2015 NRSS Executive Summary

For over twenty years the industry has recognized and used the National Retail Security Survey (NRSS) as a key benchmark for retail loss prevention. This retail security research project studies numerous elements of workplace-related criminality, along with identifying successful security counter-measures to protect people, assets, and brands in the retail industry. Now in its twenty-fourth year, the NRSS is a nationwide annual study comprising the most recent empirical data on retail loss prevention. The University of Florida and National Retail Federation have partnered for over a decade to conduct this industry-standard research, which covers retail protection issues across inventory shrinkage, employee integrity screening, awareness programs, external retail crime, and more.

Methodology
The 2015 NRSS was conducted online from March 24 to April 30, 2015. Retail loss prevention executives were sent an email invitation with a link to the survey, so they could participate anonymously. A total of 100 retail chains participated in the 2015 survey, although not all companies answered all questions. In our analysis of the data for each question, we removed select instances of extreme outliers that might have distorted the overall results. Here is the profile of retailers that participated in the study:

. Auto parts, tires, and accessories—1%

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. Books, magazines, and music—1%

. Cards, gifts, floral, and novelties—1%

. Consumer electronics, computers, and appliances—2%

. Convenience store or truck stop—1%

. Crafts and hobbies—2%

. Department store—11%

. Discount, mass merchandise, or supercenter—7%

. Drug store or pharmacy—3%

. Furniture—3%

. Grocery and supermarkets—9%

. Home improvement, building, hardware, lumber, and garden supply—4%

. Household furnishings and housewares—2%

. Jewelry and watches—3%

. Liquor, wine, beer, or tobacco products—2%

. Optical goods and services—1%

. Pets and animal supplies—1%

. Shoes and footwear—4%

. Specialty children’s apparel—3%

. Specialty women’s apparel—4%

. Specialty men’s and women’s apparel—13%

. Sporting goods and recreational products—9%

. Toys—2%

. Warehouse club—1%

. Other (including music, restaurant, garden, theme park)—10%

Key Findings
Retailers surveyed reported an average shrinkage of 1.38 percent at retail in 2014. This is the lowest shrinkage percentage level observed in the history of the NRSS. This continues the declining trend in shrinkage percentages observed over the past few studies. Out of total retail sales of $3.19 trillion in 2014, inventory shrink represented $44.02 billion in lost sales. There is no other property crime that costs the American economy more than these non-violent offenses occurring in the retail store.

Grocery stores and supermarkets surveyed reported the highest average shrinkage calculated at retail across the four categories for which we were able to segment results—3.23 percent (median of 2.71%). By contrast, men’s and women’s specialty apparel retailers and department stores surveyed experienced shrinkage of 1.22 percent, while sporting goods and recreational products retailers reported somewhat lower shrinkage at 1.17 percent.

Retailers who operate between 1,001 and 2,000 stores reported an average 1.72 percent (median of 1.22%) shrinkage, whereas for retailers surveyed at the far end of the spectrum (2,000 stores or more) the average shrinkage was 1.23 percent. Average shrinkage rates decreased or remained flat for more than six out of ten retailers. Overall, almost two-thirds of retailers surveyed noted that their shrinkage rates in 2014 either decreased (42.2%) or remained flat (20.5%), reflecting success in implementing anti-theft measures, training, and internal processes to reduce shrinkage and its impact to the bottom line.

Men’s and women’s specialty apparel retailers and department store results were largely in line with retailers overall. However, five out of the seven sporting goods retailers who reported on shrink trends—as well as four out of six grocery stores and supermarkets—noted more of an increase in shrinkage. Among companies operating over 2,000 stores, six out of nine saw a decrease in their shrinkage rate in 2014.

In the past retail LP departments have been expected to “do more with less” as budgets decline. In this study loss prevention budgets for 2014 averaged less than 1 percent of total 2014 sales. The good news is that over one-third (39.4%) of retailers surveyed reported that their loss prevention budget in 2015 is increasing over 2014 levels. Finally, the budget decline is being reversed. We also asked about the size of the LP team. Company-wide loss prevention programs in 2014 averaged 246 team members, with a median size of twenty-two. Grocery stores and supermarkets surveyed averaged 162 team members, whereas department stores averaged 632 staff members.

