Who pays the cost of theft and fraud in retail? You do.
You may remember the old advertisement where a retailer says something to the effect of, “We buy in bulk and pass the saving on to YOU!” Consumers have been making use of that kind of price-cutting since the dawn of wholesale. But savings aren’t the only thing that get passed onto us; retailers’ expenses have to get payed for somehow, and revenue is the obvious answer.
In the case of the expenses from retail fraud and theft, consumers are picking up the tab for nearly $41.6 billion in 2006 alone. That’s up from a 2005 National Retail Security Survey that placed the figure at $37.4 billion. If you add to that the annual cost of property/casualty insurance fraud and retail fraud, Americans spent over $600 a year per househould paying for theft and fraud.
Recently, we wrote about some of the expenses of employee fraud and theft. The focus in that post was that businesses have often collected huge amounts of data on the losses, but they aren’t using it. As that data accumulates over time, the analysis of it becomes even more difficult, especially without the right vertical search software. Consequently, it often sits and rots while the retailers mounts up losses.
For instance, a woman in Milwaukie, Oregon was recently arrested for defrauding Target for about $30,000 (reports Portland’s KATU.com). Her simple scheme of switching high-dollar price tags with “99-cent juice cup tags” was generating data at every transaction for a year or more. She has been banned from all Target stores, but enforcing that ban might prove tricky unless that point-of-sale data can be leveraged. But what if she goes to another city and/or uses a different identity? Target will have to make sure it can resolve those multiple identities and utilize potentially siloed data. Also, how many similar instances is Target (and retailers like them) missing?
A report on the UK’s The Retail Bulletin argues that “Retailers generate huge amounts of data yet few really leverage it effectively to support improved commercial decision making.” It’s what Jeff Jonas has called “enterprise amnesia,” which he explains happening when “an organization misses the obvious (e.g., when other relevant information is trapped elsewhere in their organization) and then takes incorrect action.” Then, as organizations slowly realize why their profits are slipping, customers have to essentially pay a fraud-tax in the form of higher prices to offset the loss. Imagine what would happen to pricing and profits if an organization could leverage existing data and to combat shrinkage and fraud.
