In parts, the British Retail Consortium’s Retail Crime Survey 2007 made for very unpleasant reading. Apparently, the total value of goods stolen from retailers now sits at a ten-year high, costing the UK economy a substantial GB pound 830 million into the bargain. Despite an 8.5% boost in detection rates post-2006, it remains the case that only one quarter of these losses are ever recovered.
The number of detected shop theft incidents rose by 3%, taking the average to 40 per store every year. Frightening, isn’t it? The average value of goods stolen in each of those incidents also escalated, this time by GB pound 7.00 to an average of GB pound 156. To cap it all, support from the authorities for this problem area appears to be eroding. Stemming the shop theft tide simply isn’t a Government-favoured KPI.
With shrink trends consistently moving in the wrong direction, traditional loss prevention models are coming under increasing pressure. Most retailers have some form of in-house loss prevention resource supported by a wide range of third party solutions providers, but there’s no real representation or voice at the authoritarian level. This is coupled with poor national and regional intelligence systems – retailers are notoriously good at non-communication with their peers in a given locality – not to mention significant ‘down time’ and unnecessary duplication of effort.
It’s fair to say that budgetary pressures are driving reactive behaviour. Risk assessments can be limited. Many mixtures of CCTV, intruder alarms, tagging of goods and bespoke security guarding have been tried but without massive success. For retail security there has been no ‘silver bullet’ solution on the horizon.
Risk and loss: an examination
Current High Street conditions are ripe for retailers to take their next step in controlling losses due to theft and, to help them in their ‘War on Crime’, a new and innovative approach to the problem is the obvious order of the day.
Step forward The Loss Prevention Company (TLPC), a business-to-business service for the retail sector in its widest sense headed up by Geoffrey Northcott – see panel ‘All you need to know about… Geoffrey Northcott: head of The Loss Prevention Company’.
The objective is the provision of effective and efficient management resources that will undertake the full panoply of retail field loss prevention functions across multiple retail fascias – encompassing tasks such as investigations, training and store compliance auditing – as well as offering expert advice concerning loss prevention techniques.
“What we’re offering is a genuinely groundbreaking, outsourced loss prevention ‘one stop shop’ service to retailers,” suggests Northcott, who has held senior loss prevention roles with several national and multinational retailers. “It’s a business-to-business service aimed at those High Street retailers with an annual loss prevention spend of somewhere between GB pound 1 million and GB pound 8 million.”
Northcott believes that by having retailers ‘pool’ their resources through TLPC’s service offering, there can be a significant reduction in their shrinkage due to theft and the costs of controlling that shrink. “This will be achieved through the effective gathering and analysis of intelligence and the targeting of resources,” continues Northcott. “Our aim is to reduce retailer costs by up to 20% due to the more effective and efficient use of experienced loss prevention field staff without exposing retailers to greater shrink risk.”
Value added proposition for clients
In addition, Northcott’s operation will realise added value benefit for retailers in three key ways. First, intelligence gathering. The confidential wider intelligence gathering capability will exist across multiple retailers and High Streets. State-of-the-art electronic analysis of crimes will lead to the more effective and efficient targeting of criminals.
“The swift identification of high risk targeted products and locations then allows us to displace and remove the wider criminal element both internally and externally from the whole retail community,” explains Northcott.
Second, TLPC is insisting on improved and more efficient buying power derived through the cost-effective management of both ‘soft’ and ‘hard’ security resources and suppliers. “As we’re going to be representing multiple retailers,” comments Northcott, “The Loss Prevention Company will be able to negotiate with suppliers from a much larger unit base. We can gain far greater economies of scale.”
Third, the new initiative will be the focal point for representation with the police service as well as local and central Government as it represents a larger proportion of the High Street than any single retailer. In other words, its influence on the authorities is that much greater through collective representation.
In effect, TLPC is seeking to render the loss prevention function opaque and seamless. From intelligence gathering through resource allocation to the apprehension, prosecution and recovery processes, the only obvious signs of TLPC’s involvement with any given retailer is the latter’s reductions in shrink and costs needed to control that shrink. A very neat idea.
Appointment of a brand director
While inviting retailers to outsource their entire loss prevention function might be a ‘Big Ask’ for some clients to even comprehend, Northcott is well aware that flexibility is crucial to the argument for so doing. “We must recognise specific risk factors and budgetary constraints. Every retailer is different.”
Interestingly, Northcott’s vision is underpinned by a desire to support each client with the appointment of a dedicated, ‘Best in Class’ brand director. A 24-hour point of contact to work exclusively “inside the brand” and deliver reduced shrink at lower cost.
“The central resource pool then services the brand director and the client’s requirements,” Northcott asserts. “On top of the basic intelligence gathering and risk assessment, including risk grading for new stores, we’ll look at issues like Human Resources and staff vetting in addition to security guarding, key holding, reporting and administration. We’ll manage procurement, and deal with all of the client’s third party supplier management.”
Having a dedicated and trusted brand director/controller embedded within the client organisation is a compelling proposition. “The costs involved will be tailored to every brand based on a review of the retailer’s current loss prevention spend, the number of stores they operate and the services required,” opines Northcott. “We want to be cost flexible with each client and meet their needs around the core outsourcing model provided by The Loss Prevention Company. Moving forward, that makes it easer for the end user to allocate budgetary resources.”
Borrowing from Stateside ideas
At least some of Northcott’s thinking has been triggered by occurrences Stateside, it seems. The manifestation of this is realised in the shape of a strategic alliance developed with Loss Prevention Innovations (LPI), a leading US-based loss prevention services outsourcing concern. Indeed, LPI has been delivering its popular outsourced loss prevention model for over a decade to many prestigious brands.
TLPC is being marketed on a one-to-one basis with a much wider group of High Street retailers, all of whom have expressed various levels of interest in the proposals put forward. At present, TLPC is beginning life with two contracts – the Paperchase contract began on 23 June with the Borders agreement starting a week later – while in negotiation with other retailers such that “a substantial turnover” can be generated in Year One.
“The three-year target is 15 clients and a GB pound 25 million-plus spend under management,” insists Northcott.
Flex the retailer relationship
Northcott is adamant that TLPC offers a significant window to “flex the retailer relationship” (not to mention the broader loss prevention agenda). “There are vertical diversification opportunities here, too,” explains the former Essex policeman. “It’s really all about shared ownership to reduce losses and costs and, at the same time, defeat the common enemy.”
With shrink and loss prevention costs diluting retailer returns to what many consider unacceptable levels, and the estimated value of stolen goods now totalling GB pound 830 million, it’s perhaps little wonder that initial feedback in respect of Northcott’s simple yet brilliant idea has been overwhelmingly positive.
