Retail World, Australia: Cognizant’s ANZ Practice Head for Retail and Consumer Goods Writes About Fighting Shrink in a Complex Retail World
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“As the complexities of global retailing continue to escalate, so do the challenges retailers face. Their margins are under pressure as shoplifting losses and internal theft are compounded by online fraud, organized crime and more complex supply chains. The advance of omnichannel retailing has added another dimension to the challenge,” writes Alan Fanarof. Excerpts:
“Retail loss prevention (LP) departments may have reached a tipping point. The tools that worked well for them in the past are no longer adequate. Today, it is imperative for LP teams to shift their focus from traditional strategies such as policing and basic reporting, to LP videos and predictive analytics. They need these solutions to combat theft, fraud and inefficient operations that erode margins.
New LP techniques such as exception-based reporting and EAS tags have emerged, allowing retailers to reduce shrinkage as a percentage of sales, although the actual dollar loss due to shrink continues to grow.
Rising shrink concerns have placed LP initiatives high on the retail agenda. Companies are keen to invest in effective and proven LP methods, and to collaborate with technology companies and specialists to find loss-management solutions that lower shrinkage. Forward-thinking retailers will differentiate themselves by exploring new methods to control shrink.
To stem the tide, retailers have created local collaborations and begun sharing intelligence with their competitors and law enforcement officials. Retailers still need to find ways to make collaboration easier, timelier, and more effective.
Since reduction of organized retail crime (ORC) benefits the entire community, retailers and law enforcement agencies need to work together to create a common communication platform on which mutual alerts are dispatched and best practices devised and shared.
A high percentage of Australian retailers plan to implement real-time theft analysis capabilities. Since limited resources and lack of adequate tools to mine huge amounts of structured and unstructured data continue to undermine the effectiveness of LP teams, retailers need to invest in technologies that collate data from applications across the enterprise to assemble a complete picture of shrink.
Retailers have focused on known and verifiable past shrink to plan for the future, but during the next decade an era will emerge in which they will analyze real-time data and predict shrink.
With consumers active on social networks and online forums, retailers can apply big data analytics to gain a better understanding of behavior patterns and develop short- and long-term LP strategies.
Analytics has the potential to be a game-changer in shrink management.”
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