By Steve Rowen, Managing Partner
November 10, 2009
A few months ago, we launched a survey asking retailers about the state of loss prevention within their organizations. At that time, we anticipated that the economic downturn would result in some reported increases both in the amount of shrink retailers cite taking place in their stores, as well as an increase in their priority to stop it. As unemployment remains high, we expected to hear of increasingly more desperate customers and employees. However, in our first analysis of this not-yet-released data, we are seeing all of this and more, and some fairly surprising shifts from prior years’ findings.
Firstly, when asked where their top three sources of shrink come from, 67% of retailers indicate employee theft of merchandise, 62% from customers stealing merchandise, and 45% say from employee theft of cash. Not surprisingly, 44% of respondents tell us that the economic downturn has caused their shrink rate to rise, and indeed, 68% tell us that fraud and shrink have become a higher priority at their company in the past two years. As stated, we expected this but our reasons were wrong.
When asked to identify the top business challenges driving new loss prevention initiatives, the number one reason our respondents cite are growth-based. Sixty one percent tell us that as they grow, they are becoming a bigger target for thieves. In contrast, only 29% believe an inability to trust employees is a top-three concern. This is in stark contrast to what we’ve seen in years past, when retailers were summarily forced into action out of complete mistrust of their workforce.
 It is worth noting that this year’s respondent pool contains a significant number of tier 1 retailers; 53% of our respondents are retailers with annual revenue topping $1 billion, and 26% are ”mega- retailers” (annual revenue of more than $5 billion). Last year, 57% of responses came from Tier 1 retailers, and only 43% identified growth-related concerns as a challenge. The fact that growth-related concerns have risen so sharply among a similarly-sized response pool is fascinating. In fact, in last year’s report, we postulated a “survival of the fittest” concept, citing that many of the worst performing retailers may have already been thinned from the herd. By the fact that today’s existing retailers are looking forward – out of the darkness – and planning for a period of organizational growth once economic conditions improve, we can see that, at least for those retailers still standing, it’s time to start thinking about growth once more.
Stay tuned to learn how our respondents view the opportunities that LP initiatives afford them, as well as the technologies that are high on their budget lists. We also look forward to viewing these results by sales performance to help identify which tack Retail Winners are following. The full report does not release until early December, but we’ll give you additional previews as we continue our analysis.
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