Loss prevention management staff is continuing to diversify by gender and ethnicity. Across retailers surveyed, an average of 23.1 percent of LP manager-level or higher staff are women. Moreover, almost one in ten LP management level staff is Latino, 7.7 percent is African-American, and 2.6 percent is of Asian-Pacific ethnicity.

The survey examined the means by which retailers screen employee applicants. Criminal conviction checks, multiple interviews, and verification of past employment history are the three most common screening techniques reported. After hiring their sales associates, retailers use numerous means to develop employee awareness about loss prevention. The most prevalent across retailers surveyed are anonymous telephone hotlines, discussing the topic during new hire orientation, codes of conduct, posted notices, and training videos were reported in use by at least 70 percent of retailers.

Questions were also asked about the security techniques to protect merchandise and apprehend shoplifters and employee thieves. Burglar alarms, digital video recorders, and armored car deposit pickups are loss prevention systems used almost universally by the retailers surveyed. The most commonly used other techniques were CCTV interfaced technologies wherein camera images are being used to detect theft, often in real time due to IP linkages to sophisticated software.

Three-quarters (75.3%) also used live customer-visible closed circuit TV (CCTV), and almost as many used point-of-sale (POS) data mining (69.9%). Not surprisingly, retailers in different categories are more likely to use some systems than others, such as acousto-magnetic, electronic security tags. All of the retailers surveyed in the men’s and women’s specialty apparel and sporting goods categories use this system, while just one-third (two out of six) of department stores surveyed have implemented them.

POS data mining was reported to be quite commonly used. All grocery stores and supermarkets surveyed use this tactic (six out of six), as do all sporting goods stores surveyed (five out of five). By contrast, just two-thirds (four out of six) of department stores surveyed and half of men’s and women’s specialty apparel retailers use POS data mining.

When dishonest employees are detected they were most likely to result in apprehensions, terminations, prosecutions, and civil demands. Prosecutions did not match the number the apprehensions. As such the most common responses to employee theft were terminations and use of civil demand. Retailers surveyed reported that dishonest employee incidents cost retailers on average $1,547.

In 2014 shoplifting incidents were most likely to result in apprehension and—to somewhat lesser degree—prosecution. As expected, just one-third of retailers surveyed allow non-loss prevention staff to make shoplifting apprehensions, but several noted that only trained LP staff were authorized to do so. Across all retailers surveyed, the average dollar loss per shoplifting incident in 2014 was $318.

Both internal and external theft are leading sources of inventory shrinkage, each accounting for approximately one-third of inventory shrinkage among retailers surveyed in 2014. This year also marks the first time in this study that retailers estimate that shoplifting accounts for more inventory shrink than employee theft. The averages vary somewhat between categories.

Traditional crimes were also tabulated. For example, the number of robberies that retailers experienced in 2014 per $1 billion sales was 3.2. Across all retailers surveyed, companies reported an average loss of $2,465 per robbery in 2014. This figure was slightly higher among specialty men’s and women’s apparel retailers, who noted an average loss of $2,651 per robbery.

The Full Report
These findings are just a sampling of the results contained in the 2015 National Retail Security Survey. I encourage all to read the full report. We have streamlined the study to produce a more user-friendly survey results report that includes updated charts and a summary of key findings. If you are interested in reading the full report, please log onto NRF.com, and after signing in, you can download a copy.

The 2015 NRSS is the result of a new strategic alliance jointly conducted by me, the University of Florida, and the National Retail Federation. I want to thank all the companies who participated in this research. I also wish to express my personal thanks to our study sponsor, The Retail Equation, for underwriting the 2015 NRSS and to LP Magazine for their ongoing support.

Your participation as a retailer is vital and directly builds the value for both you and the retail industry to understand the current landscape of retail loss prevention. The NRSS study is an invaluable tool for the retail and solution provider communities, our law enforcement partners, as well as for legislative efforts that impact retail crime and media awareness campaigns. Please feel free to contact Bob Moraca at moracar (at) nrf (dot) com or me at rhollin (at) ufl (dot) edu if you have any questions or feedback about this study.

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