Shrinkage, a $1.3 Billion Dollar Problem for New Zealand Businesses!

Shoplifting or store theft is the single biggest source of retail shrinkage in New Zealand. A recent survey by Retail NZ found that 92% of retailers contacted had experienced some form of crime in the year to August 2023, and shoplifting was the most prevalent crime, with 82% of retailers affected.

Retail crime is costing $2.6 billion per annum, and $1.3 billion of that was shrinkage, or loss of goods.

As a business what can you do to minimise the impact on your own bottom line?

By far the most effective way to deter thieves, whether opportunists or experts, is also the simplest; greet every customer that enters the premises. An employee approach is proven to reduce or even prevent theft from happening in the first place. And ensure customers are never completely alone in a store. Staff your store with enough employees. 

It’s not unheard of and I have experienced it myself many times when visiting a store, to find a single employee managing customer service, enquiries, stock availability (gone out the back), and completing transactions, all within minutes of each other. The employee does not stand a chance if a group of three or more thieves enter a store and split up intent on shop lifting. And that’s not taking into consideration the two out of every three customers that will walk out of the store, simply because they were not approached (which is a subject for another day).

To reduce costs many businesses have turned to technology designed to monitor and control inventory. However, no surveillance system or RFID tracking solution works as well as an employee who is dedicated to their products and approaches every customer. Instead of replacing the ‘human’ element, businesses should consider their employees as a deterrent to store theft. Ironically reducing staff numbers can drive a greater need for ‘locking’ down your merchandise. This in turn can be a huge detriment to sales. Who hasn’t been into a store looking for a particular item to find it locked behind a plate glass cabinet or some other form of protection, and not a salesperson in sight to assist. You simply leave and go elsewhere.

And ensure the store environment is clean and well organized. A well-lit, clean, and organized retail space communicates to store visitors that your employees are paying attention. 

In the end retail should not be about protecting product but serving customers and driving sales. You want to make it as easy and enjoyable as possible for the consumer.

What other tools or solutions can you use to reduce store theft?

A supporting option is Mystery or Integrity shopping as a loss prevention tool. More and more retail organizations see the deterrent value of the practise and are including mystery shop type programs as part of their overall loss prevention strategy. The true impact of such a program comes from promoting the program at the start, and to regularly promote the results of such shops across the organisation. Employees will have to consider that every customer may be the mystery shopper and therefore approach all customers equally.

Whilst traditional tools such as CCTV, burglar alarms, fog cannons, management visits and exception-based reporting are all highly effective tools in preventing loss in retail, don’t leave mystery or integrity shopping out of the toolbox. It’s an effective and economical strategy to incorporate in your overall loss prevention program. 

Hoed Research provides continuous feedback on customer interfaces, be it physical, auditory, or online. This is a valuable service that can help businesses quickly recognize problem areas and make the necessary changes to enhance the customer journey. We look forward to businesses taking advantage of such services to improve their customer service experience. If you have any questions and would like to find out more, please email richard@hoed.co.nz or call +64 09 5790731.

Written by Richard J Potton, Managing Director, Hoed Research Ltd.