Magazines Archives - 2009 August

Should retailers police or prevent loss?
Story 5 - Focus

Low crime does not mean no crime in Singapore, reputed to be one of Asia’s safest cities, which explains its retailers’ continuing vigilance against theft. But should operators be policing or preventing the problem? What is the difference and how effective are their measures so far? Jolene Klassen gets insights from some retailers and industry observers on the beat.

Low crime rates and a robust economy have secured Singapore’s place among the safer countries in the world, providing a sense of equanimity not only to residents, but also businesses operating in the citystate, which is favoured by international companies as a base for their flagship operations and regional headquarters.

However, by no means are retailers resting on their laurels in terms of security measures — mindful, as many are, to the slogan of the Singapore National Crime Prevention Council: “Low crime doesn’t mean no crime.”

Last December, Singapore witnessed its largest heist when an employee at locally-listed high-end watch merchandiser Cortina Holdings Ltd made away with S$7.9-million (US$5.5-million) worth of luxury watches from the company’s store at Raffles City shopping mall. Although the authorities were quick to apprehend the thief, the incident was a strong reminder to retailers that a lax attitude towards loss prevention could exact heavy revenue losses.

Increasingly, however, studies and surveys are showing that, apart from retailers having to pay the price for complacency, their slack in anti-loss measures is also costing consumers.

According to the Global Retail Theft Barometer, an annual study conducted by the Nottingham-based Centre for Retail Research, Singapore residents pay up to S$258 (US$173) annually per household for losses incurred by retailers here. Overall, the industry has lost US$145 million as a result of retail theft — and US$173 million if administrative errors are included. While Singapore registers one of the lowest shrinkage figures, at 1.21% according to the study, the research group is not discounting a rise this year, particularly in light of the global recession.

Still, Singapore Retailers Association’s (SRA) executive director, Lau Chuen Wei, states that while the current economic climate has yet to result in any sharp increases in losses on the local scene, she believes that the extent of loss “would vary from merchant to merchant, as some segments would be more prone to theft than others”.

“From what the police have shared with us, and from retailers’ feedback, the main causes of shrinkage are internal theft as well as syndicated theft. Internal theft can account for as much as 50% of total losses for some traders. The single, occasional shoplifter is not a major concern,” she maintains.

And, with the recent incident at Cortina still fresh on everyone’s mind, retailers are acknowledging that employee theft is one of their major concerns.

Singapore retailer Elim Chew, president and founder of apparel-andaccessories company 77th Street, believes this is so because employee theft is more difficult to detect than shoplifting and other causes of shrinkage. Although its encounters with such crime are low, the company frequently trains staff in a pre-emptive effort to minimise pilferage and loss, regardless of the state of the economy, Chew reveals.

Another retailer, Muji Singapore Pte Ltd, which sells unbranded quality apparel, household products, stationery and snacks from Japan, also agrees that employee theft poses one of the biggest concerns of retailers in their loss-prevention efforts. “Employee theft is considered the most detrimental … as such losses can amount to a large sum if left undetected,” states Jasmine Sng, general manager at Muji Singapore, citing the company’s close watch over its inventory management to curb occurrences.

Theft aside, the company also factors in expired food products and goods damaged as a result of “both customer and staff negligence”, into the company’s loss to provide a valuable insight into how the business can improve on its operations.

SRA’s Lau says that while the association works very closely with the Singapore Police Force, as well as the National Crime Prevention Council, to share information and trends with retailers, “more and more, retailers are adopting technology to prevent losses, and CCTVs, digital cameras and EAS systems are now commonplace”.

Sng reveals that Muji is working closely with global security company ADT Security Services (a division of Tyco International) to deploy the vendor’s Sensormatic solutions throughout its stores, using hard tags for its apparel, soft tags for its household items and CCTVs to monitor any unusual or suspicious movements on the shop floor.

In addition, the retailer deploys the Sensormatic Smart EAS (electronic article surveillance) system to analyse data and trends in their stores for better leverage to track and trace exception reports as and when they occur.

“As our stores have been using security systems for more than three years, the public [is aware] that our merchandise is tagged. As a result of this, we have not seen an increase in retail crime in our stores,” Sng asserts.

While implementing safeguards is a step in the right direction for businesses to curb shrinkage, global research group KPMG highlights that process failure, more than simple theft by internal or external sources, causes greater retail losses.

George Svinos, head of retail, Asia Pacific Consumer Markets at KPMG, points out: “It is very important that retailers have the information systems in place in order to identify the source of shrinkage in their business. It should not come as a surprise if employees and customers are aware of weaknesses in the process which are not addressed that such weaknesses will continue to be exploited.”

Retailers have traditionally focused on customer and internal theft as the traditional cause of shrinkage but KPMG’s latest study, Global Retail Loss Prevention Survey 2009, suggests that process failure is a much greater cause of retail losses, he points out. “The current economic climate has magnified people’s attention to the issue, and, certainly, as unemployment grows — and it is expected to grow further —retailers would expect the level of theft by customers to increase,” Svinos adds.

Recognising that retailers are attuned to solutions tailored “for the issues as they understand them [to be]”, he cites convenience as one reason why retailers hesitate to delve deeper into the causes of shrinkage in their companies.

“It is easier to deal with loss prevention on the basis that it is a result of external theft, as the retailer can simply blame this on external issues and not deal with the internal issues around process failure that may also exist,” Svinos explains.

“Retailers continue to invest vast amounts of money in upgraded security systems such as CCTV, inventory tagging and static security guards, but little ... in reducing the [failure] rate of processes and systems that provide better and continuous information on the cause of stock shrinkage,” he says, adding that he does not consider the measures generally implemented as preventive. “Best practice is about prevention, and not policing of retail stores,” Svinos concludes.

To view other stories, get a copy of Retail Asia. To subscribe, please download the subscription form from http://www.retailasiaonline.com/subscription.html