Retail Loss Prevention Systems in Canada

A Hot Tip about Retail Trade and Electronic Commerce in Canada

Posted on: 21 Dec 2009


Managing inventory shrinkage has become a top priority to Canadian retailers, and consequently there is increasing demand for advanced solutions designed to reduce inventory losses. Industry sources report that shoplifting and employee theft accounts for $10 million daily in merchandise losses amounting to more than $3.5 billion annually.


The total market demand in Canada for retail loss prevention systems is estimated at $13.2 billion for 2008, with a growth rate of 2-3 percent predicted for 2009. Imports will fulfill seventy-nine percent of this demand, amounting to $10.4 billion going to foreign businesses. U.S. suppliers expect to supply approximately $3.7 billion or thirty-five percent of these imports.


Over the years, point-of-sale (POS) exception reporting software has gained popularity in Canada. This software helps retailers quickly and efficiently identify employee theft. Use of POS exception based monitoring programs continues to grow, as does the integration of Closed Circuit Television (CCTV) with these types of programs. Additional opportunities exist for American exporters in Electronic Article Surveillance (EAS) tags, as many Canadian retailers have yet to employ them as a part of their inventory system. The most significant obstacle for these hi-tech products is their expense, which is prohibitive to many small and medium sized retailers. U.S. suppliers who develop more affordable products that all retailers can incorporate into their security plans will be able to seize significant market advantage.


The distribution of retail loss prevention systems occurs via relatively short marketing channels. In some cases products move directly from manufacturer to end-user. Canadian companies, however, prefer vendors with a local presence either directly or through a partner. Therefore, U.S. businesses will generally find it much easier to export their products by dealing with well-established Canadian distributors and agents who can provide local representation.


Market Demand

Canadian retailers’ primary concern in loss prevention is inventory shrinkage through employee theft, shoplifting, administrative and paperwork errors, as well as vendor errors or issues.


The average retail loss in Canada is approximately two percent of sales annually with some retailers reporting losses as high as ten percent. Recent studies demonstrate that retail loss prevention systems have lowered shrinkage by as much as one percent of annual sales. Consequently, many Canadian retailers are considering improving their current security management plans. Canadian retailers are looking for system innovations that will save time and money and be readily implemented into their current protection strategies.


In addition to shoplifting, the Canadian retail market also suffers from a higher degree of sophistication in organized crime. As a result, Canadian retailers are constantly looking to upgrade or replace their existing retail loss prevention systems with superior models. Retailers often turn to U.S. manufacturers because U.S. suppliers have a reputation for effective and up-to-date technologies to minimize retail loss. U.S. suppliers provide a wide range of hi-tech devices that can record and prevent internal commercial theft, such as innovative EAS systems, source tagging and advanced surveillance systems.


Retail loss is clearly a growing problem in Canada. Between 2006 and 2007, Canadian retail loss rose more than four percent as opposed to only two percent in the United States.


The most-stolen retail merchandise, from most common to least common, are:

1. Cosmetics and Skincare

2. Women’s Wear and Ladies' Apparel

3. Perfumes and Fine Fragrances

4. Alcoholic Beverages

5. Designer Apparel


Other commonly stolen products include razor blades, DVDs/CDs, video games and video consoles, small electric items, and fashion accessories. Statistically, the 12 to 17 age group includes the most active shoplifters in relationship to its size. The 18 to 29 age group come in second and are responsible for theft that is more sophisticated.


Small, expensive items stored in glass cases such as jewelry, electronics and designer wear, are more often stolen by employees, while the storeroom is another high concern area for employee theft. U.S. suppliers providing security solutions should include options like surveillance cameras and access control that allow the employers to monitor their workers.


The types of security measures utilized by retailers, both big and small, is also growing in diversity as technological options have become a cost-effective measure to monitoring retail losses not only related to criminal activity but also for monitoring internal theft and employee security. Today, retail managers incorporate the presence of video surveillance and alarm systems to complement store security and loss prevention measures. Combining video surveillance with loss prevention software has proven to be an effective security measure that results in millions of dollars in savings to retailers by catching thieves and providing evidence, as well as enabling authorities to investigate as many as ten times more cases.


Radio-frequency identification (RFID) is a prime example of the digital technology utilized by many Canadian retailers. One specific area of effectively used RFID in retail is EAS. While the retail market has been using EAS for some time, it is primarily only for higher priced items, like clothing or electronics. It is common to see EAS used in large retail facilities such as clothing and toy stores and to a lesser extent in drug and convenience stores. Recent studies indicate that only a small number of Canadian retailers use this technology due to the high operating costs.


By Connie Irrera

Read the full market research report

Posted: 21 December 2009

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