Retailers losing a packet through theft, damage and errors

New Zealand retailers could be losing millions of dollars a year through preventable errors, theft and other stock losses - at a time when they can least afford it.

They’re not alone. A new survey from KPMG suggests that the global economic recession is taking a chunk of sales from retailers around the world.

Many of the world’s leading retailers estimate the value of their stock loss or ‘shrinkage’ – due to theft, damage and errors – could be as much as three percent of sales or even higher, hurting retailers’ potential profits, say retail specialists at KPMG.

“What we’ve found is that many of these losses are totally preventable, but retailers seem to think this kind of shrinkage is inevitable,” says Alan Brame, Head of Risk Advisory Services, KPMG New Zealand.

“These losses are both significant and controllable; we hope the survey’s results will help retailers focus on the issue and figure out ways to lower stock loss so they can protect their profits in these tough times.”

Brame believes awareness among New Zealand retailers on the issue of shrinkage is likely to be relatively low and the recession may mean that already stretched staff may be more prone to making mistakes. Many local retailers are having big sales, which would make it even more difficult to trace stock.

Some of the losses are because of theft by customers and staff, and the economic downturn means that’s a problem likely to get worse. But KPMG’s Global Retail Loss Prevention Survey 2009 also found that a lot of stock is ‘lost’ due to mistakes in counting, data entry or similar errors.

As much as a third, or even more, of retailers’ stock losses may be due to mistakes inside a company, the KPMG survey found, much higher than previously thought.
Such a high level of mistakes within companies means that simple improvements to how internal processes are designed and rolled out can result in significant savings for retailers.

“Identifying the causes of shrinkage is challenging for many companies, but well worth the effort,” says Brame.

“Once a retailer figures out how shrinkage is happening – whether it’s staff errors or simply inadequate systems – then they can take steps to stop it from happening and eating into valuable profits.”


Ends

Breakout box:
· Retailers may be losing 3% of their sales, or more, due to ‘shrinkage’ – theft, loss or errors
· Internal mistakes may make up around a third of these stock losses, according to a new survey by KPMG.
· Retailers in Asia-Pacific think almost 70% of losses come from staff and customer theft, when it’s actually much lower.

In all, 47 large retailers worldwide participated in the survey: 28 from the Europe, Middle East and Africa region (EMEA), 8 from the Americas, and 11 from the Asia Pacific region.

About KPMG

KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 144 countries and have 137,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss cooperative. Each KPMG firm is a legally distinct and separate entity and describes itself as such.