EDITOR’S NOTE: This article was originally published in the winter 2019–2020 edition of LP Magazine Europe. British spellings, references, and organisations have been retained. For more articles from the Europe magazine, go to lpportal.eu.
How much of our shrinkage number is due to theft? If you’ve been asked this question once, you’ve been asked it a thousand times. How do you answer this question? Educated guess? Based on indicative feedback? Through deep data analysis?
Often, wrapped up in the question is a key question around safety—has there been an increase in violent incidents, and are they becoming more severe? Reportedly, the number and severity of incidents in the retail sector has increased significantly. In March 2019, the British Retail Consortium (BRC) reported a 19 per cent increase, estimating the value of theft to be at £1.6 billion. This type of press has sparked a fear in retailers that they need to understand this problem better and put mitigations in place. Retailers want to protect their own staff, their customers, and their assets. To choose the right solution to invest in, one needs accurate and timely data.
The above questions are often intrinsically linked together, and the “go to” tool to understand the answer to these questions, and move shrinkage from unknown into known shrink, is often the incident reporting tool. However, incidents that occur in retail stores are notoriously challenging to capture accurately. Estimates vary wildly as to the accuracy of incidents reported. This ranges from a good level of confidence that everything is captured, right through to retailers that think the truth could be ten to twenty times more than they are capturing. If only 0.5 per cent of actual incidents are being captured, what is the true number? Any decisions or actions made based on the reports received depend fundamentally on the accuracy of the input. Sometimes, the distressing nature of an incident can make it difficult to recall vital details. Equally, depending on the breadth of people whom you allow to record incidents, incidents could be misclassified from theft to burglary. It is vital that data governance is considered at the heart of any data capture to ensure all incidents are accurately recorded. This could include a manual review and reclassification by a colleague or may be based upon clever coding in a system to enhance the accuracy of data input up front.
When retailers look to improve their incident reporting tool, they first need to ask themselves, “What am I looking to do with the data or information that I gather?” This is a somewhat obvious question, but too often systems or processes can be designed without this at the heart. Sure, most platforms will help you answer the questions of how many incidents of theft you have had, but you may want to consider whether or not you need to know what products have been involved, where in the store the incident occurred, or if a weapon was involved. Adding fields can enable greater tailoring of subsequent actions. For example, you may wish to generate automatic alerts for specific incident types to trigger a follow-up action. For other incident types, you may be looking to gather data to review tagging policies, guarding deployment, or definitions of red routes. The catch-22, however, is that the more complicated you make the form to complete, the more difficult it can be to encourage completion.
In reality, incident reporting is the only way in which theft can be measured reasonably accurately. Sure, assumptions can be made, and are frequently, but capturing incidents as they happen is arguably the best way of getting accurate data. So why is the level of accuracy so poor right now?
Reporting Incidents
If we have established that incident reporting is the most likely way to get accurate data, the next question becomes whom the retailer allows to report incidents. Would you allow store staff, guards, managers, or even members of the public to report witnessed incidents? In order to get accurate information from the reportees, multiple factors must be correct.
They need to understand what constitutes an incident. The multiple types of incidents that require reporting is a big variable for retailers. The vast majority expect the following to be reported: witnessed theft, robbery, burglary, and violent incidents. But there are many more categories that other retailers expect to be made aware of. Some retailers also expect a breakdown of the type of incident:
- Detained thieves
- Deterred thefts
- Internal thefts
- Push outs
- Verbal abuse
- Physical abuse
- Anti-social behaviour
- Going equipped to steal
- Organised crime
- Broken packaging
- Hangers/tickets found
- Self-checkout incidents of theft
- Health and safety incidents
- Freezer breakdowns
- Other non-crime incidents
Those retailers that categorise more deeply will likely be able to understand their incidents much better but may find that people incorrectly categorise the incident itself. Therefore, definitions become all-important.
They need to understand your definition of an incident. People have different levels of acceptability. Take behavioural incidents as an example; some staff or guards may find verbal abuse very offensive, and others may consider it part of everyday life. It’s a personal bar for each and every individual and will often vary by location. Let’s say you have a zero-tolerance policy towards crime and incidents of any kind. To what degree would you expect an incident to be reported? If a customer is overheard swearing? If there’s a domestic argument in the store? The bar needs to be really clear to store personnel to make sure they are reporting the information you require.
