in LPRC Reports

Cost Justifying EAS in Supermarkets DiLonardo 2001

Independent Studies Cost Justify EAS in Supermarkets
By Robert L. DiLonardo
 2001 Robert L. DiLonardo
PriceWaterhouseCoopers (PWC), the widely respected international consulting
firm, has validated the retail industry’s cost justification methods for electronic article
surveillance (EAS) in two comprehensive statistical studies conducted during 2000 for
one of the nation’s largest supermarket chains. The common scope of the studies was to
“determine the impact of EAS on reducing in-store shrink” (inventory shortage), and to
“develop a calculation to predict a return on investment (ROI) for a fully compliant EAS
program”. One study measured performance in locations protected by Sensormatic
Electronics Corp., while the other measured performance in stores protected by
Checkpoint Systems, Inc. The primary finding is that the retailer:
– Acknowledges the value of a properly managed EAS program
– Realizes significantly reduced overall-all store inventory shortage, and
– Will earn an acceptable return on an investment in EAS.
Concurrently, Arthur Anderson (AA), another prominent consulting firm,
engaged in an assessment of EAS’s impact upon the same supermarket retailer’s day-today
operations. Using on-site observations, equipment testing, and employee and
customer interviews, the AA consultants found that EAS “will provide benefits toward
effectively fighting shoplifting related shrink while increasing the quality of shopping
experienced by the customer”. Of note is the finding that decreased theft leads to fewer
out-of-stock conditions and more open merchandising opportunities – resulting in
increased sales and improved customer service.
The results of these studies demonstrate that properly organized and managed
EAS programs yield significant, cost justified economic returns. This important work,
added to the body of available research, should have a major impact on the proliferation
of EAS within the supermarket industry.