SUMMARY ECR EUROPE SHRINKAGE PROJECT TEAM MEETING 26 JANUARY 2011 CARREFOUR OFFICES / BRUSSELS

SUMMARY
           ECR EUROPE SHRINKAGE PROJECT TEAM MEETING
                        26 JANUARY 2011
                  CARREFOUR OFFICES / BRUSSELS

Participants:
Adrian Beck / University of Leicester
Mark Boggis / Procter & Gamble
Paulo Borges / Checkpoint
Sean Bowen / Asda
Androulla Christaki / Tesco
John Collins / Morrison’s
Shawn Evans / Procter & Gamble
Josette Floyd / Procter & Gamble
John Fonteijn / Ahold
Jackie Foxford / Marks & Spencers
Gilbert Geudens / Carrefour Belgium
Phil Hagon / Sainsbury’s
Sharon Haynes / Procter & Gamble
Xavier Hua / ECR Europe
Karl Langhorst / Kroger
Hans Mathot / Jumbo Supermarkten
Neil Matthews / Checkpoint
Olivier Mouton / ECR Europe
Colin Peacock / Procter & Gamble
Erdem Pembecioglu / Metro Group
Katrin Recke / ECR Europe
Bryan Smith / Procter & Gamble
Ed Taylor / Kroger
Johan Verrecas / Carrefour
Wybren Vlaskamp / AS Watson

1.      Opening and welcome

Colin welcomed the team to the Carrefour offices and thanked Gilbert and
Johan for hosting the meeting. The Secretariat drew the team’s attention to
the ECR Europe anti-trust caution1, to ensure that the discussions in the
meeting do not contravene applicable anti-trust law.

1
  ECR Europe will not enter into any discussion, activity or conduct that may infringe, on its part or on
the part of its members and participants, any applicable competition laws. By way of example, members
and participants shall not discuss, communicate or exchange any commercially sensitive information,
including non-public information relating to prices, marketing and advertisement strategy, costs and
revenues, trading terms and conditions and conditions with third parties, including purchasing strategy,
terms of supply, trade programmes or distribution strategy. This applies not only to discussion in formal
meetings but also to informal discussions before, during or after meetings.

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A special welcome was extended to newcomers and guests to the team:
   Androulla Christaki from Tesco
   John Collins from Morisson’s
   Sharon Haynes, Josette Floyd, Bryan Smith and Shawn Evans from Procter
   & Gamble
   Karl Langhorst and Ed Taylor from Kroger’s – presenting at the meeting
   Olivier Mouton, new project manager of ECR Europe.

The team reviewed and agreed the summary of the September meeting and
the day’s agenda.

Katrin Recke explained the change in the ECR management structure, which
now has an independent MD and project manager in the persons of Xavier Hua
and Olivier Mouton. Olivier will take over the management of the shrinkage
team as of April 2011. The team gave Olivier a warm welcome and thanked
Katrin for her commitment to ECR and shrinkage over the last 10 years.

2.    Case study P&G – Ahold on batteries

Colin and John, project co-chairs, presented a case study on how their
companies had worked together to bring P&G batteries from behind the
counter into open sale.

Before situation: batteries sold from behind the service counter to protect
against theft; this slowed down sales, increased selling costs, but helped on
shrink.
After situation: open sale of batteries next to check-outs; sales increased by
86%; shrink increased too, leading to an 83% improvement in profits.

Remarks/considerations:
Placement at check-outs helped keep shrink under control; secondary sites
(promotions) were installed with anti-theft packaging.
Sales staff focus on shrinkage has also helped control theft.
Sometimes it can be beneficial to accept a higher level of shrink if this goes
hand in hand with an even higher level of profits. Trading partners need to
agree on the tipping point and take a total systems perspective – one of the
principles of ECR.
The anti-theft packaging used on secondary placements was not ideal from an
environmental perspective (quite large), but it gave the store managers the
confidence to put the products on promotional displays and was seemingly
effective on shrink control but ; again, the trade-off has to be agreed by
companies internally and with trading partners.
Open sale is always better for the shopper.

Presentation available from shrinkage workspace on www.ecr-all.org

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3.    Operationalising the loss prevention pyramid – interactive session

Adrian reminded team members of the objective of this 2010-2011 work item:
     Recommend best practices for each of the “blocks” composing the
     pyramid
     Deliver an assessment tool for companies to evaluate where they are on
     their journey to better loss prevention.

The group brainstormed a further three of the “blocks” of the pyramid in terms
of what good looks like, what the obstacles are and practical best practice
examples: data management, collaboration (internal & external) and
communication.

