Retail Reality at a Glance

Early June was packed with important, not always comforting, survey information. To wit:

The enemy within is more dangerous than the enemy without. Though awareness of organized retail crime is increasing, as are preventive measures to combat it, the majority of losses from shrink comes from internal theft and administrative error, according to the National Retail Security Survey of 139 retailers produced by the University of Florida and the National Retail Federation.

Forty-seven percent of shrink is attributed to employee theft, compared to just 32% from shoplifters, the survey reported. Blame for an additional 14% is placed on administrative error. Vendor fraud accounts for 4%.

Overall, shrink totaled 1.61% of sales, a whopping $41.6 billion in 2006, according to the study. Some good news—the percentage of shrink to sales remained virtually unchanged from a year ago.

Fourteen percent of retail workers say they arrive late to work at least once a week, according to CareerBuilder.com. More damning: 22% admit to making up fake excuses to explain their tardiness.

Apparel retailers are missing out on $12 billion in potential sales a year because store personnel are not engaging enough customers who want help. That’s what Envision Retail, a British consulting company, found as part of a worldwide survey of 2,000 customers of 120 retailers in Europe, Asia, the United Arab Emirates and the United States. (U.S. customers were surveyed in Philadelphia and Los Angeles.) Envision says just slightly more than half of U.S. customers who want help are approached. If store personnel approached them all, sales would increase by 7%, as much as $12 billion, Envision estimates.

Sizeable segments of the U.S. population are suspicious that retailers are raising prices to grow profits, rather than in response to the economy and rising energy costs, according to a June 2007 Chain Store Age/ Leo J. Shapiro & Associates study of 812 consumers. Among the key findings of the study (available at www.chainstoreage.com/specialreports):

Eight in 10 feel that prices in the stores they shop are now higher than a year ago. One in five think they are much higher;

Food stores are seen as the most inflationary, discount stores the least. Home-furnishings stores, home centers and electronics stores are viewed as being more inflationary than children’s apparel stores, drug stores and sporting-goods stores;

Wal-Mart is considered most often as the chain doing the best job of curbing inflation in its stores. Gap is rated the lowest. Overall, apparel stores, department stores and food stores suffer from the lowest credibility with consumers;

Depending on the retail category, between one-third and one-half of survey respondents say they have changed where they shop in the last year because of rising prices; and Food stores are the most vulnerable to customer switching. Slightly more than half, 53%, of food shoppers say they have made changes in where they buy food.

Customer loyalty is the Holy Grail of retailing. But store switching is retail reality, which makes finding and keeping honest, engaging employees all the more important a challenge for retailers to master.