Retail Losses Hit $41.6B in 2006

Retailers will find little to cheer about in two recent crime surveys by the National Retail Federation (NRF). One finds that organized crime is on the rise, while the other finds that dollar losses from theft and fraud have reached an all-time high.

More than three-quarters of retailers (78%) said their company has been a victim of organized crime within the past year, according to the NRF’s third annual Organized Retail Crime survey. And 71% of retailers noticed an uptick in the same during the past 12 months, up dramatically from 48% in 2006.

Organized retail crime rings steal merchandise from stores and then typically sell the goods at flea markets or through online auction sites. According to the survey, 61% of retailers have identified or recovered merchandise from a fence location, up from 59% last year.

In April, NRF, in conjunction with the FBI and the Retail Industry Leaders Association (RILA), announced the creation of the Law Enforcement Retail Partnership Network, a national database to help retailers track and identify organized retail theft via a secure Web portal. Members include Wal-Mart Stores, Safeway, Sears Holdings Corp., Macy’s, J.C. Penney and the Walgreen Co.

A separate study, the National Retail Security Survey, conducted annually by the NRF and the University of Florida, found that retail shrinkage as a percentage of sales averaged 1.61% in 2006, nearly unchanged from 1.60% in 2005. Despite significant investments by retailers in new loss-prevention programs and technology, total retail losses increased to $41.6 billion in 2006, from $37.5 billion in 2005, as overall sales rose.

According to the survey, employee theft accounted for most (47%) of retail shrinkage last year, followed by shoplifting (32%). Other losses, including administrative errors, made up the remainder.

As to the weapons used to combat theft, the survey finds most retailers’ loss-prevention arsenal includes burglar alarms (95.7%), visible closed-circuit TVs (87.1%) and digital video (84.9%). Check screening, armored cars and point-of-sale data-mining software are also prevalent.