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About the Study The GRTB (Global Retail Theft Barometer) is a study of the losses incurred due to merchandise shrinkage in global retail industry The study focuses on shrinkage trends globally and across regions, in addition to select individual countries The study was conducted by The Smart Cube and Ernie Deyle and commissioned by Checkpoint Systems 2
About The Smart Cube The Smart Cube is a global company which has delivered more than 22,000 studies to clients across every function and region, within a wide range of industries including retail, consumer packaged goods, pharmaceuticals, technology, etc. With a global network in 8 countries, the Smart Cube redefines the traditional research model by raising the quality of the analytics and the research 3
About Ernie Deyle Ernie is one of the leading experts globally in the field of retail loss prevention, business risk assessment, and risk mitigation services, most notably in the area of performance improvement programs designed to impact the P&L Statement/Earnings Report During his 30+ years retail career, Ernie has worked with over 150 retailers worldwide across multiple sectors and formats Ernie has served in a variety of roles from Chief Operation Officer, Global Leader for Profit Recovery, and Vice President of Loss Prevention for firms such as Capgemini and Arthur Andersen in the consulting space, and Kroger and CVS/Caremark in the retail industry and today at Sears Holding 4
Study Objectives To understand shrinkage rates in four key regions, covering 24 countries as well as the reasons for shrinkage and steps taken to prevent losses To provide qualitative insights of best methods of loss prevention, the most stolen items, and the impact of shrinkage on retailers. Key researched data: Average shrinkage rate for retailing as a whole Reasons for shrinkage: % share of shoplifting, employee theft, supplier fraud, and administrative/non-crime losses in total shrinkage Most effective loss-prevention solutions 5
Countries Researched North America United States Europe Austria Belgium Finland France Germany Italy Netherlands Norway Poland Portugal Russia Spain Sweden Switzerland Turkey United Kingdom Asia/Pacific Australia China Hong Kong Japan Latin America Argentina Brazil Mexico 6
Methodology An online survey of retailers across 24 countries was conducted In-depth phone interviews with loss prevention managers of leading retailers and retail industry experts were conducted to gain qualitative insights The Smart Cube analyzed and evaluated the quantitative and qualitative information obtained from this research to understand the trends in shrinkage and loss prevention during 2014 2015 A total of 203 retailers (more than 113,000 stores) in 24 countries participated in the study These companies generated US$996.2 billion sales during 2014 2015 7
Key Findings Shrinkage across the 24 countries under review was estimated at US$123.4 billion This represents 1.23% of retail sales on an average across the 24 researched countries Shrinkage has been observed to increase in most of the reviewed countries and by 0.48 pps 1 globally In the 16 countries where like-for-like analysis 2 was possible, shrinkage increased in 10 and decreased in 6 Out of the 11 verticals (where like-for-like analysis 2 was possible) loss prevention spend increased across 5 but decreased across 6 Note: 1) pps refers to percentage points the unit for the arithmetic difference between two percentages 2) Like-for-like analysis implies comparison of data from common respondents who participated in surveys of both the years 2013 2014 and 2014 2015 8
Key Findings Dishonest employee theft and shoplifting accounting for more than 75% were the key reasons for shrinkage; dishonest employee theft increased by 11 pps this year According to retailers, most incidents of employee theft occur at point of sale (POS) and the remaining are cases of stolen inventory at locations such as warehouses Retailers are using many procedures, such as pre-employment background checks of potential employees and POS exception-based reporting, to combat dishonest employee theft 9
Country Shrinkage Rates Global Retail Shrinkage by Country (2014 2015) Global Mexico Netherlands Finland China Japan Spain United States Sweden Belgium Russia Turkey Brazil Germany Honk Kong Austria Australia Italy Argentina Portugal United Kingdom Poland France Switzerland Norway 1.23% 1.48% 1.38% 1.35% 1.35% 1.33% 1.27% 1.20% 1.19% 1.18% 1.17% 1.10% 1.08% 1.05% 1.03% 1.02% 1.01% 1.00% 0.90% 0.89% 0.88% 0.81% 0.76% 0.75% 1.68% Shrinkage rates across the 24 researched countries ranged between 0.75% to 1.68% Across the countries under review, Mexico recorded the highest rate, with shrinkage amounting to 1.68% followed by the Netherlands at 1.48% Norway, Switzerland, and France recorded the lowest shrinkage rates 10
Global Shrinkage Shrinkage in the 24 countries under consideration stood at US$123.4 billion; shrinkage rate increase from 0.94% to 1.42% globally Region Country Shrinkage value (US$ billion) Shrinkage as Percentage of Sales (%) Change in Shrinkage as Compared with Last Year (common respondents) Percentage Change in Shrinkage as Compared with Last Year (pps, common respondents) Asia-Pacific Australia 2.44 1.02-0.04 China 26.06 1.35 0.48 Hong Kong 0.66 1.05 NA NA Japan 14.90 1.35 0.50 Europe Austria 0.77 1.03 NA NA Belgium 1.23 1.19 0.22 Finland 0.69 1.38-0.30 France 4.61 0.81 NA NA Germany 6.62 1.08 NA NA Italy 3.91 1.01-0.31 Netherlands 1.88 1.48 0.26 Norway 0.50 0.75 0.25 Increased Decreased 11
