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industry focus

Preparing for the Future Retail Loss Landscape - setting the research agenda for 2017

It has proven to be another interesting year for the European retail industry as it continues to grapple with an unstable economic outlook, growing competition, greater complexity, and the proliferation of technological innovation with omni-channel and e-commerce seeing rapid growth in many countries.

In many respects, retailing should be used to change - it is after all what makes it such a successful and compelling industry. But even seasoned commentators are becoming increasingly bewildered by the sheer rapidity of change seen in the past few years, with new technologies in particular driving retailers to think and adapt at lightning speed. Of course, for some this brings new opportunities to grow profits and enhance their consumer experience, while for others it is exposing working practices, processes, and thinking developed in previous times, which are now proving to be increasingly unfit for purpose.

One of the consequences of rapid change is that it can be very difficult to accurately predict what the eventual outcome might be - planning and presumption can only take you so far in the world of retail, and as competition intensifies further, an approach based upon "suck it and see" inevitably becomes the prevailing view.

For the loss prevention community, this is a very challenging strategy to adopt. Most evidence suggests that thieves are typically much fleeter of foot when it comes to exposing loopholes and vulnerabilities in new systems and approaches, with the crime prevention community usually lagging behind in a perpetual state of catch up. Of course it is not just levels of crime that can be affected by change; other retail losses can also be impacted, such as levels of wastage, out of stocks, damage, and so on. Understanding the impact of innovation across the retail loss landscape is both important and difficult to predict.

It is, however, not all doom and gloom, and developments such as the total retail loss typology - described in the Retail Industry Leaders Association (RILA) 2016 report Beyond Shrinkage: Introducing Total Retail Loss - can really begin to help organisations get a better understanding of the consequences of retail change. In addition, some loss prevention executives are increasingly being given a louder voice within the business to help it make good choices about what will really drive profit and customer satisfaction. 

What is also important, and of course I would say this as an academic, is that the loss prevention industry needs to continue to invest in new research to help it try, if not to get ahead of the change curve, at least to be in a position to react to any negative consequences in as timely a fashion as possible. The ECR Community Shrinkage and On-shelf Availability Group (Shrinkage and OSA), RILA's Asset Protection Leaders Council, the Loss Prevention Research Council, and the newly formed Profit Protection Future Forum in Australia are some of the main groups that recognise the importance of having an active and vibrant research agenda, and their work should be applauded.

Given the rapidity of change as described earlier, it is perhaps rather foolhardy to try and predict what the research agenda for 2017 should be, but it is worth reflecting on what are likely to be some of the key areas based upon recent meetings held by these groups.

 

Getting to Grips with the Future of Checkout

There has been much recent media attention on the issue of self-scan checkouts and how the losses associated with them are apparently growing as consumers seemingly adopt what might best be described as a morally ambivalent approach to their use and abuse. Indeed, a recent report - Developments in Retail Mobile Scanning Technologies: Understanding the Potential Impact on Shrinkage and Loss Prevention by Adrian Beck and Matt Hopkins from the University of Leicester - concluded that the levels of loss could be as much as 170 per cent higher than through staffed checkouts, with the potential for seemingly "honest" shoppers to take advantage of what they regard as a relatively risk-free, opportunity-rich environment to give themselves a discount by either selectively scanning items or misrepresenting more expensive items as cheaper products.

The report went on to consider the risk implications of newer forms of scanning such as mobile scan-and-pay systems, which a number of retailers are now introducing, concluding that unless retailers quickly begin to develop mechanisms to ensure users feel there is a robust and credible way in which they were likely to be caught, the losses are likely to be profound and unsustainable.

 

It is important, therefore, for research to be undertaken to better understand this issue with some possible research questions being:

• How and why do some shoppers view self-scan and mobile-scan differently from other forms of theft from retail stores, and why are they seemingly suspending their moral concerns in these circumstances?

• How might interventions be designed that can "nudge" and encourage shoppers to be more honest when using this technology?

• In which ways can risk be amplified in a range of customer-focused scanning scenarios, in particular mobile scan? 

• In which ways can products and the store environment communicate a credible risk message to this type of shopper? 

• How can we begin to develop reliable ways to better measure the losses associated with customer-focused scanning systems, and can we begin to get a sense of trends in these losses over time?

• Can we begin to determine the extent to which losses are due to malicious and non-malicious causes? How much loss is due to user or system error compared with purposeful thieving?

 

Developing the Internet of (Some) Things

The idea of the Internet of Things has been talked about and hyped for very many years, although the reality of every manufactured object having a unique identification without the need for line of sight has continually run into the combined buffers of physics and economics.

However, through a combination of technological imagination, evolution, and a more pragmatic and realistic approach towards what parts of the Internet of Things can be tolerably tagged and identified, a number of retailers have undertaken not only seemingly successful trials of RFID, but also greater integration of this technology into their businesses. It would seem important, therefore, to undertake research that offers a review or update on the "state of play" with regards to the use of RFID in retailing, focused upon the following questions:

• How are retailers making use of RFID in their businesses?

