LP Stats from Hayes Int'l

[SIW Editor]

If you haven't seen this article/report, you'll probably enjoy having a look at their numbers:

The State of the Loss Prevention Industry: 2007 Update

http://www.securityinfowatch.com/article/article.jsp?siteSection=382&id=12817

[Curtis Baillie]

Also out are the 2006 figures from Dr. Robert Hollinger of the University of Florida. Here's the link to register to get the report. He will email you permission and the password. You can obtain three years worth of reports.

http://www.lpinformation.com/Default.aspx?tabid=142

[SecTrainer]

One thing we must remember about these reports is that most of them only show numbers for direct losses, and the secondary costs are probably even higher than the direct. The fact is, even 100% successful LP with no shrink at all - could that be achieved - ends up costing you a great deal, and this cost is a drain from profits (or an involuntary element of customer price) that must be attributed to the problem of theft. That it is spent in preventing theft rather than in unprevented loss makes no difference.

What does it cost for RFID tagging, other forms of electronic product protection, etc.?

What does it cost for LP agents?

What does it cost for fidelity/bonding and other forms of insurance?

What does it cost to investigate product diversion and relabeling?

What does it cost for employee training in LP issues?

What does it cost for internal investigations?

What does it cost to continually audit register tapes?

What does it cost to implement controls for returns, exchanges and employee layaways?

What does it cost for false arrest, defamation and other related lawsuits that can arise from any LP efforts, whether properly conducted or not?

What does it cost to put things in theft-resistant bubble packs that take a case of dynamite to open?

What does it cost to put items in locked display cases that must be manned by employees?

What does it cost for background checks of greater depth than might otherwise be necessary?

What does it cost to implement GPS tracking for cargo in transit?

...I could go on and on. The point is, the numbers we see from most studies about theft stop way, way short of really answering the question, which is: What percentage of our product cost can be traced in one way or another to the problem of theft - internal or external? I've seen some estimates, and of course it depends on the product, but you wouldn't surprise me if you said that for some products, 75% of the cost can be traced in one way or another to the issue of theft. If I'm correct, the implications are truly staggering when you pump those kinds of numbers into things like the CPI and the GDP.

[NRM_Oz]

When I have lectured in LP I used USA and Australia comparisons as your country has about 15 times the people we have here and I do like to show the comparison. Whilst we talk millions, it is billions in the USA of lost dollars and lost profit.

As an ex finance whizz, I like to use as realistic figures as possible - including break up of sales, audit and LP times and to be honest I wonder how some smaller retailers can stay in business these days ?

[Lynch Mob]

One thing we must remember about these reports is that most of them only show numbers for direct losses, and the secondary costs are probably even higher than the direct. The fact is, even 100% successful LP with no shrink at all - could that be achieved - ends up costing you a great deal, and this cost is a drain from profits (or an involuntary element of customer price) that must be attributed to the problem of theft. That it is spent in preventing theft rather than in unprevented loss makes no difference.

What does it cost for RFID tagging, other forms of electronic product protection, etc.?

What does it cost for LP agents?

What does it cost for fidelity/bonding and other forms of insurance?

What does it cost to investigate product diversion and relabeling?

What does it cost for employee training in LP issues?

What does it cost for internal investigations?

What does it cost to continually audit register tapes?

What does it cost to implement controls for returns, exchanges and employee layaways?

What does it cost for false arrest, defamation and other related lawsuits that can arise from any LP efforts, whether properly conducted or not?

What does it cost to put things in theft-resistant bubble packs that take a case of dynamite to open?

What does it cost to put items in locked display cases that must be manned by employees?

What does it cost for background checks of greater depth than might otherwise be necessary?

What does it cost to implement GPS tracking for cargo in transit?

...I could go on and on. The point is, the numbers we see from most studies about theft stop way, way short of really answering the question, which is: What percentage of our product cost can be traced in one way or another to the problem of theft - internal or external? I've seen some estimates, and of course it depends on the product, but you wouldn't surprise me if you said that for some products, 75% of the cost can be traced in one way or another to the issue of theft. If I'm correct, the implications are truly staggering when you pump those kinds of numbers into things like the CPI and the GDP.

I think you make some very good points. I have always been a propenent of evaluating the costs associated with shrink reduction. It ultimately doesn't do any good to reduce your shrink if the costs associated with that reduction far exceeds the savings.

There is one point that I am not completely sure I understand what you are saying. You said, "What percentage of our product cost can be traced in one way or another to the problem of theft - internal or external? I've seen some estimates, and of course it depends on the product, but you wouldn't surprise me if you said that for some products, 75% of the cost can be traced in one way or another to the issue of theft."

If I am understanding what you are saying, you are estimating that the price we pay for goods might be as much as 75% higher as a result of theft issues causing prices to be inflated. Is this correct?

If I am correct in what you are saying, I would have to disagree. In fact, I think theft has very little influence of the cost of products in the marketplace. And, I think it is rare that any company will consciously increase prices specifically to compensate for theft. Companies target profit percentages. Part of that formula is the losses associated with shrink, but industry shrink is only 1.6% right now, so that means that is how much (or thereabouts) that goes into the "costs" of doing business that eat into profits.

Yes, this does eat away significantly at profits. But, think about it this way, if your company had 0% shrink, would they change their markup structure on products? I doubt it. I think they would still markup the prices the same and just take the extra profit, gladly. This is why I say that shrink does not impact the pricing. Nothing is likely to change if there wasn't any shrink.