News & Events

Total Retail Loss – an opportunity for LP leaders to widen their role

April 9, 2015

Today’s LP manager has a much bigger job to do than studying CCTV footage for shoplifters. Forward-thinking companies are beginning to see how LP executives may have a broader role in retail operations through the concept of ‘Total Retail Loss’.

Technology is transforming retailing and the roles within it. The responsibilities of the LP manager are rapidly changing as businesses find that traditional strategies and solutions are no longer fit-for-purpose.

Back in the old days, the LP manager acted like an arm of law enforcement and some could argue that the measures of success were how many light-fingered criminals were put under lock and key by the end of each working day.

But new thinking on what constitutes loss will dictate how the LP role evolves. There is now a proposal for a ‘Total Retail Loss’ framework that recognises a much wider range of contributory factors to loss. One of these factors is the rise of digital technology, which, while it offers marvellous new opportunities also presents LP challenges, ranging from online fraud to the logistical pressures of flash sales conceived in short time frames and promoted at scale.

Professor Adrian Beck, academic advisor to the ECR Europe Shrink and on-Shelf Availability Group, and fellow experts came up with a definition of ‘Total Retail Loss’ that at its simplest embraces all the losses within a retail organisation that are not regarded as ‘the cost of doing business’ (such as the cost of stock or heat and lighting).

The definition for Total Retail Loss is a ‘work in progress’ and will be finessed with retailer input but for now is broken down into the following areas:

  • Corporate Policy Losses – attributable to overall goals important to the business, such as a ‘flash sale’ to shift out-of-season stock or a price matching guarantee against rivals.
  • Corporate Liabilities – costs associated with issues such as criminal damage, burglary, currency exchange losses, fire and more.
  • Supply Chain Losses – losses taking place within the retail supply chain, including the distribution centre and while in transit, made up of malicious and non-malicious losses.
  • Known Operational Losses – occurring in retail stores as part of everyday activities made up of both malicious and non-malicious losses.
  • Unknown Operational Losses – losses where the cause is unknown and occurring during day-to-day retail activities.

The changes in the LP role are already underway in many companies and the trend is likely to accelerate when the industry agrees on a breakdown of types of losses that are “measurable, manageable and meaningful”.

Many LP leaders are already working in multifunctional teams as their work crosses internal departmental siloes. Ultimately, it’s not hard to imagine the role expanding to include all the issues identified with out-of-stock and the position seen as integral to driving revenue and growth.

Companies who want to attract the right talent to the role and drive commitment now need to create an identifiable career path for LP professionals.

Professor Adrian Beck is head of the Criminology Department, University of Leicester, UK. He will be making the opening speech at the Retail Fraud Show in London on 23 April and will be presenting more about his research on Total Retail Loss at the next ECR Shrink and on-shelf Availability Group meeting next May, 20-21 in Helsinki, Finland