Light fingers

Light fingers

Anti-theft tools constantly improve, but so does thieves' ability to avoid them.

When apparel retailers introduced die-tags to protect clothing from theft, determined thieves quickly discovered the tags could be frozen

and safely removed.

Thieves have also found a way around the latest electronic

surveillance tags by lining environmentally friendly, or "green", bags

with aluminium foil, forcing some retailers to install metal


Retailers are losing the battle to curb "shrinkage", or theft, judging

by the findings of a study that valued the cost of retail shrinkage at

more than $2 billion a year.

Despite efforts to control theft by customers, employees and suppliers

and also loss from administrative errors, the total value of shrinkage

in Australia in 2007 rose to $2.25 billion, or 1.39 per cent of sales,

up from 1.36 per cent in 2006.

Retail shrinkage increased 5 per cent in Australia in the past 12

months, according to a global study on shrink costs by the

Britain-based Centre for Retail Research, released by

Checkpoint Systems, which supplies "shrink management solutions" to


The findings are consistent with previous estimates that put the cost

of shrinkage in Australia at between 1 per cent and 1.5 per cent of


Australian Centre for Retail Studies program director Andrew Cavanagh

said the cost of shrinkage fluctuated as retailers implemented

prevention measures, but thieving customers, employees and suppliers

eventually found a way to circumvent them.

"When it's first introduced you get a decrease in shrinkage. But after

a period of time - and distressingly, that period of time is not that

long, less than 12 months in some instances - they will have come up

with a way around it," he said.

Many theft prevention solutions and strategies also had a deterrent

effect on sales by preventing customers from interacting with

products, Mr Cavanagh said.

"It may reduce the dollar value of what's stolen, but in terms of

reducing shrinkage percentage it may actually be counterproductive

because it lowers their sales as well. That's the balancing act that

retailers have to make."

Checkpoint Systems chief executive George Off said shrink management

solutions were now seen as a priority for retailers and could provide

a significant return on investment.

Retailers in Australia spent 0.35 per cent of sales, or $575 million,

on shrink prevention last year, and more than 40 per cent of large

retailers now use electronic article surveillance source tagging,

including magnetic, acousto-magnetic, radio frequency and microwave


Centre for Retail Research director Joshua Bamfield said shrink rates

had risen for some retailers and fallen for others in similar regions,

suggesting lower rates of shrink were due to strategy, policy and

investment in theft reduction measures.

Woolworths, Australia's largest retailer, said it had seen a steady

improvement in shrinkage rates over the past few years after

implementing a variety of methods to prevent theft.

"We have a number of measures in place and we continue to review our

programs and explore new options and technology," a spokesman said.

Australian retailers attribute 40.2 per cent of shrink to staff and

36.6 per cent to customers. Almost 47 per cent of internal theft takes

place at the checkout or cash desk, 25 per cent on the sales floor and

almost 28 per cent in the back office, delivery bay or stockroom.

Mr Cavanagh said technologies such as radio frequency tags, which are

still being trialled by Australian retailers, were likely to have the

most impact on shrinkage, because of supplier theft and clerical and

administrative errors, which accounts for almost a third of shrinkage

at some retailers.

"A lot of external theft is opportunistic, and shrinkage prevention

technology does act as a deterrent for those people," Mr Cavanagh

said. "But does it deter those people who make a living from it?"

© Fairfax Business Media

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