Retail has been hit badly, and hit first, by the recession; but equally it may be first out of recession. So while there’s gloom, Prof Joshua Bamfield of the Centre for Retail Research does offer some bright prospects, Mark Rowe reports.
Asked that old question – does security and loss prevention do fairly well in a recession? – he answered that opinion varies. "The best one can say: there is a tremendous opportunity for the security industry to say, look, there are so few profits around, that if you cut shrinkage by say 30 per cent, this can be the difference between survival and failure. Retailers, possibly for the first time in ten years, are going to be sincerely committed to looking at every cost, because they have to see what they can do to survive the recession." As Joshua went on to point out, head offices have down-sized; entire occupational levels and ranks done away with. So if a security or LP person can show where the business can make a saving, it might work. Yet while the mainstream press emphasises how badly the economy is doing, "there are lots of firms that actually have made quite reasonable profits; take for example Next. Sales have declined but they did not engage in any price cutting before Christmas." HMV, Mothercare, Primark are others who brought out good results in January. <br><br>Shrink<br><br>Does shrinkage necessarily get worse in a recession? Joshua said: "There’s a lot of criminological work that shows that in a recession, crime goes up as unemployment goes up. And this seems to relate to the fact that people are turning to crime because they cannot get a job, but also because they have more time to wander about the streets. There’s not so much work been done on shrinkage for the simple reason that there isn’t all that much information nationally and internationally published on shrinkage, but I have seen one piece of work showing that when unemployment rises, shrinkage rises. But I feel it’s a bit too neat because all the bits of work I have done, country by country even in countries where shrinkage is awful, there are retailers that manage to buck the trend . Shrinkage isn’t just about how many criminals are outside the shop, it’s what is inside the shop. If you have good security, good equipment, procedures, and follow up discrepancies, people can cut shrinkage. Smart retailers use security to prevent it [shrinkage] becoming a problem." <br><br>Fear for jobs<br><br>Might potentially-dishonest employees behave better, for fear of losing their jobs in a recession? I asked. Joshua replied: "There are workers who aren’t necessarily criminal in their behaviour, they are just casual in their attitudes. I agree that people are going to be much more serious about their job to avoid losing it; and much more anxious that the store’s performance is good. There are many retail workers that get fed up of all the coaxing they get from senior management about partnership and mentally give two fingers to it. I think they are going to feel that, the store’s profitability is important having seen so many of their colleagues in other shops lose their jobs overnight." As I added, if you walk to work through a shopping centre and not only Woolworth’s but other stores are closed and shuttered, it’s a daily reminder. <br><br>Fewer units<br><br>That said, if fewer retail units are open in a mall, that means those still open have to pay more for the same services – cleaning and patrolling – or if they pay no less, those services will have to be cut. And as Joshua said, every retailer is going to be looking at every cost, and regularly. If as they always do, glass jars break and tins fall off shelves, some shops may not get spring-cleaned or cleaned as deeply or as often. The same may be true of security; a retailer may ask its guarding contractor to reduce costs; re-negotiate a contract; or ask for fewer people on a site, or instead of having five days of cover, only having two. "You can see the impact is more likely to occur with companies supplying equipment than people." It’s one recession, he suggested, where IT may benefit, because IT is so central to what everyone does in business, people will still have to spend on it – or rather, IT. By contrast: "You can imagine a lot of people saying as far as CCTV is concerned, we will certainly continue having it maintained, but we will just carry on with the things we have got and put it off for a year this new [system] we were going to buy in 2009, " While Joshua did not have evidence for that, as he said, the things that are easiest to change are likely to be the things cut, and that means cutting or putting back contracts that have not started. <br><br>Shop theft<br><br>Is there more shop theft in a recession? Joshua began his answer by recalling the comment towards the end of 2008 that people are stealing more routine goods, rather than the exotic products. This may well be so, he admitted – people going back to using theft just as a way of acquiring goods more cheaply, rather than shoplifting to re-sell. He is however doubtful of statistics confidently reported in the mainstream media of theft from a particular retailer or the sector as a whole going up by x per cent, whereas if you look into it, a retailer has, for instance, merely said that it has detained x per cent more people – not the same thing. <br><br>At the Centre, naturally knowing what retail trends are likely to come next is important. Despite a recession – indeed, maybe because of it, online retailing is still growing. "A lot of people are going to turn to online retailing. It will be easier to do it and they will know that the price is likely to be lower." Online retailing is only 3.5 or 4 per cent of total retail, but the prospect is of a rise to 10 per cent of the total in two or three years; and to 15 or 20 per cent by 2015. Something that loss prevention and indeed all retail people will have to live with, sooner rather than later, is a change to the high street. Retailers will have to think hard about the relation between their online operation and their shops. Might a retailer get rid of shops making a loss, and push customers to the internet more; and use the remaining physical shops to market and deliver things bought online, as well as in packages in store? <br><br>Different skills<br><br>Where does the security and loss person come in? Customers will want to spend online with the names they trust – quite likely the high street name they already know, rather than an online name that could be based anywhere (or nowhere). A loss prevention or security person may well need different skills, in what Joshua calls ‘a much more software-oriented environment’. There are different issues around loss in online retailing, though he speaks of online retail losses running at two or even three times those on the physical high street. That is not such a problem for a retailer – while online shopping is such a small part of their overall business. Returns from online sales, rather than fraud and theft, is the concern. The balance between making a retail space welcoming and a place that customers want to spend money, and putting in place controls so there isn’t theft, applies online too. If a retailer uses software to makes checks on and hence slow a transaction, ‘there’s a lot of research showing people will just abandon shopping if it’s made too difficult to complete your transaction." Last but not least I asked Joshua not as a retail observer but an informed person generally: how long and bad does he think the recession will be? I gave British Retail Consortium’s figures in January, that UK retail sales values in December 2008 fell 3.3 per cent on a like-for-like basis, and 1.4pc on a total basis, from December 2007. By both measures, this was the worst December since the BRC survey began 14 years ago. Food and footwear were the only sectors to show sales up on a year ago – the latter reflecting further heavy discounting. Clothing, furniture and big-ticket homewares fell further below year-earlier levels. The first half of December was very tough for many. Christmas buying came later than usual: there were more shopping days in Christmas week this year and shoppers tended to wait for discounts and early clearance sales. Non-food non-store sales in December were 30pc higher than a year ago. This was stronger than the 9.5pc gain in November, as people were more confident about Christmas shopping online and several stores had later last order dates than last Christmas.<br><br>Out in October<br><br>Joshua suggested the BRC has been quite negative. Some others are trying to be cheery; the answer, he added, is ‘between the two as always’. "The big question is whether this is something that is going to last for another nine or ten months, and things will then start to improve; or whether we have a couple of years of this; with politicians rehearsing their sound-bites. My view is that the retail industry itself – which is a leading indicator; in other words things happen there faster than they happen elsewhere – as it was one of the first in the recession, it will be one of the first out, in October or November this year." Parts of the economy may carry on in recession until 2010. That said, just as the recession came from nowhere, so things may change rapidly for the better.<br><br>About Prof Joshua Bamfield<br><br>Although his Centre for Retail Research is best known for its annual Global Retail Theft Barometer, as the name suggests, much of its work is on general retail research and forecasts. Visit www.retailresearch.org for briefings about topics such as retail failures, RFID, and the progress of ethnic-minority retail businesses.
