FUTURE OF RETAIL SECURITY By Harold Richter

Retail Security to Loss Prevention My 24 years of Security experience has taught me one fundamental thought and application process… “SECURITY IS NOT A DEMOCRACY”… however, protecting a retail corporation’s assets was a role seen primarily as a policing one & was judged by the number of arrests made. The emphasis increasingly has changed towards the prevention & deterrence of offending, and much less upon apprehension of thieves.

2012/2013 National Economic Survey growth registered by wholesale & retail sector this being the second most important economic driver in Kenya, beating the manufacturing, building and construction, agriculture, transport and communication sectors. 7.3%

Sources of Retail Shrinkage - KENYA

Retail Crime  THEFT from business is identified as the number 1 cause of LOSS in the retail sector to date.  There is no single Government agency leading the area in the prevention of these losses.  THEFT is a major problem for retailers and it is at times perceived as a “victimless crime” or a “loss of doing business.”  CRIME losses, and the demand for safety, are increasing with volume increases.  Overall loss totals are going up because sales revenue numbers are increasing.

Why theft & why me?  The complex explanations of theft & loss are many, & often not well understood among ground level practitioners.  Loss problems have always been a function of demand, supply and the “plumbing” that connect the two.  Greedy demand for basic & luxury items by consumers & commercial buyers as well as opportunistic, ad-hoc & illicit supply chains are fed by vulnerable supply chains and stores, manned by a number of ill equipped, corruptible & incompetent staff. However, not all is lost, what we now know is helpful for devising a formalised approach to Crime & Loss Control. Credible scholarly work has been done on the broad understanding of crime and it’s causes and the possible resolution/reduction thereof. Interaction between retail business owners and loss control adjustors are paramount in wanting to combat crime and reducing losses.

Emerging Organised Syndicates If you are a shopper in Nairobi and walk into any or most supermarkets, you will notice something: Baby milk is stored in a glass cabinet, under lock & key…and the key is in the custody of one employee!  These security measures by retail outlets are as a result of increased cases of operational losses occasioned by shoplifting and general theft.  The loss control (shrinkage) industry players fear that it is a case of emerging organised pilferage ring/s targeting local supermarkets.  Market research company, proved that local retailers are losing more than 1.5% of turnover due to increased cases of shoplifting & theft of stock.  These syndicates are targeting high value products such as electronics, furniture items, baby food products, cosmetics & general food items.

Global Retail Theft Barometer (GRTB) 200 billion Kenya’s formal retail trade market worth 3 billion Annual losses from pilferage $119 billion Global shrinkage to internal system errors The study covered 1187 global retailers in 43 countries.

Global Retail Theft Barometer (GRTB)  What we previously thought to be small time cases of shoplifting has unfortunately evolved to become large scale organised crime, leading to high shrinkage rates on the stockholders.  Conventional in store policing measures are not helping – review of existing laws, company policies and procedures is a necessity. 1.45% 1.36% 6.6% global shrinkage rate

Simple … …. because they can! …. because they can! Why do shoplifters, staff and syndicates steal??

Focus Points The lack or control of policies, systems and procedures and or the poor supervision thereof, are the main contributing factors why staff are able to steal specific company assets. It is not necessary for you to try and differentiate between these areas. All 3 focus points should receive the same amount of attention. It is recommended that you consult or appoint a specialist in loss prevention & physical risk management that can focus on the areas mentioned above Theft Activities Security Matters Loss Control Matter 3 Key Areas Of Focus

How To Deal With Shrinkage What actions to be considered & what are the focus points? 1.Recruitment process – Sourcing, aptitude tests & integrity polygraph tests. 2.Employment contract- stipulate in the employment contract that the company will conduct random polygraph tests. 3.Retail Training – empower staff with the proper knowledge & skills for efficiency, optimisation and better LP awareness. 4.Key position appointments – are areas of high risk where the movement of stock is independently monitored (record & report). 5.CCTV – installation of overt/covert cameras at strategic points is essential. 6.Control Room – cameras are obsolete without the full use of a dedicated/remote control room and operator.

How To Deal With Shrinkage (continued) 7. Business Intelligence – the placement and infiltration of “Undercover agents” within the workforce to provide ongoing detailed information on all forms of irregularities, are ever more eminent.  Stock take – regular (monthly, quarterly, bi-yearly) independent stock takes must be conducted.  Loss/systems control officer – is key & is essential to ensure that controls, systems and policies are implemented and adhered to.  Loss prevention/compliance audits - to ensure that all employees, stores & depots apply themselves consistently and adheres to company loss prevention policy & procedures.  Electronic tagging and RFID – Radio-frequency identification devices are electronic tags capable of carrying more data that have a wide range of applications in the retail sector, including loss prevention.

Apprehending thieves, processing them and handing them to the police(inevitably involving court appearances) is extremely expensive & often costs more than the merchandise recovered when a thief is caught. Loss prevention specialists certainly patrol the stores & investigate suspicious behaviour, but loss prevention also includes preparing improved procedures, conformity with company loss prevention policies, training of staff, analysing loss to mitigate actual/potential losses caused by error or procedural failures and help develop new policies for the changing pattern of retail losses. How To Deal With Shrinkage (continued)

Summary & Conclusion 1.Loss Prevention (LP) is wide in scope – There is a wide variety of targets for crime & fraud in retail, so LP has to take a strategic view and work on inhibiting theft in multiple different areas. 2.Theft = 72% of Shrinkage – so alleviating shoplifting and staff theft should do most to reduce losses. 3.“Paper” shrinkage/procedural error – accounts for an average of 16.2% of shrinkage. Poorly designed processes, weak supervision and poor training & errors are main contributors. 4.Investment in LP – plays a major part on reducing shrinkage. 5.Relationships – LP officer’s role is to work with other parts of the business by developing joint methods of shrinkage analysis & controls by means of LP electronic surveillance data & RFID etc. 6.LP partnerships – to be established with other retailers, organisations & law enforcement as one can learn more about crime movement & trends in a region and information can be exchanged to combat loss.

Summary & Conclusion 8. Refund Fraud – growing problem of both shoplifting & customer theft based on abuse of company procedures. LP needs to give higher priority to developing better procedures. 9. Organised Retail Crime – is a major concern and retailers need to set up internal teams to assess the scale of the problem & produce appropriate solutions, work together with other retailers, law enforcement and organisations like RETRAK 10. Cargo theft & distribution fraud – growing and a costly problem which involves organised syndicates 11. New recruits – employers must establish that new employees are not a new source of loss. (Pre-employment polygraph tests to be implemented). 12. LP policy & compliance – should become a standard element of the business. Regular robust compliance & procedures audits is vital.

Questions? Harold Richter Hipora Business Solutions Tel: / Cell: Website: Harold Richter Hipora Business Solutions Tel: / Cell: Website: Thank you!