Study Finds Retail Theft Cost U.S. Stores $42B Last Year

The overall reduction in shrink was attributed to an increased focus on loss prevention methods and a slightly improved economic outlook.

Shrink, comprised of shoplifting, employee or supplier fraud and administrative errors, cost the retail industry in the United States $42 billion last year and $128 billion globally, according to the latest Global Retail Theft Barometer. On average the numbers represent 1.29% of all retail sales.

Per household, retail crime across the 24 countries surveyed ranged from $74 to $541. The annual cost of shrink to U.S. shoppers, as passed on from retailers, averaged $403 per household.

The study, underwritten by an independent grant from Checkpoint Systems, was conducted earlier this year by research firm The Smart Cube and Ernie Deyle, a retail loss prevention analyst. It was based upon in-depth phone and written survey interviews conducted in 24 countries among 222 retailers representing $744 billion in sales in 2013.

According to the study, shrink is down slightly in most countries. The lowest shrink rates were recorded in Norway (.83% of retail sales), followed by Japan. The U.S. came in at 1.48% of retail sales, down slightly from 1.50%. The highest rates were recorded in Mexico (1.70%) and China (1.53%). The overall reduction in shrink was attributed to an increased focus on loss prevention methods and a slightly improved economic outlook, particularly in North America. In addition, there was increased loss prevention spending in countries with the best shrink improvements.

While shoplifting is the biggest cause of all retail shrink in 16 of the 24 countries surveyed, in the U.S. employee theft ranked first at 42.9%, with shoplifting next at 37.4%.

Even as the U.S. shrink rate lowered slightly, the cost of retail crime (supplier fraud, employee theft, shoplifting, loss prevention spend) as a percentage of revenue, rose 27% to 1.74% last year (from 1.37% in 2012). That increase is primarily attributed to a surge in shoplifting and dishonest employee theft incidences in the country, along with lower loss prevention spending by U.S. retailers.

U.S. discounters (2.78%), pharmacies/drugstores (2.16%) and supermarkets/grocery retailers (1.38%) witnessed the highest shrink rates because of the widespread prevalence of organized retail crime and lower loss prevention spending for some of them, according to the study. Almost all types of retail stores in the U.S. were affected by dishonest employee theft and shoplifting.

Shoplifters and dishonest employees in the U.S. primarily targeted products that were easy to conceal and resell in the market, including fashion and mobile phone accessories. Other frequently pilfered products include power tools, wines and make-up products.

The use of source tagging RF labels prior to arriving at retailers has increased globally and continues to build momentum according to respondents, while 50% of U.S. retailers plan to increase or maintain the number of source tagged SKUs.

The report provides detailed descriptions of the sources of shrink and helps retailers understand the most cost-effective ways of addressing their problems, according to a statement released by The Smart Cube. A number of best practices emerged from our research, including appropriate spending ranges to address the issue.

“We are pleased to support this global statistical research for the thirteenth year,” says Per Levin, president and chief sales officer shrink management & merchandise visibility solutions, Checkpoint Systems. “Our hope is that retailers can learn more about the causes of shrink and work with their suppliers and solutions partners to create joint programs to reduce shrink and associated costs.”

Read the report.

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Tagged with: Loss Prevention

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