Health of retail sector set to suffer further as downturn becomes a recession.
It will probably not come as a huge surprise that the latest KPMG/Synovate Retail Think Tank (RTT) assessment of the state of retail health predicts that the health of the industry is set to suffer further, as the downturn officially becomes a recession. By Helen DickinsonThe RTT's latest discussions concluded that margins are increasingly under pressure, after an unprecedented period of pre and post-Christmas discounting, while demand is being hit amidst the daily reports of the worsening situation regarding unemployment. However, one brighter piece of news from the panel's findings was that the negative impact on retail health of cost rises has eased as the effect of less rental pressures and cost cutting s trategies kick in.
But as the wintry economic climate continues to have an impact upon the sector, and looks set to stay for some time yet, is there anything that retailers can be doing to take the pressure off?
One thing that can have a positive effect on the bottom line is ensuring that as much stock as possible stays where it should - on the shop floor, safely stored in stock rooms or in the bags of happy paying customers.
The 2007-2008 Retail Crime Survey from the British Retail Consortium (BRC) found that both customer and employee thefts decreased in line with the national downward trend in crime since 1997. But despite the fall - by 26 percent and 56 percent respectively in the twelve months to April 2008 - crime still cost the industry £1 billion during that period.
On a similar subject, another piece of research I spotted recently was the Centre for Retail Research's Global Theft Barometer 2008 which surveyed 36 countries. It found that in these locations, shrinkage and crime cost over US$100 billion, equivalent to 1.34 percent of retail sales.
According to this piece of research the most stolen items of merchandise included branded or expensive products such as cosmetics and skincare, alcohol, womens' wear, perfume and fine fragrances, and designer clothing. Razor blades, DVDs or CDs, video games and consoles, small electric items and fashion accessories also featured high on the hit list.
But it seems that trends could be changing in the kinds of products targeted. One interesting news story that I've seen recently is that meat is increasingly being stolen, with one Police Chief Constable stating that goods including large packets of bacon were being targeted in his community.
It goes without saying that protecting valuable stock is important. But if retailers are forced to use electronic tags to prevent everything from the small, high value items which have traditionally been attractive to shoplifters to packets of meat, it presents yet another cost they could do without having to consider.
But as the impact of the recession deepens, so the motivation for individuals to commit crime does too. The BRC's report highlights that “the Home Secretary has warned of a significant growth in violent crime, theft and burglaries. Retailers have already begun to report an upturn in such offences.”
The old saying “where there's a will, there's a way” seems pretty appropriate in this situation. If individuals are prevented from stealing the usual products, there is always something or somewhere else to target. And this is where retailers need to be on their guard - the current environment means that the crime perpetrators will become more innovative and creative than ever before. With company profits under pressure, an increase in shrinkage is not a cost many can afford to take on the chin.
So, whilst cost cutting in some areas may certainly pay dividends, I don't think that trying to reduce the cost of security is one where the savings will pay off.
Helen Dickinson is Head of Retail at KPMG
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