Global Shrinkage Loss prevention spend decreased or remained the same in 10 of the 14 countries where likefor-like analysis was possible; this led to an increase in global shrinkage Region Country Shrinkage value (US$ billion) Shrinkage as Percentage of Sales (%) Change in Shrinkage as Compared with Last Year (common respondents) Percentage Change in Shrinkage as Compared with Last Year (pps, common respondents) Poland 0.97 0.88-0.02 Europe Portugal 0.49 0.90 0.10 Russia 6.17 1.18 NA NA Spain 3.31 1.33 0.25 Sweden 1.07 1.20 0.53 Switzerland 0.86 0.76 NA NA Turkey 2.14 1.17-0.35 Latin America North America UK 5.15 0.89-0.20 Argentina 1.14 1.00 NA NA Brazil 3.89 1.10 0.34 Mexico 3.86 1.68 NA NA US 36.79 1.27 0.69 Increased Decreased 12
Sources of Shrinkage Dishonest employee theft and shoplifting were the major causes of shrinkage globally In 18 out of the 24 countries, shoplifting was the major cause The primary causes varied across the retail landscape, depending on retailer type, size, and location For example, shoplifting was lower in the North America region and Argentina, which were more prone to dishonest employee theft Admin/noncrime Loss 16% Supplier Fraud 7% Global Sources of Shrinkage by Source (2014 2015) Dishonest Employee Theft 39% In countries such as the UK and Brazil, administrative and non-crime loss was the major cause Shoplifting 38% 13
Cost of Retail Crime per Household Country Cost of Retail Crime (US$ billion) Number of Households ( 000) Cost of Retail Crime per Household ($) Argentina 2.39 11,930 200.42 Australia 3.40 8,875 382.96 Austria 1.64 3,704 442.20 Belgium 1.64 4,645 353.14 Brazil 5.05 59,690 84.65 China 43.63 418,440 104.26 Finland 2.23 2,571 868.40 France 11.03 27,923 395.15 Germany 12.01 40,343 297.70 Hong Kong 1.69 2,433 694.97 Italy 7.13 25,746 276.80 Japan 21.30 53,000 401.97 Mexico 6.43 31,559 203.89 Netherlands 2.93 7,550 387.79 Norway 1.30 2,259 573.91 Poland 1.53 13,660 112.19 Portugal 0.89 4,005 223.05 Russia 9.04 54,610 165.51 Spain 5.50 17,419 316.00 Sweden 0.79 4,632 171.33 Switzerland 1.40 3,362 416.0 Turkey 1.54 20,705 74.24 UK 7.24 27,232 265.76 US 75.32 122,459 615.07 Per household, cost of retail crime across 24 countries ranged between $74.24 to $868.40 Even though countries such as Norway, Switzerland, and France witnessed low shrinkage rates, their costs of retail crime per household were high Turkey, Brazil, China, and Poland registered the lowest costs of retail crime per household 14
Most Vulnerable Merchandise Small and easy to conceal items such as spirits, mobile accessories, batteries, fashion accessories, and razor blades, as well as high-value items with high resale value, such as tablets, were most vulnerable 15
Most Vulnerable Merchandise Apparel and Fashion Accessories 1. Footwear 2. Fashion Accessories 3. Sports-related Clothing DIY/ Home Improvement 1. Batteries 2. Power Tools 3. Door Locks Electronics 1. Mobile Device Accessories 2. ipads/tablets 3. Video Games Most Stolen Merchandise Food and Beverages 1. Wines and Spirits 2. Tobacco 3. Fresh Meat Health and Beauty 1. Razor Blades 2. Makeup Products 3. Perfumes and Fragrances 16
Loss Prevention Solutions Electronic Article Surveillance (EAS) antennas, labels, and tags were the most popular solutions for loss prevention, used by 73% of retailers Spider wraps and security pods/containers, and advanced inventory control tactics (such as secure cable devices) were also widely used EAS (Electronic Article Surveillance Labels and Hard Tags/EAS Antennas) Spider Wraps and Security Keepers Advanced Inventory Control Tactics (secure cable devices, etc.) Shelving Solutions and Delayed Fixtures Global Loss Prevention Solutions at Product-level (2014 2015) RFID- based EAS 15% 27% 27% 44% 73% EAS Pedestal Analytic Data Tools 11% 17
Loss Prevention Best Practices Increasing the use of source-tagging as it helps in reduction of in-store labor and ensures consistent tagging compliance Leveraging internal data more effectively to better understand shrink performance metrics at the SKU, category, and store levels Using a mix of loss prevention solutions; EAS, fixtures, CCTV, manual screening, etc. should work hand-in-hand Investing in employee training to prevent theft from stores Establishing awareness programs to make people aware both internally (training) and externally (signage) of techniques and solutions used by retailers to prevent theft Increasing vigilance during holiday and sales periods when there is high footfall in stores and an increased difficulty in deploying loss-prevention solutions Conducting pre-employment background screenings of potential employees to decrease dishonest employee theft A detailed understanding of the source of shrinkage helps implement the right solution; as per the surveyed retailers, effective prevention solutions helps them reduce shrinkage 18
Participate in the Global Retail Theft Barometer in 2016 Register on: www.globalretailtheftbarometer.com 19