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Growth: The New Shrink

United Kingdom clothing chain New Look is to retail what Madonna is to contemporary music—a brand that is successfully reinventing itself as an iconic high-stakes player in the High Street’s high-fashion market.

The clean “New Now” public image that adorned its 528 stores as well as its eye-catching website helped to move and reposition the retailer away from the value Primark end of the market to that of prime position alongside H&M and Zara in the hearts and minds of its growing customer base who have made it the third largest women’s wear retailer in the U.K.

But the ambition does not stop there as the brand has recently made a brave entry into not only the competitive men’s fashion arena, but also the booming and blooming baby-wear market.

Under the stewardship of CEO Phil Wrigley, the company that now employs more than 13,000 staff and with sales of 0.8 billion pounds ($1.5 billion U.S.) last year, is outperforming its contemporaries and going for growth with the highly choreographed opening of almost forty new stores in the U.K. in 2006 as well as continued expansion in Europe.

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But Wrigley recognized that as part of New Look’s growth, he must arrest the attrition…the shrinkage or unaccounted for stock caused by theft, damage, and loss…that clips the wings of even the most high-flying of retailers.

“Shrinkage is the only free money left on the table,” says Wrigley who has become evangelical about controlling the problem, but recognizes that even with a highly-skilled in-house loss prevention team he can not achieve the simultaneous levels of business growth and shrink reduction alone.

The First U.K. Loss Prevention Conference

This was one of the key messages New Look took to the U.K.’s Retail Loss Prevention (RLP) show in London in November 2005, a showcase conference that targeted High Street retailers with the simple objective of getting loss prevention onto the boardroom agenda and balancing it against the need to increase sales to create a fully rounded growth strategy.

Show organizer Peter Carkeek, director of EyeforRetail, explains, “There has traditionally been an underinvestment in loss prevention because retailers often complain that it does not deliver value for money, but this is often a communication issue. Getting the language of loss prevention onto the boardroom agenda is key to success and the way to do this is for shrink providers to think like retailers and develop strategies that appeal not just to loss prevention managers, but to all key stakeholders such as finance directors, the people who sign off the investment.”

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Carkeek argues that effective communication must therefore be on a number of levels. “For the retail ‘bean counters’ you must show the return-on-investment argument and emphasizethe focus upon processes and getting them right. For the human resource stakeholders the message has to be about the businesses biggest assets, it’s people. Your staff can be your best asset in the battle against loss, providing they all buy into a company culture and training that focuses upon eradicating shrink at every level of the organization.”

Loss prevention managers within retail organizations can be a lonely position as they have to communicate their effectiveness in terms of results and in many cases, such as city center locations where the law enforcement agencies treat shrink as a “soft crime,” this may be like King Canute sitting on the sea shore ordering the tide to retreat. Theycan launch their own initiatives, but they require help in getting their message across to the stakeholders within their own business.

New Look has been almost unique in the U.K. in recognizing shrink as an integral part of its ambitious growth targets and in the fact that it required help beyond its own loss prevention team.

“If one word sums up effective loss prevention it is collaboration,” says Carkeek, “the coming together of people and processes to educate internal and external audiences about the damage of shrink and how it impacts upon everyone in the business. It is not, as many police believe, a soft option because everyone pays for shrink…either directly or indirectly…through higher prices or insurance premiums.

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” Issues to Be Addressed in 2006

The 2005 Retail Loss Prevention conference brought out a number of issues, all of which will be taken up in the 2006 conference scheduled for October 3 – 4 [see sidebar].

Growth the New Shrink

  • Getting loss prevention on the boardroom agenda
  • Balancing loss prevention and sales, especially with sales on the decline
  • Underinvestment and impacts on shrink—How to get good loss prevention on a shoestring
  • Importance of focusing resources on process—A very underestimated area of loss
  • Strengthening focus on people—Your staff can be your best asset in the battle against loss given the right company culture and training
  • Getting LP recognized as a real business function—The correlation between good LP and operating efficiency
  • The inaction of police and courts in addressing and responding to retail crime
  • Importance of working together to develop a united force against shrink

Implementing a Profit-Protection Strategy

Collaboration was one of the reasons for New Look’s appointment of ORIS Group, a loss prevention specialist that shares Wrigley’s evangelism and that of other retailers because its senior personnel have “all been there.”

In partnership with ORIS Consulting, Wrigley has implemented a number of “shrink-busting” strategies:

  • Establishing a board agreed two-year program of activity with “no knee jerks”
  • Prioritizing shrinkage actions that identified quick wins first, focusing on “hot” stores, products, and people
  • Clarified ownership and accountability at all levels and all functions
  • Established a monthly profit-protection steering group chaired at board level
  • Provided a clear shrinkage focus across the business involving suppliers, logistics, finance, HR, and stores, and identified internal and external theft, process, and procedure
  • Introduced policy changes, tightening up on refunds and recruitment
  • Introduced confidential helpline and “thank you” payments as well as providing new staff and store incentives
  • Overhauled its CCTV strategy and reviewed, renewed, and upgraded all equipment and agreed specifications for new stores
  • Ensured wider visibility and communication with the launch of a “Protect Our Profit” quarterly newsletter
  • Introduced source tagging throughout all stores on all products
  • Upgraded its data mining capability

Partnering for a “Fresh-Eyes” Approach

With more than fifty years of retail experience with many of the U.K.’s leading High Street names between them, Andrew Wood and Laurence King of ORIS were brought in by Wrigley to provide a fresh-eyes approach to complement the work of his own loss prevention department.

