The word is out; shrink is down to an all time low of $34.6 Billion. Credit it to good policy, strong operations and an investment by senior management in an ‘asset protection culture’. However, as LP professionals we know we still have to hold the line on loss and profitability within our own organization – but if you are in the same boat as the majority of respondents to the 2011 National Retail Survey, you might be wondering where you should be focusing your time to get the most ROI from your contribution.
What is the biggest threat to an organization in today’s competitive retail market? Ask a retail investor, such as Bain, GE, Black Rock, and they will likely tell you that loss of brand identity will kill sales and erode profitability quicker than an LP Executive can say W-Z, PTZ or ORC. When a retailer loses brand identity and profitability erodes – it is the CEO and the executive sales organization that get tossed out just before the ship hits the rocks and everybody goes down. It is a story we’ve heard hundreds of times – a great LP program, but senior sales executives couldn’t get the job done – right?
What are the brand threats to your business? As a loss prevention professional can you play a measurable role in reducing the threat? I would suggest, based on the sheer size of the problem and the nature of today’s retailer, that counterfeiting is a high risk area that needs LP focus. The sheer size of the problem is staggering – and it is estimated that the problem is growing exponentially.
In NYC alone there are $23 billion dollars of counterfeit watches, hand bags and DVDs sold every year. Within the United States the value of counterfeit merchandise is estimated at $225 Billion dollars. It almost makes the $34 billion dollar shrink problem look quaint.
Counterfeiting is the practice of manufacturing goods, often of inferior quality, and selling them under a brand name without the brand owner’s authorization. Many well-known brands are victims of counterfeiting. Counterfeits can be found in street vendor stalls as well as legitimate-looking stores. Many stores selling counterfeits have become well organized and established so as to imitate a store selling legitimate products. Counterfeit merchandise is now often sold online creating more opportunities to dupe consumers into thinking they are buying genuine goods at discounted prices.
Counterfeiting damages brand owners’ reputations and lowers consumer confidence in the affected brands. Counterfeiting also damages brand owners and retailers selling legitimate products by causing missed sales opportunities and actual job losses by manufacturers and retailers.
What actions can be taken by LP Professionals? I read some years ago that Oakley had a team parked inIndonesiaor some such place busting counterfeiters. And yes, they were also getting shot at – so that might not be the best plan for most of us.
Unfortunately there probably isn’t one right answer to fit all situations. But if I had to guess, if you are an LP Professional working for a Brand-Centric retailer, it is an answer worth looking for.
Written by John Fice, CFI - COO of LP Innovations
Does your team handle counterfeiting as a role within your LP department?
What are some of the initiatives you find successful to prevent counterfiet merchandise with your brand?