Billions Wasted on Loss Prevention Technologies

To tackle the problem of shrinkage, retailers spend billions on technologies.

Every year retailers worldwide spend billions of Euros on various types of technology such as CCTV, tagging and data mining in an attempt to tackle the ever present problem of shrinkage, which estimated to cost the European Fast Moving Consumer Goods Sector alone as much €8 billion a year (equivalent to the GDP of Luxembourg!).  Trying to decide in which technology to invest can be a tricky business, with often extravagant claims by suppliers being unsubstantiated by any published evidence.  Persuading the business to invest can also be an uphill struggle as can deciding upon a way to measure the overall ‘value’ such investments can be worth to the business.

In a report by the ECR Europe Shrinkage Group, Adrian Beck, a Reader in Criminology at the University of Leicester and the author of the report adds, “If retail loss prevention practitioners are to be taken more seriously by other functions within the business, then they need to show greater rigor and professionalism in the way in which they go about developing business cases for investment, and how they measure and monitor the performance of ‘solutions’ they recommend.”

According to the report, the current situation presents a few challenges to the loss prevention community.  First, the loss prevention community in Europe needs to radically improve the way in which it measures the value of investments in shrinkage control technologies.  As business competitiveness increases and demands for returns on internal investment come under greater scrutiny, the need to ‘prove’ value for money is becoming more necessary.  Second, there is a lack of understanding of how to measure the value of investments and too often loss prevention practitioners use the generic term ‘Return on Investment’ as a catch-all phrase to suggest overall effectiveness rather than as a precise measure of value as it was originally created to convey.  Third, loss prevention executives need to understand and use the language of senior management when making business cases for investment.  Incorrect usage of financial terms and nave cost/benefit models will undermine credibility, particularly when being compared with investment requests from other functions in the business.

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