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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