According to the University of Florida’s yearly National Retail Security Survey, U.S. retailers lost $44.25 billion to inventory shrinkage, the loss of products prior to reaching the point of sale, in 2014. The primary cause of shrinkage was employee theft, which accounted for 40.9 percent of the total. Other major contributors were shoplifting and organized retail crime (33.1 percent) and administrative reasons (15.3).
Employee theft is most prevalent at liquor, discount and department stores, while shoplifting happens most often for accessories, sporting goods and electronics. Burglar alarms, digital video recording and live CCTV are still the most commonly used methods to prevent this type of shrinkage, but the survey shows that another system is gaining increased adoption: the use of data analytics.
Nearly 45 percent of retailers say they plan on increasing their use of IP analytics to combat theft, and the adoption of these solutions has more than doubled in three years. Price Waterhouse Coopers has recently published a study pointing out how different retailers can use different analytics systems to great effect.
They key, according to PwC, is identifying the factors that drive shrinkage up. These include a lack of risk control, poor administrative processes, management positions remaining unfilled for extended periods of time, associate turnover and price change volumes.
“It is hard to pull this data together,” recognized PwC managing director Bill Titus. “It lives in ten different places in the company, some isn’t accurate, some lives in spreadsheets.”
A comprehensive ETL architecture can be the key for a retailer to hone in on the causes of shrinkage. Once a business knows where and why the losses are occurring, it becomes much easier to reverse the negative trend.