Shrink, comprised of shoplifting, employee or supplier fraud, and administrative errors, rose in the U.S. from 1.28 percent of sales in 2013-2014 to 1.97 percent during 2014-2015, according to responses from common retail respondents who participated in Global Retail Theft Barometer surveys both years.
Globally, this compares to 1.42 percent, a figure also up from the previous .94 percent average of all common retailers surveyed the previous year.
Retailers expressed that a range of factors, including a challenging retail environment, caused them to implement austerity measures resulting in a reduction of loss prevention investments. This, combined with areas of high unemployment and limited tools to monitor internal theft and inventory discrepancies, all contributed to an increase in their shrink.
According to the report, the annual cost of shrink to U.S. shoppers, as absorbed or passed on from retailers, averaged $615 per household.
The study, underwritten by an independent grant from Checkpoint Systems, Inc., was carried out during 2014-2015 by The Smart Cube and Ernie Deyle, a retail loss prevention analyst. It was based on in-depth phone and written survey interviews conducted in 24 countries among more than 200 retailers representing nearly $1 trillion in sales during 2014-2015.
Seasonally, U.S. respondents said that 46 percent of their yearly losses occurred in winter, nearly twice as much as the next season, autumn, at 24 percent. Spring (18 percent) and summer (12 percent) followed.
U.S. apparel specialists (2.28 percent), pharmacies/drugstores (2.25 percent) and non-grocery retailers (1.9 percent) witnessed the highest shrink rates because of the widespread prevalence of internal and external retail theft targeting their merchandise.
In fact, while shoplifting is the biggest cause of retail shrink in 18 of the 24 countries surveyed, in the U.S., employee theft ranked first at 45 percent, with shoplifting next at 36 percent. The primary reasons for employee theft were weak pre-employment screening procedures, reduced associate supervision, increasing part-time workforce (especially during peak winter periods when theft is highest), and the easy sale of stolen merchandise.
Shoplifting continues to plague the retail industry due to the escalating problem of organized retail crime, easy sales of stolen merchandise through online sites, reduced investments in loss prevention tools and resources, and the general perception of shoplifting as a “low-risk/non-offensive” crime.
Shoplifters and dishonest employees in the U.S. primarily targeted small and easy-to-conceal items such as liquor, mobile accessories, batteries, fashion accessories and razor blades, as well as high-value items with high resale value, such as tablets. When sorted by retail vertical, the most stolen items included footwear (Apparel and Fashion Accessories); batteries (DIY Home Improvement); mobile device accessories (Electronics); wines and liquor (Food and Beverage); and razor blades (Health and Beauty).
According to Deyle, “This year’s results highlight the persistent factors that impact shrink and ultimately reduce retailers’ profitability. Even if retailers are paying more attention to all aspects of the problem, without a strong investment in loss prevention tactics, tools and resources, they won’t get the results they’d expect. Our hope is that this report helps the industry better understand all the complexities of the shrink problem as well as the most cost-effective ways of addressing it.”
Per Levin, president of merchandise availability solutions, Checkpoint Systems, added, “This is our fourteenth year of supporting what continues to be the industry’s only global statistical research. To combat increased shrink, retailers are adopting strategies to approach losses from a wider perspective from all levels within the organization and work with their supplier and solutions partners. With the right technologies, people and processes, they can achieve improved merchandise availability, which directly impacts shoppers’ satisfaction and retailers’ profitability.”
During the latest reporting period, U.S. retailers that also participated in the study in 2013 reduced their overall loss prevention spend to 0.50% of sales, which contributed to the reported increase in shrink. Most common loss prevention store solutions included CCTV/DVR (83 percent), alarm monitoring (78 percent), and security guards (63 percent). Most common merchandise protection solutions deployed to prevent retail theft included electronic article surveillance (EAS) (68 percent), spider wraps/security keepers (41 percent) and advanced inventory control tactics (27 percent).