Retail crime cost U.S. retailers $41.7 billion in 2011

PHILADELPHIA — Shoplifting, employee or supplier fraud, organized retail crime and administrative errors cost the retail industry $41.7 billion in the United States in 2011, representing 1.6% in sales, according to the Global Retail Theft Barometer released Tuesday by Checkpoint Systems. Of that, $18.4 billion was attributed to employee theft, $14.9 billion to shoplifters, $6.6 billion to internal error and $1.8 billion to suppliers.

Internal shrink appears to be a more significant issue — 697,000 employees were caught in 2011 after having stolen an average of $1,764.76 per incident. More shoplifters were nabbed in 2011 — 1.7 million — but the average amount stolen per incident was much lower at $373.64. However, it may be difficult to draw a hard line between internal and external thievery, the author of the report suggested, as employees may be a part of an organized retail crime group and may in fact have sought employment with the sole purpose of stealing for such a group.

Some of the highest average shrink rates were found in health and beauty. For example, shrink rates for such health-and-beauty items as mascara, eye liner and eye shadow were tabulated at 2% in North America (United States and Canada), as compared with 1.9% in the year-ago period. Shaving products were most popular among thieves, with a shrinkage rate of 3.9%, followed by perfume and fragrances (2.7%); lipsticks, glosses and lip liners (2.6%); and mascara, eye liner and eye shadow (2.3%).

"As you see from the data, the pharmacy and health-and-beauty retailers do seem to be at the forefront at this battle about retail crime," Joshua Bamfield, director of the Centre for Retail Research and author of the study, shared with Drug Store News. "The goods that health-and-beauty [retailers] sell are desirable in themselves and easy to resell, and thus [these] retailers are preyed on by criminals."

Bamfield suggested pharmacy retailers that trade on that easy-in, easy-out convenience may be more susceptible to organized retail crime. First, because that easy-in, easy-out is appealing to criminals, and second because other channels operating larger footprints may have a greater investment in combating retail crime. "In the supermarkets and department stores, there are economies of scale," he said. "You do have a lot more loss-prevention people available because of the wide range of goods sold."

“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,” Bamfield stated. “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 [United States], that figure was $435.”

The overall shrink rate was 6% higher across the United States in 2011 versus 2010, and represented the highest percentage recorded by the survey since it began in 2007. The study 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, was up 13.4% globally and was cited as the primary cause for shrink in most countries — 43.2%, or $51.5 billion, worldwide was attributed to 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.