Category Archives: Commentary

Preliminary National Retail Security Survey Results Presented

At the recent National Retail Federation Loss Prevention Conference in Los Angeles, Dr. Richard Hollinger from the University of Florida presented the preliminary 2008 results.  Many of us look to this survey as the benchmark for shrink performance and the figures here will be cited over and over again in the press.

Overall, inventory shrinkage as a percentage of sales (retail) came in at 1.52% with 95 retailers reporting.  While this is up from 2007’s all-time low of 1.44%, it is still the second lowest number in the history of this survey that has been compiled since 1991.

Extrapolating this percentage out against total industry sales in 2008, gives a dollar figure of $36.53 billion.  From a purist’s perspective, I think this is a bit dicey as the overall percentage is calculated as an average of all respondents shrink percent number and not weighted based on sales volume of responding company.  But, we do not have any better source as an industry.

As to estimates from retailers on the sources of shrinkage, the gap between employee theft (43.7%) and shoplifting (35%) continues to inch closer to each other.  Final results will be released soon and results may change slightly in the final report based on late survey responses.

Is Loss Prevention a Profession or a Trade?

I’ve said before that I find some parallels between loss prevention and human resources in regards to how they struggle to get recognized for the value they provide to their organizations.  There is an interesting column in June’s  Talent Management Magazine that explores the question of whether HR is a profession or a trade.  You can read the article here.  In summary, the writer puts forth four criteria to qualify as a “profession”:

 

  • A body of specialized research
  • Intensive academic preparation culminating in advanced degrees
  • Expert skills and knowledge among the practitioners
  • Published standards of conduct such as professional ethics
  • Now, we certainly don’t have to accept his definition, but he says in in his column that he is purposely being provocative to the HR world.  Perhaps we should be provoked into thinking about these same issues.  For years, we have run around complaining that we don’t get respected for what we do and we should have a “seat at the table.”  But, perhaps we need to look within and compare ourselves with some of the others who do have the proverbially seat at the table.

    For example, take the CFO of your organization.  I’m going to guess they likely have at least a Master’s Degree and it would be hard to find many that don’t have their bachelors’ degree.  There is clearly a large body of knowledge in the areas of corporate finance and accounting that is agreed upon and accepted by all who hope to work in this industry.  There are accepted certifications such as the Certified Public Accountant (CPA) that are required to work in certain capacities.  While somewhat tarnished by recent scandals at major firms, there are published standards of conduct and ethics and practitioners are sanctioned and can have their certifications revoked if they have violated these standards.

    These aspects of finance have not always existed.  If you were to go back 75 years, economics and finance was a murky science, at best.  Similiarly, only a 100 years ago doctors were not too far removed from tribal witch doctors as they had very little science and research to guide them until the early 1900’s.  It is possible to evolve and gain greater recognition and respect as a “profession” but perhaps we should do a little bit more work at establishing the foundations that will earn that respect instead of just complaining of its absence.

    Using Predictive Analytics to Optimize Resources

    During the panel presentation at NRF, we had several questions about the impact of the current financial and retail situation on loss prevention budgets, staffing, and strategies.  Bill Titus, Vice-President of Loss Prevention for Sears Holding, gave some great examples of how they have used predictive analytics to optimize their resources and prioritize issues.  While this has always been a responsibility for senior leadership, the panelists all agreed the current expense pressures had made this more important than ever and has pushed them to delve even deeper into the data.

    Over the last few years, I have had the chance to talk and visit with many companies who place an emphasis on analytics and data.  No one seems to have completely figured out how to predict shrinkage from the metrics (short of cycle-counting which is a good topic for future posts), but they are working hard on it.  Of course, this requires data streams and there are still plenty of organizations that do not have the data necessary to do the analytics and prioritize resources.  If you don’t have the data, you cannot organize it into “information” and if you don’t have “information” you cannot develop it into “knowledge.”  How much emphasis does your loss prevention organization place on analytics?

    New Players on the Loss Prevention Team

    During the panel presentation on “The Evolving Role of Loss Prevention,” one of the interesting points that came out of the discussion was that some loss prevention organizations are adding new players onto their team with specialist roles.  For instance, a few years ago Gap added a financial analyst to their team that came out of a pure financial background.  This position has been invaluable to them in analyzing programs, tests, and trials and helping analyze and build ROI scenarios.

    Randy Meadows from Kohls spoke of how important one of his staff is who comes from an IT background.  This person is able to interface with IT, help the loss prevention group understand how their needs can or cannot be met with a technology solution, and can help LP with implementation.  I know of another retailer who has an IT person who actually does programming for loss prevention projects which enables them to get a program implemented without having to wait in the queue for traditional IT resources.

    Another retailer there has had an attorney on staff in the loss prevention group for years who can be directly involved in the development of policy and procedures, negotiation of contracts, etc.  Many retailers have recruited people from operations to become District Loss Prevention Managers or other line roles in the LP function recognizing all the expertise they bring with them about the realities of running the retail operation.

    None of these retailers are running away from loss prevention expertise or the core responsibilities that need to be addressed.  Rather, they recognize the value of putting some specialists on the team who can broaden their capabilities and improve their effectiveness.

    The Evolving Role of Loss Prevention

    At the National Retail Federation Loss Prevention Show this week in Los Angeles, CA, I had the pleasure of running a panel discussion on “The Evolving Role of Loss Prevention.”  We had a great line-up of panelists that included Keith White, Senior Vice-President of Loss Prevention for Gap, Randy Meadows, Senior Vice-President of Loss Prevention for Kohls, and Bill Titus, Vice-President of Loss Prevention for Sears Holding Company.   In addition, we had a virtual pantheon of leaders from the loss prevention community participating in the audience.

    Over the course of the 90 minute session, we were able to engage in great dialogue, get insights from both panel and the audience, and generate some ideas for future discussion.  Since so many people commented on how valuable the session was, I will highlight some of the key points that were brought out in the discussion over the next several days.