Why Loss Prevention

• According to figures released by EuromonitorInternational, the overall retail sector – both online and in-store – in the Middle East is projected to grow from approximately $996 billion in 2015 to nearly $1.05 trillion in 2016.

• Although it is very difficult to get correct shrinkage data in this region, it is estimated to be around 1.71% i.e $ 17 billions.

This directly goes from your profit

Retail Loss Prevention

LOSS PREVENTION= INCREASE PROFITS

Retail Loss has direct relationship with the profitability of an organization. Quite often Retail Loss is associated with Shrinkage and with measures to arrest shrinkage. And, to me, this is erroneous idea to start with. The organization must recognize that the Retail loss does impact profitability and the customer satisfaction. A merchandise not reaching customer is in fact loss of revenue, profitability and the loss of customers.

What do we understand by retail loss?

What should we take into account?According to loss prevention studies, there are four types of loss that we should account for:• Known loss is loss which can be identified, quantified and explained at the

time the loss occurs. Examples include: damage, distress, out of date, customer returns, markdowns, etc.

• Unknown loss is loss that cannot be specifically identified. Examples: Employee theft, shoplifting, etc.

• Loss of cash is when a company makes less than they plan on making due to internal or external factors.

• Supply chain loss is when there is a disruption in the distribution of one of the supplies on the supply chain, making the company lose those profits.

Types of Retail Loss

Broadly speaking Retail loss could be divided into:

Internal: Internal theft is referred to as employee theft. It happens within the company. According to 2014-2015 Global Retail Theft Barometer Study, employee theft was estimated to be responsible for 39% of store inventory shrinkage.

External: External theft is the stealing of merchandise, cash, goods, or fraud resulting in loss by shoplifters. According to 2014-2015 Global Retail Theft Barometer Study, external theft accounts for 38% of inventory shrinkage.

Share of Retail loss/Shrinkage

Retail Loss on Global LevelAccording to 2014-2015 Global Retail Theft Barometer Study:

• US$ 123.4 billion is the total value of the Retail Shrinkage.

• Average cost of Retail Crime per person stands at $335.00

39%

38%

16%

7%

Employees Customers Acctg.& Admin. Suppliers

Internal Theft: Employees theft

Employee Theft: Much of the employees theft happens at the Cash counter/POS counter. Employees reported to have stolen cash and goods from their work place. Some of the common loss making examples are:

1) Most common being selling to friends and relative at discounted price.2) Or entering zero amount transactions else punching lower price than /switching bar

codes.3) Out right theft: store back room and the warehouse are two prone areas where

most outright theft happens.4) Lost en-route: merchandise being diverted/pilferage en-route from warehouse to

shops.

Then there are “return fraud”:

5)False return: issuing return to friends /relatives without actually making any return.6) Returning stolen merchandise that has never been purchased.7) No receipt return: for a legitimate customer and later issuing the receipt to issue a second return.8) Ghost employees, non existed working hours: claim salary /wages for employees that never existed or claiming hours more than worked. This happens wherever contracted staffs are employed.

External Theft: Customers and service providers

External theft: External theft is the stealing of merchandise, cash, goods, or fraud resulting in loss by shoplifters. According to the most recent survey done by National Retail Security, external theft accounts for 30% of inventory shrinkage.

1) Customers stealing merchandise mostly from the fitting rooms2) Switching bar codes3) Retuning merchandise without receipt4) Discounted purchase “return” at full price5) Shop Lifting6) Pilferage while in transit7) Loss the count of parcel in collusion with staff8) Real Accident /damage in transit9) Delayed shipment/arrival of merchandise10) Short/ Excess/Damage merchandise

Mapping of all variables of potential loss

Supply chain mapping for the flow of goods/service, fund and information

Supply Chain disruption/suboptimal performance

1) Replenishment fall short of demand2) Delayed merchandise3) Late season/product launch4) Inconsistent Forecasting5) Quality issues6) Not conforming to markets’ statutory

requirement: conformity certificates7) Loss in transit

Most Stolen merchandise

Products easy to conceal, wide public appeal and which could be easily resold:

• Footwear

• Batteries

• Mobile and Mobile accessories

• Razor

• Foods/drink items

Identify Common Shoplifting Methods and Traits

Shoplifters are often never alone. They usually try to have someone else there in order to distract the employees. The shoppers have to be able to hide the merchandise and here is how they usually hide it.

• Clothing

• Handbags

• Strollers

• Umbrellas

• Purchased merchandise

The End of Retail Loss

Picture from: Loss Prevention Media

How to fix Internal Shrinkage/Theft

EASFixtures

Manual ScreeningEmployees Training

Optimize Supply Chain practicesData analytics and benchmarking

Background check of employees before hiring

External Shrinkage or Theft

Insurance

Source TaggingSecure the premise

Secured Fitting/Trial RoomDisseminate information of measure taken

by retailers for the safety and security

The future of Loss Prevention

E-commerce theft and fraud

Seven Types:• Identity theft• Friendly fraud• Clean fraud• Affiliate fraud• Triangulation

fraud• Merchant

fraud• International

fraud

Identity theftCounterfeit and Grey market

• Also a type of e-commerce theft and fraud

• Stolen identity in order to commit fraud

• Types of Identity Theft:– Child ID theft– Tax ID theft– Medical ID theft– Senior ID theft– Social ID theft

• Legal but unintended sale by the manufacturer

• Sale of imported goods which would otherwise be either more expensive or unavailable in the country to which they are being imported.

• Example: Apple products which are not sold in South Korea, being sold to those in South Korea with manufacturer knowledge

Questions?

Thank you