By Steve Rowen, Managing Partner
February 9, 2010
It’s no secret that in a tough economy, ordinarily “good” people will resort to uncharacteristically “bad” behaviors. No one knows this more than retailers, because as they told us in our most recent Loss Prevention Report, customers are stealing more goods due to economic conditions. Interestingly enough, they tell us their employees (most likely thankful for a job) have become less of a shrink-hazard, yet due to individual and organized customer theft, more respondents than ever report the priority of LP rising in their organizations (68%).
So with such a need for enhanced LP solutions (and a cognizance of that need), what’s preventing retailers from “getting there”? An issue of human capital.
As we can see from the figure below, in the current economy, expense and time to recoup investments top the list (Figure 1).
Figure 1: Can’t Buy What We Can’t Manage
Source: RSR Research, December 2009
These numbers are very much in line with the top organizational inhibitors identified last year (86% cite expense this year vs. 83% in last year’s report, while 53% cite difficulty proving ROI in 2009 compared to 45% in 2008).
However, manpower expense has become a much larger concern: retailers report that having the staff required to review LP and audit data is a significant inhibitor to their ability to adopt new initiatives: 41% cite lack of manpower as preventing forward progress this year, compared to 29% in 2008. This is no doubt attributable to budget cuts and freezes across industry, but as retail budgets free up at a rate faster than unemployment can fall, a window of opportunity will (and does) exist for retailers looking to capitalize on the enhanced talent pool still in search of employment.
Laggards have an even harder time with all roadblocks, reporting higher than the aggregate pool across the board: 92% cite expense as a top inhibitor, 69% can’t prove ROI readily enough, and 54% say they don’t have the personnel to properly manage any new systems. Quite simply, laggards lack the funding, tenacity, and human capital required to increase their Loss Prevention efforts.
Winners, on the other hand, have a different set of challenges. For them, the ability to execute is the enemy. Twenty-five percent of Retail Winners report that “We’ve got a good LP plan, but we don’t execute well,” compared to 7% of average retailers and 0% of laggards. This is further example of Winners’ need to better leverage the investments they’ve already made, and a significant indicator that enhanced business intelligence is necessary for them to reach such a goal, as we’ll see in a moment. This is of particular concern to FMCG retailers, who cite execution as a roadblock at a much higher rate than other segments. But even more importantly, FMCG retailers still have an inordinate amount of challenges surrounding their perpetual inventory systems. A staggering 58% of FMCG retailers say their perpetual inventory systems are so inaccurate that they “cannot get their arms around them,” vs. 23% of GMA retailers and 27% of DIY/other categories. We know that the faster the turn rate, the more quickly perpetual inventory can get out of balance, but to have it be a top-three obstacle for so many in the 21st century is a stunning statistic.
Within the scope of the report, retailers also go on to tell us that the key to overcoming these inhibitors lies in better Business Intelligence. Sixty three percent of the total response pool cites “better business intelligence to analyze all our data” as a top way to overcome problematic inhibitors. We invite you to read the full report by following this link.
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