I am back in the saddle again after undergoing hip replacement surgery this past summer. That is why you did not see me at the National Retail Federation LP conference in San Diego in June, when I usually report preliminary shrinkage statistics. It is also the primary reason that the 2012 National Retail Security Survey (NRSS) Final Report is not yet published.
As those of you who have gone through orthopedic surgery know, it is not an immediate recovery process. It set me back in my work schedule, and as a result, delayed both the data collection and analysis phases of the NRSS. Nevertheless, I am now walking, riding my bike, climbing stairs, fishing in my boat—all without pain for the first time in many years. My new titanium left hip is performing better than I ever expected. I know that this column is about loss prevention research, not orthopedic health issues, but I wanted to explain why you haven’t yet seen the 2012 NRSS results before now.
The most important number that is annually produced by the NRSS is the industry-wide average shrinkage percentage. The overall average during the 2012 fiscal year was 1.47 percent.
As of this writing, the Final Report is not quite ready to print, but I have some preliminary numbers to share. However, I must inform you that my hip surgery is not the only reason that the Final Report is late. The other reason is due to a less than robust response level among senior LP executives who were asked to complete the questionnaire. I wanted to wait until we received at least 100 responses from major U.S. retail firms to make sure that this year’s shrinkage statistics were as stable and reliable as possible. One could argue that I waited too long, but without enough respondents, shrinkage numbers become unreliable and could lead to questionable results and invalid conclusions. Unfortunately, after receiving 94 questionnaires, I decided that waiting any longer would not yield more responding retail firms.
The most important number that is annually produced by the NRSS is the industry-wide average shrinkage percentage. Based on the 91 valid shrinkage percentages reported, the overall average during the 2012 fiscal year was 1.47 percent. This number is slightly higher than the all-time lowest shrinkage percentage of 1.42 percent reported last year. It is hard to tell at this time if this will become a long-term trend, but it would appear that retail shrinkage is beginning to increase slightly. More specifics by vertical markets will be presented in the Final Report.
We have also calculated the sources of shrinkage loss. As has been the case for two decades, senior LP executives believe that the largest proportion of retail shrinkage is attributable to employee theft—this year 40.9 percent. The second largest loss source was believed due to shoplifting and organized retail crime (ORC) at 33.1 percent. Administrative and paperwork errors accounted for 15.3 percent. Vendor frauds were estimated at 5.96 percent. Lastly, 7.48 percent of shrinkage is attributed to “unknown” sources of loss.
The unknown category is now included in the survey to allow some respondents to indicate that they really do not know exactly where their losses are coming from given a weak audit trail. Incidentally, we recognize that the percentages of loss source figures exceed 102 percent. This is due to the way in which the question is asked, which does not force each respondent to make their responses total 100 percent.
Final Report Release
I know that this is just a quick and very incomplete overview of the 2012 NRSS findings, but given the lateness of the Final Report, I felt that I owe the readers of this column whatever statistics that we now can release. Moreover, it is appropriate that these preliminary results are first published in LP Magazine, since this publication and fellow bionic hipster and magazine executive editor, Jim Lee, have long been a supporter of this important research project for the retail loss prevention community.
The 2012 Final Report will be available online very shortly and will be announced via the magazine’s weekly e-newsletter, LP Insider. Finally, I want to thank all of you who sent cards, gifts, and best wishes during my surgical recovery. Your expression of concern was very much appreciated by me and my family.