According to results compiled through the latest Global Retail Theft Barometer study, retail shrink is on the rise in the U.S., and it is costing both retail companies and retail shoppers as a result.
Retail shrink, which is comprised of shoplifting and related external crimes, employee theft or supplier fraud, and administrative errors, escalated in the U.S. from 1.28 percent of sales in 2013-2014 to 1.97 percent during 2014-2015, based upon responses from common retail respondents who participated in Global Retail Theft Barometer surveys that were conducted in both years.
Globally, this compares to 1.42 percent, a figure also found to have increased over the previous .94 percent average of all common retailers surveyed the previous year.
Retailers participating in the retail theft survey expressed that a range of factors, including a challenging retail environment, caused many retail companies to implement measures resulting in a reduction of loss prevention investments. This decline in available loss prevention resources and personnel, combined with areas of high unemployment and limited tools to monitor internal theft and inventory discrepancies, all contributed to an increase in retail shrink, according to the survey.
Additionally the report estimates that the annual cost of retail shrink to U.S. shoppers, as absorbed or passed on from retailers, averaged $615 per household.
The retail theft study, underwritten by an independent grant from Checkpoint Systems, Inc., was carried out during 2014-2015 by The Smart Cube and Ernie Deyle, a retail loss prevention analyst. Results were based upon in-depth phone and written survey interviews conducted in 24 countries. With more than 200 retailers participating in the survey, the pool of respondents represented nearly $1 trillion in sales during 2014-2015.
Seasonally, U.S. respondents indicated that 46 percent of their yearly retail shrink losses occurred during the winter season—nearly twice that of the next highest reported season, autumn, at 24 percent. Spring (18 percent) and summer (12 percent) followed.
Vertical Retail Comparisons
U.S. apparel specialists (2.28 percent), pharmacies/drugstores (2.25 percent) and non-grocery retailers (1.9 percent) experienced the highest retail shrink rates according to the survey. Respondents indicated that this was due to the widespread prevalence of internal theft and external incidents of retail theft—including shoplifting and organized retail crime incidents—targeting their merchandise.
Employee Theft vs. Shoplifting
While shoplifting was reported as the biggest cause of retail shrink in 18 of the 24 countries surveyed, in the U.S., employee theft ranked first at 45 percent, with shoplifting next at 36 percent. Participants reported that they believe the primary reasons for employee theft included weak pre-employment screening procedures, reduced associate supervision, increasing part-time workforce (especially during peak winter periods when theft is highest), and the easy sale of stolen merchandise.
Shoplifting continues to plague the retail industry due to escalating problem of organized retail crime, easy sales of stolen merchandise through online sites, reduced investments in loss prevention tools and resources, and the general perception of shoplifting as a “low-risk/non-offensive” crime.
Most Stolen Merchandise
Shoplifters and dishonest employees in the U.S. primarily targeted small and easy-to-conceal items such as liquor, mobile accessories, batteries, fashion accessories and razor blades, as well as high-value items with high resale value, such as tablets. When sorted by retail vertical, the most stolen items included footwear (Apparel and Fashion Accessories); batteries (DIY Home Improvement); mobile device accessories (Electronics); wines and liquor (Food and Beverage); and razor blades (Health and Beauty).
According to Deyle, “This year’s results highlight the persistent factors that impact retail shrink and ultimately reduce retailers’ profitability. Even if retailers are paying more attention to all aspects of the problem, without a strong investment in loss prevention tactics, tools and resources, they won’t get the results they’d expect. Our hope is that this report helps the industry better understand all the complexities of the retail shrink problem as well as the most cost-effective ways of addressing it.”
“This is our fourteenth year of supporting what continues to be the industry’s only global statistical research,” said Per Levin President of Merchandise Availability Solutions, Checkpoint Systems. “To combat increased retail shrink, retailers are adopting strategies to approach losses from a wider perspective from all levels within the organization and work with their supplier and solutions partners. With the right technologies, people and processes, they can achieve improved merchandise availability, which directly impacts shoppers’ satisfaction and retailers’ profitability.”
Loss Prevention Measures
During the latest reporting period, U.S. retailers that also participated in the study in 2013 reduced their overall loss prevention spend to 0.50% of sales, which contributed to the reported increase in retail shrink. Most common loss prevention store solutions included CCTV/DVR (83 percent), alarm monitoring (78 percent), and security guards (63 percent). Most common merchandise protection solutions deployed to prevent retail theft included electronic article surveillance (EAS) (68 percent), spider wraps/security keepers (41 percent) and advanced inventory control tactics (27 percent).
Interested parties can obtain a copy of the complete 135-page Global Retail Theft Barometer report and see a video overview of the study at http://www.GlobalRetailTheftBarometer.com. In addition, an in-depth review of the study will be available via a webinar hosted by LP Magazine on November 11th at 1 p.m. EST. To register for the webinar, click here.