition at ECR to gather more empirical data, in this call and on previous ones, we have become aware of a number of case studies, that suggest that advertising "works" and can reduce internal theft. Retailer 1: This retailer had given notice to a very high shrink store that n three months time, they would be going into "special measures". What they observed was that before the start of the assessment of the likely measures needed, and before making any new investments, the store itself had miraculously recorded an 18% reduction in loss. The conclusion from the retailer was that the awareness of an upcoming investigation had lead to a reduction in staff dishonesty. Retailer 2: For this petrol retailer, to counter their problem of “drive offs” whereby the customer filled their car with fuel but rather than pay, drove off, they installed ANPR / LPR technology to replace their previous paper based "drive off" incident recording system, where staff were required to write down the number plates of the "drive off" vehicle along with the time, date, details of the incident. The placement of the ANPR cameras were not advertised to the customer, however store associates were made aware of the technology and its ability to accurately record the number plates of every vehicle. In the first month of installation of ANPR, drive offs reduced by 60%. Retailer 3: This retailer evidenced a significant reduction in shrink that could only be explained by a reduction in staff dishonesty with the introduction of a store wide communication to all managers and store associates of a new central video monitoring capability that can detect incidents of fraud, theft, and poor compliance. Measuring the losses in the stores that were told they were now being monitored vs control stores, they saw a positive improvement in loss, explained only by the communication, that lead to a change in store associate and manager behaviours, dissuading them from stealing and undertaking fraudulent actions. Crucially, the value of the reduced losses, helped deliver improvements to the bottom line that they allowed them to prove a business case for the remote monitoring capability. Retailer 4: This fashion retailer, to counter the internal theft problem, prepared an advertising blitz on the risk and consequences of being caught stealing from the company and evidenced a 14% reduction in losses. Retailer 5: This retailer created a poster campaign of targeted messages to store associates to discourage internal theft. They implemented the posters in trial stores and compared the results to control stores who did not receive the posters. The results at the overall store level did not show an overall reduction in losses. However, when they looked at the results against their targeted categories, tobacco, sandwiches and cash, they saw clear evidence of a change in losses. Against their targeted messages on tobacco, which is sold from behind the kiosk meaning any product losses cannot be explained by external theft, they saw a 293% reduction, similar results were also seen with lottery tickets and postage stamps. On sandwiches and ready meals, they evidenced a 25% reduction in losses. Finally, on cash losses, they evidenced an 18% reduction. These five case studies illustrate the potential impact of advertising the risk of internal theft which taken together point perhaps to a double digit potential reduction in losses. It was clear though that to be effective, retailers need to be very clear on the messages themselves, with the messages differentiated against the different internal thief personas, as the retailer presenter shared, the older, more experienced store associate will respond differently to messages around the impact of being dismissed on their family than a young, new hire. A practical idea every loss prevention team could take away would be to take this advertising challenge to their marketing teams, and ask them to apply the same disciplines and rigour they use when creating targeted consumer advertising, to communications that could reduce staff dishonesty. If you would like to learn more, in the video below, I discussed the meeting and the takeaways with Professor Emmeline Taylor.

