Canadian retailers lose over $3 billion annually to crime: Retail Council of<br>Canada, PricewaterhouseCoopers Survey

    
    Retailers continue to fortify themselves against the influences of
    criminal activity
    

TORONTO, Sept. 16 /CNW/ - Despite challenging economic times and turbulence in both the domestic and global economies, results of a PricewaterhouseCoopers (PwC) and Retail Council of Canada survey of medium and large retailers for 2008 show that Canadian retailers are continuing their vigilance against the influences of criminal activity.

    
    Key findings:

    -  Despite the existence of some proven prevention methods, corporate
       policies and monitoring procedures, the loss of inventory, (known as
       retail shrinkage), translated to just over $3.0 billion in losses for
       Canadian retailers in 2008 or $8.5 million per shopping day in Canada.

    -  Shrink rates of the retailers surveyed ranged from 0.4% of net sales
       at the low end to 2.3% of net sales at the highest. 76% of respondents
       reported shrink rates below 1.25% of net sales.

    -  Employee theft is the largest loss area (35%), with shop theft
       (including organized crime activity) rated at 32%.

    -  The survey confirmed the importance of the store-level staff in theft
       prevention - 70% responded that store operations staff is most
       accountable for prevention of losses at the store level.

    -  90% percent of retailers surveyed perform daily loss prevention
       measures at the opening and closing at each of their stores; 85% use
       proactive measures to detect cash theft by employees at least every
       seven days - these are some of the methods that are being employed to
       prevent and detect losses.

    -  Retailers surveyed indicated that their controls begin before they
       even buy merchandise from suppliers - 94% scrutinize vendors as part
       of vendor selection process and 61% dedicate loss prevention resources
       to the supply chain process.
    

Retailers continue to employ strong governance practices when it comes to theft prevention with most having policies in place that define the consequences of shoplifting, internal theft, vendor or supplier fraud and the pirating of intellectual property. Similar to the findings of the 2007 survey, retailers also indicate a strong tendency towards prosecuting offenders caught in the act of stealing. Sixty per cent of respondents prosecute employees more than half of the time when an employee is caught stealing, while 79% prosecute customers more than half of the time in the same scenario.

"Going forward, retailers may be less apt to pursue costly legal action against employees and customers for theft as a result of budgetary pressures from the economic decline - particularly where they have proven that they can continually prevent or detect it," says Ian Booler, Director, Advisory Services at PwC. "Based on the combination of the responses related to policies and procedures and combined with the shrink levels, we know that when strong governance practices are combined with proven theft prevention methods, Canadian retailers can effectively monitor and control established theft risks. In addition, those retailers who have leveraged a good mix of technology, processes and people, are better positioned to identify and address new theft risks as they come into the Retail market."

Despite the fact that online retail sales account for an estimated 2% of total annual Canadian retail sales (statistic provided by RCC), the theft risks related to this sales avenue has caught the attention of management as a potential source of loss, 55% of respondents indicated that they run an online store and all respondents indicated they routinely monitor online transactions for fraud as part of their loss prevention procedures.

Losses related to fraud from returns, credit cards or gift cards remain areas of high concern and considerable sources of loss. However, the survey shows that alarm systems, closed circuit TV and armoured car pick-up services have become industry standard practice as measures to reduce losses and monitor theft risks. These are proven methods that apply equally to all different types of retail segments in the market.

"While retailers have resources dedicated to preventing losses, they are still heavily reliant on the staff working on the front-lines," says Bill Yetman, Chief Operating Officer for the Retail Council of Canada. "We also see that with tightening economic conditions, pressure is increasing to minimize losses and protect the bottom line. Every retailer is looking to do 'more with less' and staff on the front-line will be increasingly counted on in the coming year."

Survey results confirm that retailers in Canada make significant investments working on the front lines. For instance, store operations staff compensation contains a measure for 'shrink' or loss measure and theft prevention training done in person is by far the most common and indicated as the most effective way used by retailers to train employees on loss prevention. It is also now a common best practice to perform pre-employment screening before hiring new staff. In fact, over 75% of respondents perform pre-employment screening as a routine procedure. Some retailers go even further, just under 50% of retailers request new employees to pass a police background security check as part of the hiring process as a means of ensuring they are protected against internal theft.

"One way to identify areas of improvement within individual retail locations is through comprehensive site reviews and visits," says Yetman. "Ninety per cent of our respondents said they perform periodic security audits of their locations to ensure that all security elements are reviewed as compared to corporate policies and procedures. It is clear that, where possible, establishing security best practises should be a priority for Canadian retailers and the survey results indicate that it is."

Methodology

The survey information was collected and analyzed between January 2009 and March 2009, from a confidential web-based survey application software. Information was provided on a voluntary basis. Respondents to the survey included vice-presidents, directors and managers within the Loss Prevention and Security functions of Canada's leading retail organizations. Owners or other management staff of smaller retail operators also participated in a separate survey targeted at the smaller market retail segment. Information was compiled and analyzed by the Retail Council of Canada in partnership with PwC for medium-to large retailers.

For more information please visit www.pwc.com.ca/retail or www.retailcouncil.org.

About PricewaterhouseCoopers LLP

PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 155,000 people in 153 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice. In Canada, PricewaterhouseCoopers LLP (www.pwc.com/ca) and its related entities have more than 5,200 partners and staff in offices across the country.

"PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership, or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity.

About Retail Council of Canada

Retail Council of Canada (RCC) has been the Voice of Retail in Canada since 1963. We speak for an industry that touches the daily lives of Canadians in every corner of the country - by providing jobs, career opportunities, and by investing in the communities we serve.

RCC is a not-for-profit, industry-funded association representing more than 40,000 store fronts of all retail formats across Canada, including department, specialty, discount, and independent stores, and online merchants.

RCC is a strong advocate for retailing in Canada and works with all levels of government and other stakeholders to support employment growth and career opportunities in retail, to promote and sustain retail investments in communities from coast-to-coast, and to enhance consumer choice and industry competitiveness. RCC also provides its members with a full range of services and programs including education and training, benchmarking and best practices, networking, advocacy, and industry information.

For further information: Kiran Chauhan, [phone], [email protected]; Mark Beazley, [phone], [email protected]