By Jack Buller, Simpactful Senior Partner and Bob Cinq-Mars, Simpactful Senior Consultant
On November 16th, Target EVP and CFO, Michael Fiddelke, reported that shrinkage at the retailer is accelerating to the tune of an incremental $400 million in profit loss through Q3 in 2022, and projected an impact of $600 million by the end of the Calendar Year vs. 2021. Sadly, Target is not alone. The National Retail Federation’s 2022 Retail Security Survey tallied retail “shrink,” which includes theft, gift card fraud, and inventory mismanagement at nearly $95 billion worth of losses last year, or an increase of $5 billion vs last year.
According to the 2019 National Retail Security Survey, theft accounts for 36.5% of losses. This is not surprising to Loss Prevention Experts who have cited issues such as increases in Organized Retail Crime (ORC), legislation that has increased the threshold for Felony crimes, reductions in retail floor staffing, the expansion of 3rd party marketplaces and shifting economic trends which, together, create more incentives and opportunities for shoplifting and reselling of merchandise.
The losses are impacting retailers across the board – from Wegmans and Kroger to CVS and Target. The combined rate of acceleration and absolute scaled profit impact are forcing top Retail executives to require shrink management and cost transference plans from Category buyers. According to Simpactful Senior Consultant, Bob Cinq-Mars, “More than ever, merchants are now becoming accountable to shrinkage losses.”
As Simpactful Partner and Shrink Expert, Jack Buller, puts it, “We have never seen this level of focus and anguish over the losses associated with shrink with our retailer clients as today. The increased levels of shrink, much of which is attributed to in-store processes vs. just theft (e.g., inaccurate store inventories) are wreaking havoc on On-Shelf Availability (OSA), both in terms of locked products and out-of-stocks.”
He continues, “On a more positive note, the potential volume and profit upside from addressing shrink is enormous. Simpactful has been able to cut shrink losses by up to 20% via optimized protection and shopper “self-selection” solutions that increased sales. We have also helped one brand turn their scorecard green by trimming out-of-stocks by 27% through joint retailer and manufacturer plans.”
Simpactful has invested in key elements to accelerate results in this space: 1) Developed a data-driven approach that drives targeted solutions by store, 2) partnered with Bob Cinq-Mars who led joint retailer-vendor profit recovery efforts at Walgreens, and 3) created simple roadmaps to execute this work.
Our Shrink and OSA practices have identified 3 critical elements to success:
- Both sides of the desk must be committed to working solutions. Retailers and manufacturers have unique contributions to solving shrink and OSA gaps.
- Store-level data that drives out emotion and gets to the core of actionable solutions, especially as it pertains to optimized product protection.
- A crisp but simple roadmap to stay on course and get the work completed.
Increased shrink is frustrating for brands and buyers, but by presenting buyers with steps you can take together to proactively protect brands and retail interests, it is possible to use this headwind to strengthen your results and retail relationships. Interested in learning more about Simpactful’s
Shrink and OSA solutions and how we can help you? Contact the Simpactful team today at email@example.com or 925-234-6394. Visit www.simpactful.com