Study: Shrink costs U.S. retailers $42 billion; employee theft tops shoplifting

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Study: Shrink costs U.S. retailers $42 billion; employee theft tops shoplifting

By Marianne Wilson - 11/06/2014

Thorofare, N.J. --Shrink—including shoplifting, employee or supplier fraud and administrative errors—cost the global retail industry more than $128 billion last year, with $42 billion lost in the United States alone, according to the latest Global Retail Theft Barometer study. This represents 1.29% of retail sales, on average.

In other top line U.S. findings, employee theft outranked shoplifting as the biggest source of shrink, and fashion and mobile phone accessories, power tools, wines and make-up products ranked among the most stolen merchandise in the United States.

The study, underwritten by Checkpoint Systems, was carried out in 2014 by The Smart Cube and Ernie Deyle, a retail loss prevention analyst. It was conducted in 24 countries among 222 retailers representing $744 billion in sales in 2013.

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

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.

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 United States 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.

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. 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.

In other survey findings:

In the United States, discounters (2.78% ), drug stores (2.16%) and grocery retailers (1.38%) had 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 United States were affected by dishonest employee theft and shoplifting.

• Shoplifters and dishonest employees in the United States 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 survey respondents, while 50% of U.S. retailers plan to increase or maintain the number of source tagged SKUs.

“We are pleased to support this global statistical research for the thirteenth year,” said 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.”

Click here to obtain a copy of the latest Global Retail Theft Barometer report and see a video overview of the study.

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