This year shoplifting will cost US retailers over $50.6 billion collectively with stores experiencing an average shrink rate of 1.38 per cent, according to the most recent research by the National Retail Federation.
In response over 80 per cent of retailers currently employ electronic article surveillance (EAS) in a bid to stem the loss, and many more are considering its use in the future.
If you’re among the retailers pondering the prospect of implementing EAS or upgrading your current system, here’s an insight into calculating the return on investment (ROI) of EAS.
Effective product-based security
In retail, EAS is regarded as one of the most simple and effective ways of protecting individual items against theft. The system sees antennas installed at the entryway to a store and security labels or security tags are affixed to individual merchandise.
Each tag and label houses a transmitter that remains in constant communication with the antenna. When a protected product comes into proximity of the store entryway, an alarm sounds, alerting staff to a potential theft.
The cost of EAS
Implementing EAS involves two sets of costs – initial and ongoing.
Initial costs include the purchase and installation of the antenna, along with the purchase of label deactivators and tag detachers, and sufficient security tags and labels to guard each individual product.
These costs will be impacted by factors like:
- The type of system and level of security chosen
- The size of the retail outlet being protected
- The number of entryways that require protection
- The width of the entryway and number of pedestals required
- The way the antennas are installed – via pedestal, underfloor, overhead etc
- Delivery and installation costs
- The volume of merchandise and how many labels or tags will be required
- The number of tag detachers or label deactivators required and their installation cost
Ongoing costs include:
- System maintenance
- Running costs (such as electricity consumption)
What is the lifespan of an EAS system?
Broadly speaking, a reputable EAS system has an expected lifespan of about 10-15 years. During that time it is required to reliably protect a retail outlet 24/7 with zero or minimum downtime and few if any false alarms.
Like any electronic device, you get what you pay for when you invest in EAS. While there are cheap options available, these may not represent the best value over the long term. You want your system to be reliable and stand the test of time.
Established EAS brands with a good reputation are more likely to offer value in the long-term as their reputation is built upon quality, reliability and longevity.
Meanwhile, retailers should also consider the fine print of any system, looking at factors like warranty, servicing schedules and ongoing support.
How much will EAS reduce theft?
When retailers implement an EAS system they can expect to see loss reduction of between 60 and 80 per cent.
Cost versus savings
Calculating the specific ROI of your chosen EAS system involves looking at the cost of your current stock losses due to theft and weighing them against the initial and ongoing costs of your proposed system, while factoring in depreciation over the desired term.
When considering the cost of theft, it’s important to factor in both “hard” costs and “soft” costs.
Hard costs of shoplifting
Hard costs are those that are quantifiable, such as the theft shrink rate. For example, in a store with annual sales of $1 million, a three per cent theft shrink rate would cost a retailer $30,000 per year.
Soft costs of shoplifting
Soft costs are those that are harder to ascertain, like the time it costs staff to access items that have to be locked away due to fear of theft, or the productivity cost of having staff watch the floor for theft rather than concentrating on selling.
There are also further hidden loss costs like products being out of stock due to theft, or the cost to the general ambiance of the store.
Weighing the initial and ongoing cost of an EAS system versus the current costs of shoplifting and the savings that will be achieved by implementing EAS allows you to ascertain the ROI of your EAS.
This rough calculation offers an insight into when your system is likely to pay itself off and the very real money it could save or even earn you in the long term.
The bottom line
There’s good reason EAS has attained such popularity in the retail world. For many store owners, the cost of implementing and running an EAS system is far less than the ongoing cost of theft.
Meanwhile, EAS helps ensure a retail environment remains welcoming. It is an unobtrusive and consistent loss prevention strategy that allows customer service staff to do their job, and consumers to effortlessly interact with products.