“I have worked with Laurence before when I was at Debenhams and Dorothy Perkins,” says Wrigley. “He brings external focus to the task, which helps and complements the work of my own internal team.”

Wrigley recognizes that there are no quick wins in dealing with determined individuals who see New look as rich pickings. His appointment of King’s team is part of the long-term profit-protection strategy to help New Look realize its true growth potential.

King, managing director of ORIS, believes that tackling shrinkage is acultural challenge and reducing it requires a long-term strategy that involves every level of the organization.

New Look works with both sides of the ORIS Group through the work that head of the company’s audit and loss prevention Stuart Green is doing with ORIS founder Andrew Wood.


“We recognized that ORIS had a suite of products that allowed us to see what was happening with our shrinkage,” says Wrigley. “The bottom line was that we needed to change our thinking to treat shrinkage as a top-down issue because when you are busy growing the business, you are not treating it as business critical.”

Wrigley said that although there was some initial reservations from the internal LP teams who felt it should be part of their remit, King’s cultural approach brought renewed vigor to the business and now all staff are fully on board.

“Everyone has now bought into the strategy and shrink has now jumped up everyone’s agenda as a major priority,” says Wrigley.

Ambitious Shrinkage-Reduction Goal

New Look has ambitious targets to cut shrinkage by 50 percent over the next four years, which Wrigley projects will represent savings of 7.5 million pounds ($13.7 million U.S.) in EBIT (earnings before interest and tax). The company has already realized dramatic savings through it’s cultural program that empowers the entire workforce.

“Our job is to deliver value and choice to our customers to grow value for our shareholders, to do otherwise would be negligent,” explains Wrigley. “We are in this for the long term because it’s not just finance and audit that benefit from improved shrinkage, but all of New Look’s stakeholders.”

New Look is now the retailer of choice for its chameleon-like market repositioning. But this owes much to its decision to not only make “Noir the New Black,” but “Growth the New Shrink”—the new internal mantra, not just for the loss prevention team, but for the business as a whole. The company’s 13,000 staff have been effectively anointed as “agents ofchange management,” each empowered to individually help sustain its brand shift strategy.

No one is allowed to take their eye off the ball as they strive to deliver growth in a highly competitive fashion marketplace struggling to find a foothold out of the slump that affected sales, particularly last Autumn when foot traffic on the High Streets declined sharply due in part to loss of consumer confidence driven by the global price of oil, a recurrent issue that continues to gurgle just beneath the surface.

A Summit of Retail Competitors

Wrigley wants nothing short of a zero-tolerance approach to the problem facing all retailers. It was in this spirit of recognition of the global reach of shrink that New Look brought together its High Street rivals to unite against the “common enemy” that collectively stole 1.5 billion pounds ($2.7 billion U.S.) worth of stock in the U.K. last year alone.

According to the respected European Retail Theft Barometer, fashion items are high on the wish list of thieves and organized gangs in the U.K., which as a nation tops the list of European countries in terms of shrinkage levels.

Although they are daily competitors, these retailers are all joined by the common thread of being “fashion victims” when it comes to shrink. This was thereason competitors from Next, Monsoon, Jaeger, Marks and Spencer, Mothercare, and River Island gathered together last year in the first of what is likely to become a lobbying force to take issues on fashion theft and best practice to the British Retail Consortium (BRC) and the Home Office. The summit at New Look’s flagship store in London’s Oxford Street discussed a wide range of issues, including staff recruitment and retention, data mining, CCTV, register thefts, tagging, loss measurement, and “cabbage”—the growing problem of branded items that find their way, either legally or illegally, onto flea market stalls, car trunks, or eBay.

A Web-Enabled Case Management Tool

As New Look’s products have become more desirable to the customers, they have also become more attractive to thieves both inside and outside of the business. To help the loss prevention team track cases of internal fraud from the point of reporting through the investigation process to case closure in terms of a prosecution and/or a successfulcivil recovery, the company implemented a web-enabled case management tool.

Growth the New Shrink

The case management software takes over from the point where the loss prevention team are made aware of a suspected case of fraud, whether it is detected by data-mining processes or comes via a confidential hotline or anecdotal word-of-mouth.

It provides the loss prevention team, as well as key stakeholders, such as finance managers or HR, with accurate records of the value of fraud detected as well as the potential fraud prevented, and the cost of the investigation for civil recovery purposes.

Its objective is to provide timely mapping and closure of fraud investigations. It also measures the ROI for investigators and fraud-detection systems and captures and records weak business processes so that users can act to avoid repetition in the future.

The system is fully compliant with RIPA, the Regulation of Investigatory Powers Act 2000, which ensures that loss prevention teams are not invading civil liberties by using ultra-vires procedures to build their cases.

One of the benefits of case management is regional reporting, which highlights the numbers of cases by source and outcome.

For New Look’s investigation team, case management is a cost-effective and efficient management tool. Staff will realize that fraud has become a priority, it serves as a preventative measure and reduces shrink.

“Case management is a powerful tool that is totally results driven and proves that there is no hiding place for fraud in the business,” says Wrigley. “The team understands that it allows no hiding place if they are not performing.”

For New Look, this is a new and exciting development at a time of great change in a business that is rapidly becoming High Street’s high priestess of high fashion and has set its sights on making “Growth the New Shrink,” rather than the other way around.


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