Growing Sales through Shrink Management

Leszek KorzeniowskiSales Manager EE ExportCheckpoint Systems CEE

5th ECR Baltic Forum 2011, Riga, November 10th

• Specialist in EAS solutions for Food and Apparel Retail• World leader in RF EAS technology• Hand Labelling Systems & Merchandising Solutions• Strong partnership with most of the top 200 retailers

A global reach…

What we provide to our clients……

Why we provide to our clients……

Merchandise shrink continues to rise

$116 billion in 2011

Growth of 6% vs 2010 (Europe 7,8%, Baltic States X%)

Shrink as a percent of sales represents an astonishing 37% of Net Retail Profit Margin

(GRTB 2011)

1,34

3,66

Profit Shrink

Average Retail Net Profit (%) Vs. Shrink

Food Retail EAS Trends - Europe

2000

2010

2013

RFEMAM

45% 30% 25%

85% 10%5%

94% 5%1%

Secure Merchandise Behaviour Shifts

2000

2010

95%

5%

55%

45%

In Store Labelling

Source Tagging

In Store Labelling

Source Tagging

Why do retailers start Source Tagging programmes?

• Speed to shelf: improvement as products arrive at stores shelf ready, correctly & securely tagged by the vendor

• On Shelf Availability: can improve through reduced & controlled shrink

• Operational savings in stores: through the reduction of manual tagging practises

• Sales improvement: reducing defensive merchandising, promoting more aggressive open self service formats

• Point Of Sale efficiencies: reduced delay at POS thanks to one step remote deactivation, better customer satisfaction

• Staff focus on selling: Not tagging products and policing clients, but assisting the sales process

• Product presentation: improved as security becomes integrated & invisible

• Shrinkage reduction: through universal & uniform tagging of risk items

Consumer Risk Profile

15% 15%70%

May Neversteal

Will alwayssteal

Opportunity thieveswill steal provided the

perceived risk of detectionis low & theft is relatively easy

SOURCE: Michael G Kessler & Associates (August 2007)

Shrink is an unavoidable fact of life

“I always feel like shoplifting”

Consumer Risk Profile

15% 15%70%

May Neversteal

Will alwayssteal

Opportunity thieveswill steal provided the

perceived risk of detectionis low & theft is relatively easy

SOURCE: Michael G Kessler & Associates (August 2007)

Shrink is an unavoidable fact of life

10

Retailer response can be various ….

Shrink is an unavoidable fact of life

Source Tagging Programs – proof of concept

Health & Beauty Quantifiable Benefits

2003/2004

2004/2005

2004/2005

2003/2004

Shrinkage 29,7%

14,5%

7,5%

Sales-2,2%

Health & Beauty Quantifiable Benefits

Fresh Food – Highest rotation reseller market

Value of red meat turnover 234.000.000 €

% Shrink 2,33%

Value of Loss 5.452.200 €

Retailer Objective: 50% Improvement 2.726.100 €

Investment 1.959.048 €

Total Savings Goal 767.052 €

Actual Shrink Reduction: 86% 4.688.892 €

Investment 1.959.048 €

Total Savings Scaled 2.729.844 €

Increase in sales: 11%New potential turnover 259.540.000 €

Potential Increased Sales Opportunity 25.740.000 €

Wines & Spirits

The new approach is to consider anti-theft elements as a Commercial Asset.

It is a sales growth driver.

Solution needs to be collaborative – neither side can implement a successful solution on their own.

Solutions have to be a deterrent and respect the brand equity of a premium, luxurious product.

We need to turn this into a WIN WIN.

Phase IIPhase IISolutions@Source

Phase IPhase IOptimized SMS

Phase IIIPhase IIIRFID

Modular ApproachEach phase is

self-fundedand enables the

next

Achieve shrinkage goalAchieve operational excellence

Improve OSAIncrease merchandise velocity

A: 1st year 8M € reduction in Operations Cost B: Funded rollout of 1100 stores with EAS & saved 12M USD in labour C: Aimed to achieve 350 FTE reduction D: 800.000 Hours waiting time saved at POS E: 94.000 Days saved for hard tag manipulation to speed throughflow at POS

Solutions@SourceObjectives & ROI

17

Solutions@SourceCategory Solution Guidelines

18

Who uses Solutions@Source ?

Securing merchandise is necessary to enable sales

Ultimately, the method of securing merchandise should fit with corporate objectives and local operational needs, it is rare that one solution fits all requirements

The solution employed should seek to strike the balance between enabling sales, and reducing shrink

Conclusion

Thank You !