LP Magazine

JAN-FEB 2019

LP magazine publishes articles for loss prevention, asset protection, and retail professionals covering shrinkage, investigations, shoplifting, internal theft, fraud, technology, best practices, and career development.

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average number of SCO machines (for the case-study retailer) could also expect to see shrinkage losses 31 percent higher than an estimated industry average, while those utilizing an above-average number of machines could expect the rate of loss to be at least 60 percent higher or more. Technology monitoring and video analysis data looking at €72 billion ($83 billion USD) of transactions found that nonscanning at fixed SCO machines accounted for 0.44 percent of SCO sales, amounting to 9.5 percent of all store-recorded shrinkage. The data suggested that nonscanning behaviors alone (not including misscanning, walk-aways, and so forth) are likely to add 0.45 basis points of loss per 1 percent of fixed SCO utilization. Together, the various data sets strongly indicate that previous assumptions that fixed SCO does not generate additional losses for retailers are incorrect—the losses are real and, in some cases, significant. Based on the available evidence, it is estimated that for each 1 percent of fixed SCO utilization, a retail store should expect their shrinkage losses to increase by at least one basis point. This estimate does not consider other forms of loss that SCO systems are likely to be generating, such as lost margin and lost profits due to out-of-stocks caused by increased errors in stock-inventory records. Given this, for a store with 25 percent of the value of transactions being processed through fixed SCO, it can probably expect its shrinkage losses to be about one-third higher than the average rate found in grocery retailing. Impact on Retail Losses: Scan-and-Go Systems Analysis of 140 million transactions found that the average utilization rate of this technology was still relatively low in the companies that agreed to share data—2.82 percent of the value of all transactions. Of this total, 12 percent or 17 million were subject to a partial rescan audit (only a small proportion of items are checked). Of those, 2.88 percent were found to contain at least one error, generating an overall inventory error rate of 0.52 percent of scan-and-go sales. When overscans (the consumers scans the same item more than once) were taken into account, the net loss was calculated as 0.31 percent of scan-and-go SCO sales, equivalent to a 0.7 basis point increase in losses for every 1 percent of utilization. However, analysis of 20,000 random full rescan audits (every item is checked) provided by one case-study company paints a very different picture. It showed an overall error rate of 43.4 percent—1,407 percent higher than the partial rescan audit data. When this error rate is used to calculate net losses, it shows that the rate is as much as 4.68 percent of all scan-and-go SCO sales, generating a loss-to-utilization ratio of 10.4 basis points per 1 percent. Taken together, stores using this technology (at the utilization rate found in this study) could see significantly higher losses, perhaps as much as 40 percent higher. Further analysis of full rescan audit data, using probability statistics, showed that as the size of shoppers' baskets increased, then the likelihood of an error occurring also increased. When a shopper has fifty items in their basket, then there is a 60 percent chance they will make at least one error, while for those with 100 items there is almost a nine in ten chance they will make an error. One retailer shared data comparing stores with and without scan-and-go SCO, which showed that those with the technology Data comparing stores with and without fixed SCO found that levels of loss were higher in the former than the latter, with some grocery case studies recording losses in the region of 33 to 147 percent higher. Relationship Between Number of Fixed SCO Machines and Rates of Loss 121 142 153 158 160 150 140 130 120 110 100 90 80 70 1-3 4-6 7-10 11+ Shrinkage Rate Index Number of Fixed SCO Machines Non SCO Stores Non SCO Stores Non SCO Stores Non SCO Stores UNEXPECTED LOSS IN THE BAGGING AREA 53 LP MAGAZINE | JANUARY–FEBRUARY 2019

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