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Retail workers have seen it countless times -- a customer rifles through a rack of DVDs (or sweaters, or lipstick, or sneakers, or macaroni and cheese) and slips one into a bag before making a quick but casual beeline for the exit. Or a truck filled with furniture arrives, and half the load is water damaged. Or the management discovers that a stock clerk has been quietly making off with inventory that was supposed to end up on the shelves.
"Shrinkage," the industry term for loss of inventory due to shoplifting, vendor fraud, employee theft, shipping damage or cashier mistakes, is a pervasive, not to mention costly, problem for retailers. In 2010 these losses amounted to $37.1 billion, or 1.58 percent of total retail sales, according to the 2011 National Retail Security Survey, conducted by the University of Florida in partnership with the National Retail Federation. That's up from 2009, when shrinkage cost retailers $33.5 billion, or 1.44 percent of sales.
Perhaps not surprisingly, an industry has sprung up to provide solutions for retailers aiming to curb their losses. Retail loss prevention, also called asset protection, is much more than just store security. Careers in the field include business management, risk management, criminal investigations and auditing. Now many retailers, especially larger ones, have comprehensive loss-prevention strategies that include electronic tagging and internal investigation teams.
Instead of simply collaring the crooks and hauling them to the back office, where managers call the police, loss prevention is more likely to take place throughout an organization. That's according to an analysis of five major retailers by ECR Europe, a nonprofit that studies the retail industry. In 2007 the organization examined loss-prevention practices at Target Corporation, Limited Brands, Best Buy, CVS/pharmacy, and The Gap, which together had an average shrinkage rate of 0.9 percent (lower than the industry average).
ECR found that these companies had nine characteristics in common, including making loss prevention a priority throughout the management and supply chain; performing close quantitative analyses that allowed them to track exactly what was going missing; and putting loss prevention tactics into practice at the store level, rewarding salespeople who successfully monitored theft and making sure those who didn't faced consequences.
In other words, many different jobs in the retail industry may include some element of loss prevention, depending on how vigorously the company embeds the concept in its corporate culture. Certainly, keeping a close eye on employees is a good idea. The National Retail Security Survey found that 43.7 percent of shrinkage -- accounting for $16.2 billion -- was due to employee theft. Nearly 19 percent of those cases involved collaboration between employees and "external bad actors."
Shoplifters, too, did their fair share. They were responsible for 32.6 percent of shrinkage, to the tune of $12.1 billion in losses. And increasingly, these shoplifters were seasoned criminals. "Increased shoplifting and shrink rates mirror what retailers are seeing with professional and organized crime rings," said Joe LaRocca, the National Retail Foundation's senior asset protection advisor, in a prepared statement. "Retailers are continuing to put resources in place to fight these self-serving and unethical criminals who walk out with billions of dollars in unpaid merchandise every year."
Loss-prevention professionals are on the front lines of that battle.
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