NEW YORK (Sept. 6, 1:15 p.m. ET) — Although retail “shrink” — the amount of merchandise lost to shoplifting — appears to be on the downswing in the United States, it remains a significant enough problem that brand owners are pressuring the supply chain to devise new anti-theft measures.
A recent example is the request for proposals for new packaging put out in August by Elizabeth Arden Inc. The New York-based fragrance manufacturers seeks new packaging that not only secures its scents, but maximizes customers' access to the products and minimizes the amount of time store clerks spend activating and deactivating the security measures.
“Our primary goal is to find some big thinkers, some really smart people in the global supply chain industry, to help us find some answers for a problem for which no answers exist,” spokesman Greg Griffin said in recent telephone interview.
Currently, the retail marketplace largely is divided into two main modes of shopping: behind glass and on open shelves.
According to a recent news release from Elizabeth Arden, shoplifting only accounts for 20 percent of theft of its fragrances, which include brands as diverse as Elizabeth Taylor, Juicy Couture, Halston and Curve. Organized retail theft rings make up the lion's share of shrink.
While a variety of methods in place — including source tags, clamshells and spider wraps — work , they are more defensive in nature. Elizabeth Arden wants something more proactive, Griffins said.
“Our primary goal is to find some big thinkers, some really smart people in the global supply chain industry, to help us find some answers for a problem for which no answers exist,” he said.
Elizabeth Arden's request for an “idea partner,” which expires Sept. 26, is posted on the website of the Loss Prevention Research Council, which in June issued for “benefit-denial technology developers.
The Gainesville, Fla.-based council is working with major retail chains including Lowe's, Best Buy, Office Max, Walgreens, Meijer, Sears/Kmart and Sterling Jewelers.
“I don't want to overstate it, but — more than retail CEOs would like to admit — loss through shrinkage shapes retailing,” Read Hayes, director of the LPRC, said in a recent telephone interview. “Packaging [also] is driven, in large part, by shrinkage.”
For retailers, hiring security guards or installing surveillance cameras isn't the best way to minimize shrink; they need packaging that allows customers to see and touch what they're buying, and that will not add time to the checkout process, he said.
The ideal packaging should protect a product against theft from its point of manufacture through the entire supply chain, with no negative impact on the consumer, Hayes said.
“The store experience has to be as positive as possible; not to take up too much of our time as busy Americans,” he said.
Despite the economic uncertainty and accompanying double-digit unemployment that have plagued the U.S. economy since 2007, two recent surveys showed retail shrink on the decline.
The National Retail Security Survey, published by the Washington-based National Retail Federation, found that shrinkage decreased to 1.44 percent of sales in 2009, down from 1.51 percent in 2008. According to the survey, total retail losses in 2009 were $33.5 billion, down from $36.5 billion in 2008.
According to the survey, collaboration between the NRF and the University of Florida, the majority of retail theft in 2009 — 43 percent — was due to employee theft, with shoplifting accounting for 35 percent. Administrative error made up 14.5 percent of shrinkage and vendor fraud accounted for 3.8 percent of the losses. The remaining 4 percent was caused by miscellaneous sources.
2010 numbers for the NRF survey were not available by press time.
According to the Global Theft Retail Barometer, conducted by the Centre for Retail Research in Nottingham, England, in 2008, U.S. retailers no doubt feeling cost pressure brought on by the onset of the economic downturn, decreased spending on loss prevention.
The level of global retail theft in reached $114.8 billion in 2009, according to the study. The North America, which accounted for 40 percent of the global total, U.S. retail theft increased 8.1 percent over 2008, according to the study. In 2010 theft globally totaled $107.3 billion — a 5.6 percent decrease from the pervious year — and in North America, the U.S. retail theft rate decreased 6.8 percent, which the researchers attributed to major spending increases in loss prevention over 2009.
Among the best-selling anti-theft products for Alpha, a division of Checkpoint Systems Inc. of Philadelphia, are its Alpha Keepers, polycarbonate boxes with AM and RF bases.
But the downside, according to several of those interviewed for this story, is that Keepers have to be assembled and disassembled every time a product goes on the store shelf or out the door.
“It's still best in class [but] I know every retailer wants to replace it because it takes labor,” Alpha spokesman Carlos Peres said in a recent telephone interview.
Alpha also sells radio-frequency-equipped hard tags and bottle caps to customers selling clothing and liquor, and is a member of the LPRC.
Perez said Alpha is involved in requests for new designs for anti-theft packaging; but new designs could add cost in research and development, manufacturing and distribution. Ultimately, he said. New packaging has to account for several factors at the retail end of the supply chain.
“It is still a factor of execution. The store manager and associates have to apply it consistently. Especially their high-margin products, if that doesn't happen, two things may happen.
“First, they may put the product on the shelf unprotected; and second, they may not even put the merchandise on the shelf if they don't have [packaging] available,” he said.
According to both the retail theft surveys, thieves tend to focus on small and easily-concealed, expensive, branded items that have considerable popular appeal and are easily re-sellable. Those include electronic games, DVDs, MP3 players, clothing, cosmetics and perfumes, alcohol, fresh meat and expensive foods.
Other most-stolen products are razor blades, mobile phones and high-end wristwatches.
Some in the retail industry see the challenge of designing next-generation anti-theft packaging an opportunity.
“There's an opportunity to develop new packaging, in particular new plastics, with wonderful opportunities for graphics and other features that can really enhance the look of those products and make them stand out on the shelf, while at the same time, protecting the individual store from theft,” Marc Smith, a spokesman for Sears Holdings Corp., said in a recent telephone interview.
Sears' stores include those with the Sears name, Kmart, and Land's End. Although Smith did not give a specific figure for losses from theft, he said shrinkage is a major concern — as is not limiting customers' access to products.
Yet another reason to move into new types of anti-theft packaging, Hayes said, is safety.
“People get cut; there are emergency room visits from people getting cut as they try to get into packaging,” he said.
None of the sources interviewed for this story said that so-called “wrap rage” — consumers' anger at having to cut through difficult-to-open packaging — is no longer a significant issue in stores.
“When we ask [shoppers] what their impressions are of a clamshell, they consider it something that goes along with saving money. We haven't found the [“wrap rage”] per se,” he said.
Part of that, the experts agreed may be due to the fact that stores offering the best deals have seen sales spike since the onset of the last recession.
“The shopper who shops in discount stores understands the defensive mechanisms are unfortunately part of saving money,” Griffin said.
For those who persist in stealing, Elizabeth Arden's design parameters include “benefit denial,” which means that even if a thief succeeds in absconding with products, once they're out of the protective packaging, they'll be damaged or otherwise rendered useless.