Apparel, children’s toys, electronics and electronic accessories are expected to be the most stolen items this holiday season in the U.S., according to the 2016 Retail Holiday Season Global Forecast.
The study, underwritten by an independent grant from Checkpoint Systems, Inc., was carried out by Ernie Deyle, a retail loss prevention analyst, and provides an analytical view of business risks that major retailers face during this holiday season. The 13 markets covered in the report span North America, Europe and Asia, and include the U.S., Belgium, France, Germany, Italy, Netherlands, Portugal, Spain, UK, Australia, China, Hong Kong and Japan.
In addition, the retail cost loss burden for the retailers surveyed in the U.S. for 2016 is expected to be $132 per person, of which $50, about twice as much as in other calendar quarters, is expected to be incurred in this holiday season. These increases in losses place an enormous burden on retailers and, ultimately, on honest consumers who pay for it in higher prices.
Overall, research shows that retailers in all 13 researched markets will experience both the heaviest sales volumes and the weakest performances specific to margin rate during this time period. Strains on profitability manifest during the holiday season largely because of increased shrink/theft from internal sources — primarily via employee theft and other sales reducing activities (SRAs) — and external factors (primarily via shoplifting/organized retail crime).
According to Deyle, “Building holiday inventories earlier and specifically for high-risk items may lead to increased sales reduction pressures, including markdowns and shrink throughout the fourth quarter. In fact, as this report reveals, despite more than one-third of the year’s retail sales expected to be registered in just these three months, more than 40% of SRAs are also incurred in this same time period. This leads to increased shrink, and puts additional strains on brick-and-mortar retailers already reeling from an ongoing inhospitable retail market.”
According to the report, the retail shrink rate for this holiday season in the U.S. is expected to be almost double that of the prior two quarters. It notes that U.S. retailers book 32% of all margin dollars for the year during the holiday season. However, the rate of margin for that quarter decreases to 29% from a robust 31% for the rest of the year, which is just under an 8% decline of realized margin captured.
The report further states that for most retailers, wholesalers and distributors, inventory — including the space to store it — is the largest single cost of doing business. While reducing inventory means lower costs, insufficient inventory leads to out of stocks, lost sales and unhappy customers. So balancing these two factors is critical to profitability and growth, particularly in omni-channel environments. But achieving this balance is not easy. The alignment and use of advanced data analytic tools, inventory management strategies, along with technologies such as RFID provide retailers with advanced visibility to track merchandise as it moves throughout the supply chain to distribution centers, retail backrooms and store shelves. This increases the overall value proposition specific to item, category and department financial contributions.
The report recommends retailers address issues include the following:
- Maintain operational execution standards, while being vigilant regarding financial performance expectations.
- Update planning and financial performance models to properly account for advanced deliveries of seasonal products, since the seasonal build starts earlier now than in the past.
- Enhance oversight to seasonal/holiday merchandise to ensure financial goals are achieved while cost center controls are contained.
- Employ point of sale data analytic technology focused on SRAs to stabilize inventory loss and ensure on-shelf availability while enhancing product protection countermeasures.
- Properly train seasonal help to manage the increasing complexities of the season.
According to Carl Rysdon, vice president of Inventory Control Solutions for Checkpoint, “This is our fifteenth year of researching the state of retail shrink. We are proud to support important insights into our industry. With more than 45 years in the industry, Checkpoint has evolved alongside our customers to support today’s retailer needs.”
Interested parties can obtain a copy of the full 99-page report here.