Below follows the output of the break-out sessions:

Data Management
   What data is needed to put a number on shrink:
       o inventory management data (item, daily, by store) (possible best
           practice: regular daily stock counting at Ahold 99,8% accuracy);
       o POS data, including returns, voids, staff behaviour;
       o store incident records;
       o burglar alarms & EAS alerts;
       o data on cooling & transit of products (to detect spoilage/waste);
   Shrink to be attributed to individual suppliers and managers
   Shrink to include damage, waste and non-scans
   Timely and accurate data is essential
   Access to data by right managers – focused approach, clear roles &
   responsibilities;
   KPIs around shrinkage, ideally joint if in trading partner relationship
   Data mining abilities to point to events outside the norm (exception
   reporting) and to turn this into information, intelligence and action.

Collaboration
   Alignment on KPIs, priorities & objectives (internal & external)
   One voice from head office
   Regular meetings
   Joint action plan
   Put a value on the shrink project – size of the prize
   Internal collaboration between profit protection and buyers needs to work
   before you can collaborate externally
   Openness, equal partners, open book accounting to understand costs and
   benefits, data sharing (within boundaries of applicable competition law)

Communication
  Embedding shrinkage communication into normal                 communication
  procedures
  Positive framing of the message
  Flexible approach: top-down, bottom-up, peer-to-peer

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Compelling visual image

Action: Adrian to collate findings and add them to those of last meeting. Next
meeting to address further blocks.

4.      Kroger Loss Prevention approach

Ed Taylor and Karl Langhorst presented an outline of Kroger’s approach to
shrinkage management.

Main points:
  Kroger is a US based retailer with 2500 stores across 33 states, trading
  under different store banners.
  In addition it covers convenience, jewelry, fuel stations, manufacturing
  plants.
  Sales add up to $76 billion / annum.
  Shrink management is a corporate department since 5 years; before, all
  divisions handled shrink separately.
  Learning about shrinkage was derived from deep-dives into highly affected
  product categories.
  Operational excellence in processes and execution, as well as data analysis
  helps with shrink, but there is still quite a problem with DSD deliveries.
  A way of getting manufacturers involved in the shrinkage issue was for
  Kroger to move to pay-on-scan.
  Data analysis is basis for shrink measures, not perception.
  Kroger has standardised shrink training programmes and report cards with a
  common shrinkage KPI across the company.

5.      Global Retail Theft Barometer

Paulo Borges presented the main findings of the global theft barometer 2010.

Presentation available from shrinkage workspace on www.ecr-all.org

Main points:
  Shrink represents 1.36% of retail sales globally. In Europe it’s 1.29% of
  sales.
  There has been a drop since the last survey, both globally and at European
  level.
  Hot products/stores in Europe are: apparel, convenience stores,
  hardware/DIY.
  There is a correlation between increased security spending and a reduction
  in shrinkage, or rather theft. But store audits and compliance programmes
  also contribute to that number.
  The biggest source of loss is external theft, followed by employee theft.
  Errors and supplier fraud together account for 22% of losses.

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EAS remains the most used method of anti-theft protection, but there’s
     also a stronger focus on keepers. Only 28% of items remain unprotected in
     Europe.
     Looking at 10 years of European shrinkage data, there has been a steady
     decline.

Discussion:
The team expressed concern at the fact that the title of the survey focuses on
theft, but that the questionnaire effectively deals with shrinkage in the broader
sense. This should be pointed out to the author for future releases as it skews
the results and the causes analysis.

Action: Shrinkage co-chairs to write to author of global theft barometer to
raise concern about theft versus shrinkage terminology.

6.      Visible tagging

Neil Matthews reported on the Checkpoint project on how to make source-
tagging more effective through visibility, carried out in partnership with Tesco,
Auchan, CVS and P&G. A yellow padlock mark has been designed and tested
for cosmetics and skin-care products with positive feedback by consumers.

In the meantime there has also been some offender research which confirms
that such a symbol would increase the element of doubt in a potential
offender’s mind about the presence of a tag or not; but this would only affect
opportunistic thieves, not organised crime.

As to the placement of the symbol, it could also be put on the SRP or on the
shelf-edge, not just the front-of-pack.

In any case, a symbol will always have to be accompanied by an effective EAS
system which is implemented and monitored in the most efficient way.

Further tests are currently running and Checkpoint will report back to team at
next meeting.

Presentation available from shrinkage workspace on www.ecr-all.org

7.      Other topics

The team briefly reviewed the agenda of the shrinkage seminar to be held next
day. Around 45 participants have registered.

Adrian informed the team that there would be a shrinkage break-out session at
the annual ECR Europe conference on 5-6 April this year. The following
description was currently on-line:

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Shrinkage – who really pays? Shrinkage has been seen as a retailer problem, but
growing awareness of its impact on the shopper now means manufacturers must
also think critically about it. This interactive session will provide practical insights
into effective shrinkage management through collaboration.

Action: Shrinkage team members who wish to present a collaboration case
study at the event should contact Adrian asap.

8.     Next meeting

17 May – hosted by Ahold in Zaandam (NL)

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