SCOTTSDALE, Ariz. -- Supermarkets that use technology to monitor cashier performance and combat shoplifting were able to reduce shrink dramatically last year.
According to the 11th annual Supermarket Shrink Survey, conducted by the National Supermarket Research Group here, supermarket retailers using automated cashier performance monitoring systems were able to reduce shrink by 31%.
Although astounding on the surface, this number makes sense if one considers that cashier fraud alone accounted for 51% of all employee theft and 28% of total store shrink. Cashier theft even outpaced shoplifting, which represented 22% of store shrink, according to the survey.
The report, which includes information from 74 retail companies representing 8,428 chain and independent stores, revealed that overall shrink represented 2.28% of sales in 1999, down 8% from 1998.
Conventional supermarkets, defined as stores with up to 40,000 square feet, reported average retail shrink at 2.32% of sales, representing an average $224,808 loss per store. Superstores, with more than 40,000 square feet, reported shrink at 2.24%, or $442,848 in losses per store.
Technology was clearly a factor in the industry's ability to reduce those numbers. Eighty-seven percent of responding companies reported that they relied more heavily on automated loss prevention methods in 1999 than ever before, with a particular emphasis on cashier monitoring and shoplifting prevention systems.
Training was another critical ally in the fight against shrink. Grocers that implemented new shrink awareness programs were able to reduce shrink by 12% over those who did not, according to the survey.
Report authors indicated that technology coupled with adequate training are necessary to combat "a major problem that impacts our economy," said Larry Miller, director of the National Supermarket Research Group.
"Companies that use technology and employee training programs generate better results in reducing shrink," he said. "Programs must have a balance of policies and practices combined with the efficient use of technology to be truly successful."
Employee theft was by far the most significant of all components of total store shrink, accounting for 55% of shrink, followed by shoplifting (22%) and back-door receiving errors and vendor dishonesty (10%).
According to the report, companies that did show significantly less employee theft employed three primary methods of controlling store shrink:
formal automated cashier monitoring systems;
internal audit departments and programs; and
formal loss prevention training programs for employees.
Retailers who combined the use of technology with employee training and awareness programs were able to further reduce shrink in their stores. These combinations included:
automated direct store delivery (DSD) receiving systems combined with a written back-door receiving program;
new employee shrink awareness programs combined with automated cashier monitoring and productivity systems;
formal loss prevention training combined with closed-circuit TV.
The use of automated DSD receiving systems reduced shrink by 14% and electronic shelf price verification contributed to an 18% reduction. The use of electronic article surveillance (EAS) systems also reduced shrink by 19%.
But the report's authors contend that technology solutions only provide long-term benefits if they are supported by a high-level management commitment to new policies and practices. "Management's attitude toward shrink control has a tremendous impact," said Miller.
The report provided several examples of how company-wide policies and practices can support technology implementations:
companies that review their closed circuit TV tapes "regularly" reported up to 16% less shrink than companies that review those tapes less than once per month, and made 135% more shoplifting apprehensions;
companies that combine automated DSD receiving with a written back door receiving program, centralized damage reclamation and written procedures for back room organization and control, and reported up to 53% less back door shrink than companies without these disciplines;
companies that combine automated cashier performance monitoring with a new employee orientation program that includes shrink prevention and formal written follow-up procedures reported a 17% reduction in shrink compared to companies that did not provide such training in a regular fashion.