CUTTING LOSSES

MARC MILLSTEIN

When it comes to controlling costs and boosting profit margins in the food industry today, few issues may be as difficult or unpleasant to face as loss prevention.

But that is exactly what many retailers and wholesalers are focusing on, in increasing numbers, according to SN's first State of the Industry Report on Supermarket Technology.

Among the highlights of the report:

A full 81% of respondents characterized loss prevention as either an extremely important or highly important issue at their companies.

Almost 85% of respondents said they are currently using some form of loss prevention system at their stores.

More telling, almost 50% of those polled said they plan to significantly expand or upgrade their loss prevention programs at their stores in 1995.

About 85% of respondents said losses due to employee and consumer theft at their stores accounted for 2% or less of sales at their stores; but more than 14% cited losses of 3% to 6%.

The problem of losses due to theft was especially severe among independent operators. The study found that 4.1% of independent/wholesaler respondents had losses exceeding 6% of sales, compared with only 1.3% of respondents in that top loss range.

When it comes to deciding which segment to target the most -- consumers or employees -- to reduce theft, a majority of repsondents, 57%, cited customers.

The State of the Industry report was developed by SN Productivity section editors and executed by the Market Research Department at Fairchild Publications, New York, which publishes SN.

The report included responses from executives at 119 retailer chains, independents and wholesalers. The 119 companies combined accounted for more than $166 billion in total annual sales in 1994.

Together, the responses revealed a strikingly clear picture of an industry striving to come to terms with the serious issue of loss prevention -- and ready to take aggressive action to fight back against the problem.

Shown here are highlights from the report focusing on the area of loss prevention.

RESPONDENTS estimate the amount of losses due to theft as a percentage of store sales:

<<1% 38.2%

1%-2% 46.1%

3%-4% 11.8%

5%-6% 2.6%

>6% 1.3%

Stepping Up the Attack

Only 33% of respondents said they significantly expanded or upgraded their loss prevention systems in 1994. In 1995, however, that number is expected to surge to nearly 50%.

Did you expand or upgrade loss prevention in 1994?

YES 33%

NO 67%

Will you expand or upgrade loss prevention in 1995?

YES 49.5%

NO 50.5%

Facing Loss Prevention

A full 81% of respondents characterized loss prevention as an extremely important or highly important issue today. Just over 18% described it as moderately important.

Most Important 5 40.5%

4 40.5%

3 18.1%

2 0.9%

Least Important 1 0%

Methods of Choice

Closed-circuit TV monitoring is the most frequently used method to prevent losses due to theft. Other common methods include electronic cashier monitoring and security guards.

METHODS OF LOSS PREVENTION

Closed-Ciruit TV Monitoring 74.5%

Electronic Cashier Monitoring 71.3%

Uniformed or Plain-clothed guards 67%

3rd-party hotline or reward program 21.3%

Other 5.3%

Stopping the Leaks

More than 84% of retailers and wholesalers are using some form of loss prevention system to prevent theft.

ARE YOU CURRENTLY USING SOME FORM OF LOSS PREVENTION SYSTEM AT YOUR STORES?

YES 84%

NO 16%

Choosing the Target

A majority of companies, 57.3%, are gearing their loss prevention efforts toward stopping theft among customers. The remainder, 42.7%, have programs designed with employees in mind.

ARE LOSS PREVENTION EFFORTS AIMED MORE TOWARD PREVENTING THEFT AMONG EMPLOYEES OR CUSTOMERS?

EMPLOYEES 43%

CUSTOMERS 57%