Shoplifting Costing Companies $119 Billion

According to the Global Retail Theft Barometer, the global shrink rate is 6.6% higher than the previous year, and represents the highest percentage recorded by the survey since it began in 2007. Shoplifting, employee or supplier fraud, organized retail crime and administrative errors cost the retail industry $119 billion in 2011 or 1.45% of sales.

The study underwritten by an independent grant from Checkpoint Systems, Inc. monitored the cost of shrink (loss from shoplifting, employee theft and administrative errors) in the global retail industry between July 2010 and June 2011. It found that shrink increased in all regions surveyed. Customer theft, including shoplifting and organized retail crime, up 13.4%, was the primary cause in most countries costing retailers $51.5 billion or 43.2% of shrink.

Dishonest employees were responsible for $41.65 billion or 35% of shrink. Unlike in Europe and Asia, employee theft in North America and Latin America surpassed shoplifting, and was responsible for 44.1% of shrink in North America and 42.6% in Latin America. In addition, the average amount admitted stolen by employees was more than eight times the average stolen by shoplifters.

“Although there are commentators who view retail crime as a harmless or intriguing social phenomenon or simply as a cost of doing business, this ignores the impact of criminal gangs, growing levels of violence against employees and customers, and the links between retail crime and drugs, fraud and extortion,” said Professor Joshua Bamfield, Director of the Centre for Retail Research and author of the study. “Moreover, retail crime on average cost families in the 43 countries surveyed an extra $200 on their shopping bill, up from $186 last year. In the U.S., that figure was $435.”

Correlation Between Security Spending and Theft
The 2011 study also found that while retailers increased their spending on loss prevention and security by 5.6% over 2010 to $28.3 billion globally, loss prevention equipment’s share of total loss prevention expenditures actually declined slightly. This may be why fewer thieves were apprehended globally. The region with the sharpest decline in loss prevention equipment’s share of expenditures was Europe, down 6.25%. Notably, shrink in Europe increased 7.8%, topping the global average.

“Of the top 50 global retailers who responded to the survey, the ones which reported a decline in shrink from the previous year did not construe loss prevention merely as a matter of theft, but worked across their operations to systematically combat shoplifting, employee theft, vendor loss and administrative errors. Ninety-six percent of these retailers’ stores used audit programmes to monitor the use of loss prevention policies and above all, the retailers increased their loss prevention spending almost twice as much as the global average,” added Professor Bamfield.

Global Retail Shrink Rates
The countries suffering the highest rate of shrink included India (2.38% of retail sales), Russia (1.74%) and Morocco (1.72%). The lowest rates of shrink were found in Taiwan (0.91%), Hong Kong SAR (0.95%), and Japan and Austria (both 1.04%). The US rate was 1.59%.

Shrink by Vertical Markets
Shrink varies according to business type, vertical market and country. In 2011, some of the highest average shrink rates were found in apparel/clothing and fashion/accessories (1.87%) followed by cosmetics/perfume/health & beauty/pharmacy (1.79%). Among the highest shrink items was cheese (3.09%). Shrink for health and beauty items such as mascara, eye liner and eye shadow increased globally by 30% to 2.14% and outerwear shrink increased by 15.3% to 2.94%. Meanwhile, footwear shrink increased by 1% to 0.99%.

“As global economic growth stalled in the past year, retailers did not increase capital equipment expenditures at the same rate as the rest of their loss prevention expenditures,” said Farrokh Abadi, President Shrink Management Solutions, Checkpoint Systems. “The result, unfortunately, may be seen in higher shrink numbers. As illustrated by Professor Bamfield, the retailers who most successfully combated shrink last year invested judiciously in comprehensive loss prevention solutions.”