16 Oct 2018

Exploring the # 1 Cause of Shrinkage in the GCC



A recent article published by Loss Prevention magazine refers to a 2015 PricewaterhouseCoopers survey of Loss prevention professionals, focussing on the significance that certain findings may hold for retailers in the GCC. The survey indicated that inventory management complexity increases when implementing and / or integrating new systems that enable omni-channel retailing. This increase in complexity results in an increase in process failure and administrative errors, which have a direct impact on shrinkage. This is hardly a surprising finding but it is one which is of growing importance to the local retail environment.



Although the survey that is referenced in this article was conducted in 2015, it offers valuable insight for GCC region which delayed the introduction of omni-channel retailing. We are currently witnessing a burst of omni-channel activity as many traditional brick and mortar retailers are launching omni-channel offerings to retain market share and compete with pure-play ecommerce players that have reported significant adoption & growth in the past two years.



The 2017 GCC Retail Loss Prevention Survey found that 33% of "Shrinkage" within the region is a result of process failure and administration errors. This is significant in that this is double the amount experienced in other regions. The underlying cause of such a high frequency of process failure and admin error was primarily believed to be due to communication breakdowns resulting from the sheer diversity of the workforce which is largely comprised expatriate staff from surrounding Arabic States, Asia, North Africa and Eastern Europe where English is not the not the first language.



It is important to note that most "Shrinkage" or Loss Prevention Surveys categorise system related failures under process failure and administrative errors and thus, inflate this metric while also concealing the impact of true system related failures. The 2017 GCC LP Survey did not specifically ask respondents to split out “system” related failures from process & administrative errors and therefore it is unknown whether this inflated this metric.



The question therefore is whether GCC Retailers should anticipate (or have anticipated) further increase in process failure and administration errors as they embark on their omni-channel journey.



Having been the catalyst and facilitator to the first ever regional Loss Prevention Survey, Jard aims to delve deeper into system related errors in the 2018 Survey that we plan to conduct late November 2018.Although we are proud of the results of the 2017 survey, this year we are looking to apply different methodology to conducting the survey and seek to involve local experts in the execution of the 2018 GCC Loss Prevention Survey. We invite local loss prevention practitioners to reach out and get involved as we scale up our efforts to ensure that accurate, actionable loss prevention insights are available to the region.