The last nine months in retailing have been riddled with poor performance, decreasing stock values, and shrinking corporate footprints. It’s safe to say that retail is in the midst of one its most difficult periods to date. This difficult period stems from years of staff reductions driven by technological advancements, which allowed retailers to do more with less. Despite staff reductions, retailers are still hard pressed to find additional payroll savings. The bad economic news continues to mount, as gasoline prices will surpass $4.50 per gallon.
Two million homes are now in foreclosure. This number will peak at 3 million before all is said and done. Consumers will spend more at the pump and less in the stores, and no retailer or vendor will survive unscathed. For some retailers, this will translate into job growth for the loss prevention industry over the next year.
Competitive Pressure Escalates During Recession
Though politicians are reluctant to use the term recession, the country has been in one since late Fall 2007. Some people are comparing today’s economic issues to those of the Depression. With high-end retailers feeling the pinch as well, we could be entering a period that even a diverse slate of presidential candidates may not be able to save. Between 2002 and 2007, the retail industry opened 25,000 units in the United States. Retailers that entered this period with strong brands, balance sheets, and market share will survive. Retailers that have not already been purchased by an equity group for privatization may have a hard time surviving. The normal competitive pressures to perform are now even more severe in this understaffed, bad economic period.
Increased Crime And Decreased Staff Proves Detrimental For Retailers
A few constants remain in the retail industry as a direct result of this economic downturn. The first is the never-ending need to evolve technologically. Retailers must continue to refine the abilities to collect, disseminate, and protect information. This will allow them to deliver their services and products more efficiently. The second constant is the need to protect information that is in peril — a significant issue for every retailer. A third constant during a recession is the increase in shrinkage dollars. Reduced sales increase the shrinkage dollar’s percentage. Also, crime rates increase significantly during a recession, which translates to increased internal and external theft for the retailer. Coupled with decreased staffing levels, retailers may have a perfect storm on their hands.
Advancements In Technology: The Double-Edged Sword
According to The Futurist magazine, computer technology will surpass human intelligence, and it will be able to replicate, communicate, and train itself, all within the next 50 years. Though this image may be somewhat scary, its true impact will be incredible and inevitable. Retailers will be forced to continue to invest more than 60% of their capital budgets in technology in order to stay competitive, drive economies of scale, increase the speed of delivery, and predict and modify employee and customer behavior in real time. The prediction and modification of behavior variables is the uncharted territory where retailers will be faced with ethical decisions they have not yet begun to think about or discuss. The ability to track, predict, and modify a customer’s or employee’s behavior and actions in real time will eliminate certain civil liberties and reinforce prejudices. This may negatively impact staffing levels, customer traffic, and sales if it is not managed carefully. Our society’s zero tolerance mentality will have a long-term whiplash effect if human mistakes aren’t taken into consideration. One merely needs to observe overcrowded prison populations and current efforts to redefine the zero tolerance consequences to realize this and to ask, have we gone too far?
Technology Reigns Supreme
The impact that technology has made in the retail industry to date is incredible. Technology has increased performance, but it has also eliminated jobs and businesses, impacted privacy rights, and given birth to a new wave of identity theft crimes and an almost depersonalized invasive culture. Academia has only just begun to discuss some of technology’s negative consequences, including the emphasis on multitasking and the negative impact e-mail is having on grammar. On the flip side, some believe these educational values will continue to impact the birth of democracy throughout the world. Therefore, technology’s impact on society will continue to redefine our very existence.
This recession will have positive and negative consequences for the retail industry. Some retailers and vendors will not survive it. Stalled store expansion rates give retailers time to focus on core issues that are typically ignored during fast growth cycles. The loss prevention industry is presented with a great opportunity during times of recession. To address the increasing shrink problems loss prevention executives must take this time to develop aggressive responses that ultimately deliver profit dollars to retail stores.
Make no mistake — we are in a storm. How we weather it, both as individuals and as retail organizations, is paramount. The loss prevention executive’s response, including increased employee performance and open communication, will help loss prevention to decrease shrink and increase profit at your stores. The loss prevention industry has the potential to make its biggest contribution yet. The question is, how will your loss prevention staff weather the storm?