They need to understand the urgency. Some incidents are more urgent than others. Some retailers expect a full-scale response to certain types of incidents, whereas others have a more considered, data-gathering view of incident reporting. The reporter of the incident needs to understand what’s urgent and what isn’t.
They need to understand what level of data will be required to complete an incident report. Do you want to know about witnessed theft, unwitnessed theft (such as discarded packaging), and what was said in a verbally abusive incident? The person completing the report needs to know this in advance, so they can ensure they have gathered the correct information.
They need to witness the event. Witnessing an incident, particularly one of theft, can be challenging. They need to be able to recall the event accurately, or have CCTV footage of the incident happening, in order to prove ASCONE (Approach, Select, Conceal, Observe, Non-payment, Exit) when reporting thefts. Some people find witnessing incidents distressing and are unable to recall them accurately. It has been estimated that only 10 per cent of theft incidents are actually witnessed.
They need to have time allocated to the task of completing an incident report. Costs in retail stores are scrutinised heavily. Allocating time to report incidents is an important factor in accurately reporting. This can be easily overlooked, especially in the extremities of the day, where staffing is tight.
They need a tool to report the incident. There are options available for retailers on choosing a reporting mechanism. This could be a third-party or in-house solution. However, many of these reporting tools take time to complete, which adds to complexity and gives staff and guards reasons not to report.
They need to have easy access to the reporting tool. Is the tool for reporting incidents a mobile device, a phone number, a webpage? The easier the tool is to access, the more likely the incident is to be reported in a timely and accurate way.
They will need to establish the correct information on the offender. Offenders are under no obligation to give accurate information as to their identities. How many crimes have been committed by Mr. Smith at 1 High Street? Retailers do not have any way of validating these details until the Police are involved, so this adds to the risk of inaccurate reporting.
They need to understand why this is important to do. What are the consequences if incidents aren’t reported? What are the benefits of reporting accurately? Carrot or stick approach is an interesting debate, which varies significantly by retailer, which we will explore later in this article.
Many retailers use a guarding company to report incidents. This could be slightly counterintuitive as the guard has a vested interest in reporting as many incidents as possible. This could give inaccurate data the other way, which also leads to inaccuracy in reporting. Arguably though, it is easier to enforce reporting through a third party, so are you more likely to capture more of the incidents?
With the above factors at play, it’s safe to say that witnessing and reporting 100 per cent of incidents is virtually impossible to achieve. When so few incidents are witnessed to the degree required, is this a fair reflection of the crimes that are happening in your stores? What are the alternatives? You could take industry trends and surveys, but with every retailer facing the same challenges, the information that feeds these surveys also remains questionable. You could use Police crime data to gather trends, but with challenges of reporting to the Police, covered a little further on, this information is highly likely to be less accurate than your incident reports. So the focus needs to be on internal reporting, but how can this be more accurate than it is today?
What Does “Good” Look Like?
A good incident reporting process requires careful thought and consideration. Factors already mentioned above are challenging to overcome but not impossible. Take retailer X. They have significantly improved their incident reporting numbers. Is it perfect? No. Is it a more accurate reflection than most? Yes. The methods they have used are as follows:
- Stores are only held accountable for the proportion of their shrink that hasn’t been reported. For example, if the store has shrink of €50,000 and reports €10,000 of theft, the store will be required to account for the remaining €40,000.
- Guarding allocation is given based on the incidents reported. Higher incident reporting drives high guarding allocation.
- Reporting incidents (or not) carries incentives and consequences, such as recognising improvement or applying disciplinary action.
This approach has proven to be highly effective in improving the number, but retailers also need to consider the options in terms of identifying crime happening in the store.
The platform itself, as mentioned previously, is also vital. The simplicity, speed, and ease of use also needs to be well thought through. That, along with sharing of information with other retailers, is also part of the recipe of success. There are obvious benefits of retailers using a bespoke solution to gather the information they require, but there is also something to be said for using a generic platform. To have a solution that multiple retailers use would be useful for data collation and data sharing, Police reporting, and identifying repeat offenders.
Another emerging option is to automatically detect and report incidents. Using technology to identify a suspicious action and report it to the store staff or guards, with the ability for them to comment on the suspected incident, seems to be the future of what good looks like. This effectively automates incident reporting.
With the right ingredients and a degree of confidence, you can in fact answer that all important question: how much of our shrink is down to theft?
