professor adrian beck university of leicester, uk total retail loss: developing a global standard...
TRANSCRIPT
Professor Adrian Beck
University of Leicester, UK
Total Retail Loss: Developing a Global Standard for Measuring Loss in Retail Organisations
Project Update and Discussion
BACKGROUND
• Little consensus on what constitutes retail ‘loss’.
• The term ‘Shrink’ is widely used across the world but no internationally agreed definition exists.
• Rapidly changing nature of retailing requires a reconceptualization of how retailing defines loss.
• Role of LP teams needs to change to reflect growing business complexity.
Shrink definition varies enormously between companies, sectors and countries – it even varies within some companies!
What is included, excluded? Unknown loss? Known loss? Process errors? Cash Loss? Theft? Non Theft?
Also little agreement on how shrink is measured Retail? Cost? Cost Plus?
WHAT’S IN A NAME?
Mark downs? Vendor fraud? Losses from out of stocks? Damage? Wastage? Till errors?
On line frauds? Voucher scams? Counterfeit notes?? Missed returns? Customer compensation? In-store use?
WHY IS THIS NEEDED?• This ambiguity of definition:
• Makes benchmarking unpredictable, unreliable and unhelpful
• Blurs boundaries of accountability
• Fragments control processes which provides opportunities for theft
• Can create a culture of ‘acceptable’ loss
• Growing retail complexity requires a radical review of what generates loss.
• Huge opportunity to identify the true cost of loss – realise the size of the profit growth opportunity ‘locked’ within the business.
• Growing budget pressure requires a better understanding of where to prioritise LP spend.
• Opportunity to make greater use across the business of the loss management expertise within LP teams.
METHODOLOGY
• Review of existing literature.
• Meetings with retailers
• Electronic survey of retailers
• Retailer case studies to populate new model
NEXT STEPS
• Roll out of project to US retailers – broaden buy in and improve applicability of model
• Write interim report to update European retail community
• Prepare for broader global survey of Total Retail Loss
FEEDBACK AND QUESTIONS
• Key questions raised by electronic survey
• Opportunity for this group to contribute to the process
External Theft
InternalTheft
Cash Loss
Counterfeit Notes
Voucher Scams
Staff Discount Abuse
Waste
Damage
Out of Stocks
Mark Downs
Pricing Errors
Customer Compensation
Missed Returns
In-store Use
Internal Theft
Vendor Fraud
3rd Party Logistics Theft
Waste
Damage
Product Contamination
Criminal Damage
Burglary
Bomb Threats
Natural Disasters
Health & Safety
Fire
Corporate Fraud
Currency Exchange
Losses
Demonstrations
Online Fraud
Customer Guarantees
Unplanned Sales
Total Retail Loss
Known Operational Losses
Unknown Operational Losses
Supply Chain Losses
Corporate Liabilities
Corporate Policy Losses
MaliciousNon-
maliciousMalicious
Non-malicious
Total Retail Loss
How to measure loss?
Retail Prices 1Cost 2Cost Plus 0Both (Retail and Cost) 2
Should the word ‘retail’ appear?
Total Retail Loss
Known Operational Losses
Unknown Operational Losses
Supply Chain Losses
Corporate Liabilities
Corporate Policy Losses
I would go for Corporate Liabilities, Corporate Policy Losses, Supply Chain Loss and Store Loss.
Split Store loss into Malicious, Non-Malicious, Unknown.
External Theft
InternalTheft
Cash Loss
Counterfeit Notes
Voucher Scams
Staff Disc/Loyalty Card Abuse
Waste
Damage
Out of Stocks
Mark Downs
Pricing Errors
Customer Compensation
Missed Returns
In-store Use
Total Retail Loss
Known Operational Losses
Unknown Operational Losses
Supply Chain Losses
Corporate Liabilities
Corporate Policy Losses
MaliciousNon-
malicious
We make an assumption here that the offending staff member has not been caught during their first offence. We assume they make up some of our Unknown Losses. “Loss Value of Incident” *15 [The average amount of times they have committed the same offence without being caught]
Counterfeit Vouchers?Voucher & Coupon Scams?
Food Surplus - A few other retailers that, like us, provide food that would be waste to charities (who sell the food on at a reduced rate to the poor for want of a better word). Whilst this is a loss, I believe it should come under a separate section to waste as although it is actual loss it is also Brand enhancing.
How do we make this comparable?
100 100
100 100
100 100
88 100
100
100
88
90
75
75
100
100
100
100
100
90
90
100
100
90
75
100
88
88
Should we be including non malicious cash loss?
Internal Theft
Vendor Fraud
3rd Party Logistics Theft
Waste
Damage
Total Retail Loss
Known Operational Losses
Unknown Operational Losses
Supply Chain Losses
Corporate Liabilities
Corporate Policy Losses
MaliciousNon-
malicious
62100
62100
88 62
100 100
100 100
I am confused as to why this is called out as separate line
Feels like there should be more here....one I can think of would be shortage claims / credits given to the stores. Some retailers don't allow for this but if a pallet does not arrive, and the DC cannot find, then the store has to be credited and the retailer needs to guess what happened to that pallet.
Do we need to capture unknown loss here as well?
Product Contamination
Criminal Damage
Burglary
Bomb Threats
Natural Disasters
Health & Safety
Fire
Corporate Fraud
Currency Exchange
Losses
Demonstrations
Online Fraud
Total Retail Loss
Known Operational Losses
Unknown Operational Losses
Supply Chain Losses
Corporate Liabilities
Corporate Policy Losses
100
90
100
100
100
100
100
100
100
100
90
100
88
100
100
100
100
100
81
50
88
88
Include counterfeit in this category
Is criminal damage the same as vandalism?
Should it be trying to measure reputational damage costs?
Customer Guarantees
Unplanned Sales
Total Retail Loss
Known Operational Losses
Unknown Operational Losses
Supply Chain Losses
Corporate Liabilities
Corporate Policy Losses
80 62
80 50
Not relevant to us; moving to measure these
DISCUSSION POINTS
• How does this fit with your organisation’s current thinking on measuring loss?
• How measurable is this typology in your organisation?
• In what ways can it be further improved?