Magazines Archives - 2007 October

War on shrinkage begins with education and awareness
Cover Story

Shrinkage is chipping away at retailers’ bottom lines in Singapore yet many are slow to see preventive measures as an investment. To change shopowners’ perception, experts are prescribing education and awareness as the recourse. Jolene Klassen reports.he line between inventory shrinkage, or loss prevention, and shop security are blurring. Yet, many retailers in Singapore are still barely scratching the surface when it comes to overall protection. Although they are generally aware of the importance of implementing safeguards against shrinkage, many fail to see the exercise as an investment rather than a liability or cost.

For years, shopowners have regarded any form of protection apart from the basic as an additional cost — a luxury. The general perception is that businesses can afford to look at spending on these “extras” only in boom times.

Currently, shoplifting, organised crime, employee theft and administrative errors make up the bulk of shrinkage for the country’s retailers. Last year, although shop theft fell to 4,804 cases, the decline was a mere 1% from 5,225 the year before. The crime has been ranked the most common, accounting for 61% of all crimes in the city-state.

Changing perceptions Indeed, deterrent systems available today run the gamut, from devices linking point-ofsale (POS) modules with the company’s network interface and surveillance cameras connected to CCTVs to radio-frequency identification (RFID) tags and electronic article surveillance (EAS) systemssystems.

All these can be integrated into the store layout and displays. Deluged with choices, selecting the right vendor and the system that best suits needs can be overwhelming for any retailer.

But, first, a change in the retailer’s perception towards implementation is needed, and “education and awareness is the key approach”, insists Jason Lim, sales manager at MICROS-Fidelio, Asia-Pacific. Only with a better knowledge of what technology is available and what extent of implementation is adequate for their operations will retailers be more inclined towards taking precaution, Lim avers.

Apparently, protection is not merely about installing a type of device on the premises. Although cameras and RFID tags, for example, keep pilferage significantly in check, the course that Lim highly recommends is an integrated approach designed to suit a retailer’s unique needs. The system should provide exception reports to track the many retail transactions, from POS to inventory, logistics and the receipt of goods at warehouses and outlets.

For this, one might consider MICROS-Fidelio’s Datavantage XBR Store Analytics, Lim suggests. Apart from incorporating an entire spectrum of retail functions, it can be tailored to analyse margins and encourage productivity to ensure quick returns on investment (ROI), which is key for any investment.

And while loss cannot realistically be completely eradicated, preventive steps can minimise it, as demonstrated by Home-Fix DIY Pte Ltd. Says its area manager, Ken Ong: “As a retailer, we cannot stop people from shoplifting, but we can prevent it.

For instance, we put expensive goods in locked showcases, perform regular stock checks on expensive items and ensure that high shrinkage items such as batteries are displayed behind cashier counters.”

Such measures thwart opportunities by making it harder for thieves. (It also helps that Singapore has strict law enforcement and government awareness campaigns.)

Still, Ong maintains that internal theft poses one of the main challenges to retailers these days.

MICROS-Fidelio’s Lim points out that in developed countries like Singapore, theft by employees — more commonly known as internal fraud — could pose the highest incidence of retail crime. He believes that most perpetrators “are very experienced staff who know what they’re doing”. Their activity often goes unnoticed by the management until much later when the losses or irregularities are more prominent and have already caused a setback in the business or, worse, the damage has become

too great by then to be reversed. Popular Holdings Limited’s operations manager, Thomas Tan, also attests that external elements are not solely to blame for stock shrinkage. To combat the problem, he is all for preventive measures but laments that the cost of implementation is borne solely by the retailer.

Tan also rues the lack of collaboration between retailers and vendors which, he stresses, is key to better system implementation. Particularly concerned about what happens to the merchandise further up the supply chain, he complains: “Currently, there is little or no collaboration between retailers and suppliers to ensure a form of tracking device, sensor or other technology is attached to the merchandise before it is sent to our warehouse.”

He is seeking to work more closely with suppliers to improve the situation.

Within its stores, Popular relies on CCTV, surveillance cameras and EAS systems to beat crime. This retailer also conducts staff training on antiloss methods and holds biannual inventory audits to stem loss on the shop floor.