Getting Incidents Reported
As mentioned earlier in the article, a debate can be had around whether a retailer drives up their reporting numbers by incentivising reporting or by forcing stores to report. Either way has pros and cons:
- Incentivising—people often feel more engaged if there is something in it for them. However, could it drive more inaccurate reporting, just to improve the numbers?
- Enforcing—key performance indicators are a standard approach in the retail industry, so people will be used to being measured on their submissions. This can, however, also lead to inaccurate reporting, and the motivation for people to complete will be lower. What are the consequences of not reporting? If you try and add consequences, how would you know when a store has failed to report?
Another important factor that seems to be in mind is Police response to incidents. The response can take a long time to arrive, with potentially little consequences for the accused. It has been well reported that retail incidents are becoming less and less “serious” as other incidents that the Police deal with have become more and more serious and commonplace. That, combined with a significant drop in Police numbers, makes incident reporting to the system and to the Police less of a priority.
A good incident reporting mechanism will also help a business understand what the Police response has been like in certain areas of the country, so they can then lobby the relevant authorities where required. As such, the challenges of how much crime actually happens is massively under-reported. Only a fraction of incidents are witnessed. Of those witnessed, only a proportion are reported as an incident. Of those reported, only a small amount are then reported to the Police.
Using the Data
What else happens with this information? You could choose to share it with the many local crime groups, national initiatives, and regional crime sharing platforms, or take civil or criminal action.
Criminal action. It’s been well reported that Police response to shop crime is at an all-time low. Understandably, they need to prioritise more high-risk crimes with their limited resources. So the role of crime groups in gathering data and intelligence on retail criminals becomes all the more important. Let’s explore some pros and cons of each of the available options.
Local Crime Groups
- Pros—they’re great if you’re a local retailer that has mainly local problems with the same crime group. They’re also good at influencing local Police forces.
- Cons—organised crime is a national problem and with major criminals travelling significant distances, this group is limited. Police policies and procedures are very difficult to influence.
Regional Crime Sharing
- Pros—they’re great if you’re a geographic retailer, and as criminals travel, it’s arguably better than local crime groups. Multiple combined incidents can be gathered, and that intelligence passed around the group to good effect.
- Cons—as with local crime groups, the national methodology that major criminals use is harder to track, and a regional group’s power over policies is limited.
National Crime Solutions
- Pros—these are best for national retailers. They have consistent ways of working and more power over the policies and procedures of the Police forces.
- Cons—they struggle to deal with small-time criminals that are only active locally.
Having multiple reporting mechanisms can be frustrating—one for the retailer internally, one for law enforcement, one for local crime groups, and so forth. If this were an integrated approach, it would also increase the likelihood of accurate and timely reporting.
Civil action. Financially, civil action can deliver a much greater return to a retailer. A criminal prosecution may well put the individual to the inconvenience of unpaid work, or even behind bars, but that is little compensation for the shrink line. Civil recovery is difficult to achieve. It requires a number of factors to be true, from the details of the individual that have been given, right through to whether they have the means to pay the agreed compensation to the retailer. It’s not a particularly positive hit rate. Again, the right incident reporting tool is invaluable here, along with the absolute need for accurate and timely information.
Next Steps
Right at the beginning of this article, we asked two questions: what proportion of our shrinkage is down to theft, and is the amount of violence in our stores increasing? Undoubtedly, incident reporting, either manual or automatic, is the best way of answering these questions, and moving shrink from unknown to known. However, as this article has discussed, it is challenging to get right. It’s unlikely to ever be perfect, but are you able to say that you can achieve the best version of the truth? Is there more you can do?
The key to success is as follows:
- Have a simple, accessible tool to complete incident reporting. Ensure you have given absolute clarity on what information needs to be gathered to report accurately and clear definitions on what qualifies as an incident. And give people the time to report accurately.
- Consider whether the benefits of having a bespoke tool really outweigh the benefits of having a generic tool.
- Can you use technology to identify incidents that have occurred?
- Incentivise or enforce accurate completion.
- Use the data. Share it internally and externally. Feedback actions you’ve taken with it. And prosecute with it.
- Have a line in the sand—once the above actions are in place, that’s your baseline.
With the above in place, you could not only answer the original questions but also answer the next obvious question: how do we compare to other retailers?
The ECR Shrink and Waste Group will be conducting further conversations, surveys, and studies into this subject matter. We would encourage as many retailers as possible to partake in these activities so that robust conclusions can be drawn, along with helpful outputs for retailers to implement.