Retail Shrink Loss Burden Expected to Cost U.S. Consumers $50 per Person This Quarter Alone
As we enter the 2016 holiday shopping season, retailers are gearing up their fulfillment and stocking strategies to make the most of consumer dollars. They should also be addressing retail shrink and loss prevention, however, as apparel, children’s toys, electronics and electronic accessories are expected to be the most stolen items this holiday season in the U.S., according to the 2016 Retail Holiday Season Global Forecast.
The study, underwritten by an independent grant from Checkpoint Systems, Inc., and executed by retail loss prevention analyst Ernie Deyle examined the typical business risks faced by major this holiday season. The 13 markets covered in the report span North America, Europe and Asia, and include the U.S., Belgium, France, Germany, Italy, Netherlands, Portugal, Spain, UK, Australia, China, Hong Kong and Japan.
The analysis found that the retail cost loss burden for the retailers surveyed in the U.S. for 2016 is expected to be $132 per person, of which $50 is expected to be incurred in this holiday season. This is approximately double the loss burden experienced in other quarters. Retailers in all 13 researched markets will experience both the heaviest sales volumes and the weakest performances specific to margin rate during this time period, causing strains on profitability during the holiday season due to increased shrink/theft from internal sources and external.
According to Deyle, “Building holiday inventories earlier and specifically for high-risk items may lead to increased sales reduction pressures, including markdowns and shrink throughout the fourth quarter. In fact, as this report reveals, despite more than one-third of the year’s retail sales expected to be registered in just these three months, more than 40% of SRAs are also incurred in this same time period. This leads to increased shrink, and puts additional strains on brick-and-mortar retailers already reeling from an ongoing inhospitable retail market.”
Aside from shrink, retailers must also balance inventory needs and consumer demand for the holiday season, always a precarious task. 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. Achieving the balance of these two factors is critical to profitability and growth, particularly in omnichannel environments. To do so, the alignment and use of advanced data analytic tools, inventory management strategies, and technologies such as RFID provide retailers with advanced visibility to track merchandise as it moves throughout the supply chain to distribution centers, retail backrooms and store shelves. This increases the overall value proposition specific to item, category and department financial contributions.
The report recommends retailers address issues include the following:
Interested parties can obtain a copy of the full 99-page report here.