August’s riots may have cost retailers up to £300m in damage, theft and lost revenue, but they have also focused attention on widespread security issues besetting the entire sector.
It sounds a lot and it was: as rioting broke out in key UK towns and cities in August, retailers across the country were left facing £300m worth of damage, according to analysts Retail Economics. Even more disconcerting, however, is the estimated annual UK retail cost of theft and fraud calculated by the Centre for Retail Research: £4.84bn – a figure that also includes an estimated £977m spent by the retail sector in combating crime.
Customer and employee theft head the loss list, at £1.89bn and £1.62bn respectively per year. Retailers expect to deal with shoplifting, but are also faced with employee theft – from refunds on non-existent returns to turning a blind eye as shoppers walk out with goods.
For many retailers, staff theft is one of the great unmentionables, something few care to admit and which can also be difficult to eradicate. Earlier this year, retail consultancy Martec International and Retail Knowledge, which organises retail fraud events and conferences, produced The Retail Fraud Survey. It was arguably the first in-depth analysis of in-store and online security issues, following interviews with 100 retailers including Jaeger, John Lewis, Marks & Spencer, Primark, Monsoon, Paul Smith, and River Island.
“It seems that there is very little joined-up thinking when it comes to multi-channel loss prevention,” says Brian Hume, managing director of Martec International. “We usually had to interview two loss and prevention managers – one responsible for stores and one for online. With click-and-collect now accounting for around 25% of online sales, there really needs to be an integrated strategy across the channels.”
In the survey, retailers were asked to name their top three loss-prevention issues. Leading the field were: maintaining or introducing a culture of loss; internal/staff fraud; and coping with increases in shoplifting volumes.
Paul Bessant, managing director of Retail Knowledge, which organises the annual Retail Fraud conference and Retail Fraud on the Road (to be held in Leicester on October 6), says fashion retailers are largely preoccupied with the first two issues. “The continual theme from fashion brands isn’t organised shoplifting, but internal theft. Privately, some fashion brands are telling us that 75% of their in-store loss is actually internal,” he explains.
According to Bessant, another key issue highlighted is unauthorised ‘borrowing’. Staff planning a night out will ‘borrow’ something from stock, which when returned the next day is marked down and sold as damaged. “It is a cultural issue for retailers,” he says. “Many staff doing this consider themselves to be excellent employees and don’t actually see it as being wrong.”
The thief within
‘Borrowing’ apart, staff theft often involves such age-old practices as ‘sweethearting’ (under-ringing, not giving the shopper the till receipt and then pocketing the difference in cash from the till at a suitable moment); or colluding with shoppers to pack more items at the checkout than have been paid for. Till-monitoring systems have long been available to identify such fraudulent activity by picking up anomalies – for example, above-average numbers of ‘no-sales’ or refunds; use of unclassified merchandise (when the bar code label has gone missing, for example, and staff have to key in the code) rather than scanned labels; or repeated sales of low-value lines far in excess of what should be in stock.
Significantly, while The Retail Fraud Survey suggests that alarms, security cameras and card-payment technologies are universal, just over half (53%) of the retailers questioned use electronic tagging, while two-thirds use analytics to try to identify problems at the till.
Payback for such systems is often rapid, as young fashion retailer Republic discovered when it installed analytical tools from IntelliQ at the end of 2010. “We have achieved a return on our investment within the first six months of using the system,” says Paul Burlace, head of profit protection for Republic. “I am also confident that the system will deliver year-on-year payback, not just through the identification of invisible internal theft, but also through improvements in procedural compliance at point of sale.”
Combating shoplifting can be equally challenging. Fixed-penalty fines of £80 are now commonplace for thefts valued at £200. But minimal fines for first-time offenders are seen by many retail security chiefs as a poor deterrent – especially since around half of the 50,000 or so fixed-penalty notices issued annually are never paid, according to the sentencing panel of The Magistrates’ Association.
It also states that of the 1,500 cases of store theft analysed, only 5% were first-time offenders. On average, an individual appearing in court had 19 previous convictions for a total of 42 different offences, 21 of which were for stealing from shops.
Store-banning orders for known culprits can be a highly effective tactic because any breach is regarded as ‘aggravating circumstances’, ensuring more severe penalties from magistrates.
Organisations such as the Loss Prevention Fashion Forum, hosted by retail loss prevention specialist Oris, argue that the tendency to treat retail crime as a public nuisance, rather than theft has compounded the problem. Perhaps the stiff penalties handed out to August’s looters may make some of those one in 10 teenagers realise that shoplifting really is crime.
Securing your stock
While steel shutters, CCTV and electronic article surveillance (EAS) tags may prove ineffective against hooded looters, they can provide a deterrent for the less determined.
EAS tags have been around for decades, and the choice ranges from pin-on plastic units to swing tickets or fabric labels sewn into garments.
In June, Checkpoint Systems launched a combined radio frequency identification (RFID) and EAS system aimed at fashion retailers. It enables stock information and product location data to be combined with security function. Overhead sensors can track garment movements within the store as well as trigger alerts. If something is stolen, the system will know what has been taken.
EAS systems tend to use either radio signals or acoustic-magnetic (AM) technology, although hybrid sensors for detecting both types are now available. Intrepid Security, for example, has recently launched a hybrid detector operating at both 58kHz for AM tags and 8.2MHz for radio ones.
The latest launch from SG Systems is a mini-pad AM tag deactivator. It can deactivate tags at distances of up to 12cm, with audible and visual signals to confirm that the tag is no longer active.
While tags can alert staff to potential thefts as they are removed from the store, some can trigger an alarm if they are tampered with in fitting rooms. Ink tags, from companies such as Catalyst, can provide an equally effective deterrent, spilling ink over both garment and thief at any attempt at unauthorised removal. However, this results in ruined merchandise and obvious loss.