RETAILERS AND WHOLESALERS ALIKE ARE PLACING NEW EMPHASIS ON AN OLD SUBJECT -- LOSS PREVENTION

MARC MILLSTEIN

NEW YORK -- Cracking down on employee and consumer theft in a bid to recapture lost profits will command enormous industry interest in the year ahead.

Retailers and wholesalers, already in a fierce battle to cut losses due to theft, will significantly expand their loss prevention efforts in 1997.

Nearly two-thirds of distributors said they plan to launch or expand their loss prevention program in 1997, up from just over 50% with similar plans for 1996.

In terms of loss prevention systems most often used today to stop theft, retailers and wholesalers ranked closed-circuit television surveillance and electronic cashier monitoring at the top of the list.

Those were among the key findings and highlights in the area of loss prevention uncovered in SN's third annual State of the Industry Report on Supermarket Technology. The sweeping report is based on a nationwide survey of supermarket chains, independent operators and wholesalers, and includes responses from 143 senior executives at companies representing more than $221 billion in total sales.

The survey was developed and conducted by SN Retail Systems and Marketing, Supply Chain and Operations and IS Solutions editors at Fairchild Publications here, which publishes SN, Brand Marketing and IS Solutions. The confidential mail-in responses from participating executives were tabulated and analyzed by a third-party research firm.

In addition to charting loss prevention trends, survey results presented here also explore top IS challenges for retailers and wholesalers today.

LOSS PREVENTION TRENDS

The vast majority, 79.0% of survey respondents, including 87.4% of retailers and 54.3% of wholesalers, are now using some form of loss prevention system at their firms. More than one in five respondents, on the other hand, said they have yet to tap into the potential of the systems for cutting losses.

In terms of loss prevention plans for the year ahead, a striking 64.4% of respondents, including 68.6% of retailers and 44.4% of wholesalers, said they plan to significantly expand or upgrade their programs in 1997. Those percentages represent a strong jump from the 53.2% of respondents, including 57.8% of retailers and 31.6% of wholesalers, who cited similar plans for 1996.

When asked which loss prevention systems they use today, an overwhelming percentage of respondents, 88.0%, cited closed-circuit television monitoring, while more than three-quarters of retailers and wholesalers, 76.9%, listed electronic cashier monitoring. In addition, more than two-thirds of distributors, 68.5%, said they use uniformed or plain-clothes security guards to prevent theft.

A majority of survey respondents, 54.6%, also said they now make use of an electronic article surveillance technology, as least on a limited test basis, as part of their loss prevention program. Just over one-third of respondents, 38.9%, have a hot line or reward program in place to combat theft.

The survey also delved into the sensitive area of average shrink rates. For most respondents, 52.7%, including 57.3% of retailers and 31.3% of wholesalers, average losses due to theft totaled 1% to 2% of gross sales volume. Yet 27.5% of respondents, including 24.0% of retailers and 43.8% of wholesalers said losses due to theft represented less than 1% of sales.

At the other end of the scale, 7.7% of respondents said losses due to theft ranged from 5% to 6% of gross sales, while 12.1% cited losses of 3% to 4% of sales. No one in the survey reported losses of more than 6%.

The vast majority of respondents, 74.8%, including 78.4% of retailers and 57.9% of wholesalers said their loss prevention efforts were geared about equally toward preventing theft among both employees and customers.

TOP CHALLENGES

The survey also asked executives about the biggest challenges facing IS departments today. More than half of wholesalers, 51.3%, and one-third of retailers, 36.9%, cited availability of skilled labor as the top challenge facing them in the year ahead.

Getting clear priorities from top management ranked second, cited by 26.2% of retailers and 30.8% of wholesalers, followed closely by budget, listed as the number one IS challenge by 23.3% of retailers and 17.9% of wholesalers. Availability of technological solutions, on the other hand, was cited as the top challenge by 23.3% of retailers and 15.4% of wholesalers.

LOSS PREVENTION INTENTIONS

Nearly two-thirds of respondents plan to expand their loss prevention programs in 1997, up from about half of respondents who said they did so in 1996.

Prevention Choices

Closed-circuit television and electronic cashier monitoring are the loss prevention systems used most frequently. (Multiple responses allowed.)

LOSS PREVENTION EXPANSION

Nearly 80% of respondents now use some form of loss prevention system in their stores.

THE TRUE COSTS

More than half of respondents said losses due to theft represented 1% to 2% of gross sales, but nearly 20% estimated losses are even higher.

PRIME TARGETS

The vast majority of respondents said their loss prevention efforts were geared about equally toward employees and customers.

BIG CHALLENGES

More than half of wholesalers and one-third of retailers cited availability of skilled labor as the top challenge facing IS in the year ahead. (Multiple responses allowed.)