Research sponsored by Checkpoint Systems – the provider of merchandise availability solutions to the global retail sector – reveals that retailers will see shoplifting erode their profits over the coming months as they begin to gear up for a bumper Christmas period.
Designer apparel, luxury foods and electronic accessories are expected to be the most stolen items this festive season, with higher quantities of merchandise put out on the shop floor, additional door displays, the employment of temporary staff and increased footfall all contributing towards potentially high losses across the country.
Underwritten by an independent grant from Checkpoint Systems, the study was carried out by Ernie Deyle, a retail loss prevention analyst, and provides an analytical view of business risks that major retailers face during the coming holiday season. The 13 markets covered in the report span the UK, North America, Europe and Asia and include the US, Belgium, France, Germany, Italy, Netherlands, Portugal, Spain, Australia, China, Hong Kong and Japan.
Two weeks ago, Fung Global Retail & Technology suggested that holiday spending could increase by 3.5% year-on-year, with Brits expected to spend around £2.5 billion more than they did for Christmas 2015. Indeed, stores across the UK could see sales top the £73 billion mark in the final two months of the year.
However, despite this potential increase, retailers’ margins will be squeezed over the festive period, with many ‘bricks and mortar’ retailers opting to cut their prices in order to increase footfall and keep up with the competition from other physical and online retailers.
From now through until December, gross margins will be reduced by 3.26% with the rate of erosion leading to a 9.8% decline of realised margin captured. On an annual basis, for every £77 in sales there’s £1 worth of ‘loss value’ incurred. However, during the Christmas season, the run rate is expected to decline to £61 in sales for every loss value incurred.
Festive shoplifters bite
Over the next two months alone, dishonest shoppers and employees will steal merchandise totalling 38% of losses incurred over the entire year. For their part, the retailers are caught between wanting to attract seasonal shoppers and protecting their merchandise.
The amount merchants will lose equates to every person in the UK stealing the equivalent of £15.15 over the festive period. This figure is more than double that stolen over the rest of the year. That increase places an enormous burden on retailers and, ultimately, on honest consumers who pay for it in the price increases that swiftly follow.
The grocery retail sector, which is already under pressure from the swift rise of discount stores, will see leading alcohol brands targeted as shoplifters ‘fill their stockings’ with expensive whiskey, vodka and champagne. Traditional festive foods, like beef, lamb and turkey, are also high on their shoplifting lists, while the wide range of gift sets and chocolate boxes on display presents an appealing opportunity for the more light-fingered customers.
Of the items most wanted this Christmas, leather jackets and designer winter coats rank highly, while make-up and perfumes are easy to conceal and have a high resale value on the black market and online marketplaces.
Electrical items are also expected to be in favour during the festive months, with electric toothbrushes, shavers, hair straighteners and kitchen appliances all popular presents.
What’s causing the increase?
Christmas presents an increased number of opportunities for shoplifters. With higher numbers of customers in store and more merchandise on display, singling out the shoplifters becomes that much more difficult. In addition, the chance to quickly sell on the stolen items such as gift sets and alcohol becomes a good deal easier for the thieves.
Retailers’ decisions to take on more than 3,500 temporary staff over the key sales period can also exacerbate the increase due to a lack of training/compliance. The high turnover of goods often results in merchants rushing items to the shop floor without security tagging them, making it simpler for thieves to remove these goods from the shelves without paying for them.
The report reveals that, for most retailers, wholesalers and distributors, inventory – including the space to store it – is the largest single cost of doing business. While reducing inventory means lower costs, insufficient inventory leads to ‘out of stocks’, lost sales and unhappy customers. Therefore, balancing these two factors is critical for both profitability and growth, and particularly so in omni-channel retailing environments.
The report recommends that retailers should:
*thoroughly train seasonal workers in order to manage the increasing complexities of the festive period
*employ technology designed to stabilise inventory loss and ensure on-shelf availability while enhancing product protection countermeasures
*maintain operational execution standards, while also being vigilant regarding financial performance expectations
*update planning and financial performance models in order to properly account for advanced deliveries of seasonal products
Neville Payne, vice-president of merchandise availability solutions at Checkpoint Systems, commented: “Retailers are faced with the difficult task of ensuring that they can manage the vast influx of customers, as well as protecting their merchandise and ensuring it’s always available for honest shoppers to purchase. It’s important not to compromise on the bottom line over the festive period by taking shortcuts. Staff training and security compliance are easy steps to take for ensuring a successful Christmas season.”