• What lessons can be learnt about the way in which the return on investment model was developed and the way in which the trials have been undertaken?

• What benefits has RFID delivered to these companies, and what challenges remain?

• In what ways are retailers using RFID to combat a range of losses they typically experience?

• How is the technology evolving in the future to broaden the range of objects that can be identified consistently and reliably through RFID and other communication protocols?

 

Understanding Risks and Measuring Consequences of E-commerce

While much of global retailing has found a period of stagnation over the last few years, those involved in e-commerce have seen this portion of their businesses continue to grow rapidly. Certainly the uptake varies tremendously between countries, with the UK, USA, China, and the Baltic States seeing year-on-year double-digit growth, while other parts of the world have yet to fully embrace this form of business.

This area of retailing is developing very fast, with many established retailers seemingly playing catch up with businesses set up exclusively to deliver an e-commerce environment. In addition, it has in some ways become a bellwether of the apparent vibrancy of a retail business - if they do not offer an e-commerce platform, then surely they are behind the times and unlikely to prosper in the future. 

This has driven many companies to rapidly expand and develop e-commerce platforms, often at breakneck speed, without developing the necessary expertise and systems or understanding the many and varied risks associated with this form of business.

 

Given this, it is important to undertake research to better understand what these risks might be, focused upon the following questions:

• In what ways are retailers developing and delivering e-commerce, and to what extent was risk management part of the decision-making process?

• What are the types of risk associated with these forms of e-commerce?

• How are these risks being measured within retail businesses, and how do they compare with other forms of loss?

• Who has responsibility for managing these risks?

• How are these risks being effectively managed?

 

Avoiding the Road to Technological Determinism

The retail industry is not short of technology-focused providers keen to sell them a vast array of so-called solutions to fix their shrinkage and loss problems. This includes various types of tagging technologies, video systems, analytics, cash-counting machines, and shelf-based systems, to name but a few.

However, Amplifying Risk in Retail Stores: The Evidence to Date on Making Shop Thieves Think Twice, a recent review undertaken for the ECR Community Shrinkage and OSA, found that there was little recently published evidence on the efficacy of a wide range of interventions typically employed by retailers in their stores to stop thieves stealing their stock, although the role of store staff was found to be one of the most consistent and effective ways to deter shop theft. 

In some respects, the retail industry has been plagued by what might be called the "solutions looking for problems" syndrome, where technology providers dream up yet more ways in which retailers can "solve" their shrinkage problems without ever properly engaging with them to fully understand the actual problems they face, nor the ways in which they might go about resolving them.

In addition, there is often a disconnect between the requirements and capabilities of the actual end user (often a store colleague or a security guard) and the specifications of the system being commissioned and introduced. Just because a technology can be developed and delivered does not necessarily mean it is needed, a concept related to technological determinism, a theory that says technology drives a culture's social structure and values instead of vice versa.

 

Given this, it is important that research is undertaken to help bridge the gap between intervention providers and their retail customers, focused upon answering the following questions:

• What are the key challenges and concerns that various parts of the retail loss community are facing now and in the future?

• How might these challenges and concerns be better managed and controlled through the development of new technologies?

• How are a range of current technologies actually being utilised by end users, and do they meet their expectations and requirements?

• To what extent do those tasked within retail organisations to procure loss prevention technologies understand the way in which they will be used and evaluated within their own businesses?  

 

 Other Research Topics

This is in no way meant to be an exhaustive list of the research that needs to be undertaken in the near future. Other topics undoubtedly include:

• Defining, measuring, and managing on-shelf availability and inventory accuracy.

• Controlling waste in food retailing.

• Understanding the impact of product returns on losses. 

• Managing losses in the supply chain.

• Understanding the potential of feature-recognition technologies to control crime.

• Exploring the impact and control of organised retail crime. 

• Measuring the nature and types of losses across the retail landscape.

• Investigating how big data can help retailers better control their losses. 

• Understanding how to better engage with employees to deliver a low-loss retail store environment.

Retailing is an exciting and demanding world in which to operate. It requires those tasked with understanding and managing risk to evolve and change as quickly as the businesses within which they are employed. If they do not, then in the rather fateful words of General Shinseki, they may find themselves an irrelevance. Reacting to this changing world needs high-quality research to underpin the development of successful and sustainable interventions focused upon helping businesses grow their profits and improve their customer experience so that they can continue to flourish in a time of great uncertainty.  

ADRIAN BECK is a professor in the Department of Criminology at the University of Leicester, UK, where he is primarily focused on research on retail crime and shrinkage issues. Since 1999 Beck has been an academic advisor to the ECR Community's Shrinkage and On-shelf Availability Group. He can be reached at bna@le.ac.uk.