Retailers losing billions to inventory shrink

The nation's retailers lost a staggering amount of money in 2016 due to shoplifting, organized crime, internal theft and other types of inventory shrink.



Inventory shrink totaled $48.9 billion in 2016, up from $45.2 billion the year before, as budget constraints left retail security budgets flat or declining, according to the annual National Retail Security Survey by the National Retail Federation and the University of Florida. The thefts amounted to 1.44% of sales, up from 1.38%.



According to the study, which was sponsored by The Retail Equation, 48.8% of retailers surveyed reported increases in inventory shrink, and 16.7% said it remained flat. Shoplifting and organized retail crime accounted for 36.5% of shrink, followed by employee theft/internal (30%), administrative paperwork error (21.3%) and vendor fraud or error (5.4%).



Shoplifting continued to account for the greatest losses of overall shrink. Shoplifting averaged $798.48 per incident, up from $377 in 2015. The rise was partially attributed to retailers allocating smaller budgets for loss prevention, leaving them with fewer security staff to fight theft, the report said.



The average loss due to employee theft per incident was put at $1,922.80, up from $1,233.77 in 2015. The average cost of retail robberies dropped to $5,309.72 from $8,170.17 in 2015, but remained at more than double the $2,464.50 seen in 2014.



For the first time in the survey, retailers were asked about return fraud, reporting an average loss of $1,766.27.



“Retailers are proactive in combatting criminal activity in their stores but acknowledge that they still have a lot of work left to do,” said NRF VP of loss prevention Bob Moraca. “The job is made much more difficult when loss prevention experts can’t get the money they need to beef up their staffs and resources. Retail executives need to realize that money spent on preventing losses is money that improves the bottom line.”