Deploying an EAS solution across a large number of stores takes significant financial investment from a retailer, not to mention the investment of time and effort to complete such an extensive rollout. Many grocery retailers operate on increasingly fine margins[1], so will want to have proof that they will receive a sufficient return on investment.
The first argument – reducing the amount lost to theft
Chapter two of this blog series highlighted just how much a retailer might be losing to shoplifting. The first way that an EAS solution can deliver a positive ROI is by reducing this amount. There has been plenty of research into the impact of EAS on shoplifting, with the consensus being that it is an effective way to reduce theft[2]. EAS antenna and tags act as a deterrent to both opportunistic theft, and organized retail crime.
In chapter two we used data from the National Retail Security Survey which found that retailers lose approximately 2% of their revenue in the form of shrink[3], and 70% of that is because of theft[4]. This means that for a retailer with a revenue of $100 million we can estimate that they lose about $1.4 million per year to theft. For a retailer the size of Walmart, with an approximate $559 billion revenue in 2021[5], the amount lost could be as high as $7.8 billion – an eye-watering amount regardless of who you are.
In 2019, it was estimated that shoplifting cost the US retail industry $62 billion[6]. Even if EAS can contribute to a small reduction in that amount, its case for offering a positive ROI will be strengthened.
The second argument – increasing on-shelf availability
Shoplifting not only costs the retailer directly in the form of valuable goods leaving their store for nothing but there is a secondary financial impact on the store. For example, when products are stolen, those items are no longer available to be purchased by honest customers, who will inevitably go without or visit a competitor to source the products from them.
This is lost revenue to retailers. Calculating this lost revenue is much harder as many customers will simply see an out-of-stock item and move on. However, it is estimated that out-of-stocks cost the US retail industry upwards of $1 trillion per year[7], with some of those out-of-stocks being because of shoplifting.
Pilot to prove ROI
Checkpoint strongly recommends piloting an EAS program to help predict and prove ROI. In recent pilots with new customers, and by focusing on the high-risk products exclusively, Checkpoint has seen up to a 50% reduction in theft of individual SKUs[8] after the installation of EAS.
This will then trickle down and cause fewer out-of-stocks and missed sales opportunities. While each store will have its own ROI, impacted by factors unique to them, Checkpoint believes that a well planned and executed EAS installation will provide all retailers with a positive ROI.
If you are considering EAS for your stores, and are wondering whether the investment would be worth it, why not explore further with a consultation and pilot with Checkpoint? See for yourself the positive ROI that you could enjoy from an EAS rollout. As we say at Checkpoint, lose less and sell more, with EAS.
Next time…
…we look at the risk vs. reward dynamic for shoplifters. Why do some people steal? What factors do they weigh up and what level of risk are they prepared to encounter? We look at why the risk may be perceived as low and why the reward is high and the attitudes that reinforce these beliefs.
Resources:
[1] Supermarket News, As digital sales soar, profits are a concern for grocery retailers, Sept 2021
[2] Sidebottom, A., Thornton, A., Tompson, L. et al. A systematic review of tagging as a method to reduce theft in retail environments. Crime Sci 6, 7 (2017)
[3] NRF, National Retail Security Survey, 2018
[4] NRF, National Retail Security Survey, 2017
[5] Forbes, Walmart revenue hits $559 billion for fiscal year 2020, Feb 2021
[6] Business Insider, Retailers are facing a $62 billion problem that has nothing to do with the pandemic, July 2020
[7] Retail Dive, Out-of-stocks could be costing retailers $1 trillion, June 2018
[8] Based on shared by confidential data from NA hard discount chains when implementing EAS