Food Waste: The Opportunities and Challenges of Selling Loose

Most surveys on the location of food waste suggests that a significant, if not the majority of food waste occurs in the consumers home, the consumer either prepares too much food, the goods expire before they are cooked, eating plans change, etc. Advocates for food waste reduction believe that consumers often buy too much and more than they need because they are only available in bags, plastic boxes, nets, etc. These advocates believe that if retailers were to display, promote and incentivise shoppers to buy loose products, shoppers will be more likely to buy just what they need and thus less will be wasted. In the UK, advocates Gino D'Acampo, promotes the benefits of buying what you use, celebrating loose Vs packs. In a recent meeting, the retailers in the food waste working group discussed the good, bad and ugly of selling loose products in the fresh department. Below are the three key takeaways from the discussion, supported by over 50 retailers from the working group. Takeaway #1: Really? There was a lot of discussion in the group as to whether the promotion of selling loose was a strategy would lead to a change in behaviour, there are good reasons, such as hygiene and convenience of handling, why consumers choose packed, bagged and netted products. There was also discussion as to whether there would be a reduction in the quantity of food wasted in the consumers home, nearly a quarter of the food wasted in the home is because too much was cooked. Finally, there was discussion on convenience, for many time conscious shoppers the convenience and ease of being able to just pick up (say) a bag of potatoes beats having to pick your own potatoes, put them in a bag, weigh them and apply the label. Net, the conclusion of the discussion was that the the case for change had not been proven. Takeaway #2: Selling Loose Increases Food Waste in Retail? Bags, nets and packages were created for good reasons, they can often increase the shelf life, they reduce the damages and the spoils from handling, in the home, in the store, and across the whole supply chain. They also help provide the shopper with assurances of quality and when stock is low, it reduces the presentation of just the rejected "ugly" products. Through a productivity lens, replenishing and presenting loose is more time intensive for store associates. For online orders, picking an order of (say) 1 kg of loose onions can be 4X the time it would take to pick a 1kg bag of onions. Finally, at the checkout, scanning loose products requires the items to be "looked up" on a product menu, and then the quantity to be inputted or weighed, This takes seconds when checking out via a staffed lane but via self-checkout, can take significantly more time and of course, lead to mistakes and the temptation to not scan. Typically, most multiple supermarkets now sell more carrots and brown onions than they have ever had delivered! Net, while loose will make the fresh area more attractive and add some "theatre" to the shopping experience, there are a lot of operational complexities and extra costs associated with selling less, with a greater risk of damage and of being wasted, or at least, requiring a heft discount to clear. Takeaway #3: Product Recognition Tech to the Rescue? One retailer shared with the group their trial results from the use of "smart" product recognition scales that they have deployed in the produce aisle. Note, we also learnt that other retailers had installed these smart scales at the Self Checkout. In the trials, after assurances on accuracy, the scales were found to be 99% accurate, the retailer shared that in silent mode, the scales observed that 4% of labels printed were "wrong" in that the products presented did not match the label printed. In some cases, this was a simple mistake, I just pressed the nearest button. In other examples, perhaps the intent was more than a mistake. Moving to active mode, they learnt that the error rate went down from 4% to less than 1%. But most impressively, they learnt that the time taken for the shopper to place the products on the scales, select the item, type in the quantity and put the label on the bag, was reduced by 85%. The seal on the business case was made on the time savings for their online pickers and their improved productivity. To learn more about what was discussed in the meeting, please see recap video with Richard Thalemann, our special advisor on food waste.

REVEALED: Cutting-Edge Supply Chain Innovations Tackling On-Shelf Availability Challenges

It’s a little over two weeks until the showcase finale of our On-Shelf Availability (OSA) Innovation Challenge. These initiatives have the power to tackle some of the stubborn problems in retail today. Each week we will shine a spotlight on one of the focus areas where our innovators will have the biggest impact. This week: the Supply Chain. In the ever-evolving world of retail, optimising on-shelf availability means pre-empting challenges before they manifest on the shop floor. Traditional supply chain management tools and techniques sometimes struggle with the shifting demands of modern retail, leading to gaps on shelves and lost sales. Supply chain innovations pave the way for more efficient, resilient, and profitable retail operations, focusing especially on curbing retail losses, including shrinkage. Our judges were looking for smart approaches to these unique supply chain challenges. ● Lack of visibility of previous stock-outs leading to mismatches in inventory records ● Slow responses to out-of-stock situations that leave shelves empty for extended periods ● One-size-fits-all approaches to safety stock levels that are unfit for dynamic consumer demand ● Conflicts in online vs. in-store inventory that lead to fulfilment issues ● Misaligned case sizes shipped to stores that require excessive back-room storage and increase the risk of theft, damage, or loss. Standout innovations that impressed our panel of 36 global OSA experts, representing dozens of leading international brands, in the Supply Chain category include: Digit7 Subcategory: Poor supply chain visibility Digit7's smart drone enhances on-shelf availability with autonomous mapping and real-time alerts, reducing out-of-stocks and improving inventory visibility and management. InventoryInsight Subcategory: Poor inventory record keeping InventoryInsight leverages advanced machine learning to optimize ASDA’s replenishment, enhancing on-shelf availability and driving significant sales and efficiency gains. Wiliot Subcategory: Online vs In-store availability Wiliot revolutionises on-shelf availability with tiny IoT tags providing real-time, item-level tracking and insights across the supply chain, optimising inventory placement and management. Will any of these be among the ten finalists selected to pitch to our judges? The only way to find out is to sign up for our OSA Innovation Challenge showcase finale on May 22.

Watch: Invitation to OSA Innovation Challenge - May 22nd

Join us on May 22nd, and watch the video to learn why.....

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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.