Retail theft study: Shrink on the rise globally

According to the results of the new Global Retail Theft Barometer, shrink increased by more than 6 percent in 2011, costing retailers $119 billion or 1.45 percent of sales. In North America, shrink also rose by 6 percent, costing retailers an estimated $45.3 billion.

The study, underwritten by an independent grant from Checkpoint Systems, included survey responses from 4,750 large retailers, which had combined sales of $986 billion. Among the countries covered in the survey were the U.S., China, India, France, Russia, Japan, Germany, Spain, Italy, Australia, the UK, and South Korea.

Dr. Joshua Bamfield, director of the UK-based Centre for Retail Research and author of the study, attributed the increase in shrink to several factors including a poor economy and an increase in organized retail crime.

"Obviously retailers are working hard and collaborating with one another to drive down crime, but there are pressures I think because of the economic challenges facing many individuals. I think also there are a portion of people who feel that the political system and the economic system and the bankers have let them down and the only way in which they can help themselves is to literally help themselves," Bamfield said. "For organized crime, which tends to focus on counterfeits, drugs and prostitution, retail crime is a comparatively easy crime to commit and one where there are far fewer severe penalties than if they're involved in drugs. We're seeing an increasing shift from what you might call a more dangerous type of activity to having a go at retail crime."

While customer theft, including shoplifting and organized retail crime accounted for the majority of losses in the study at 43.2 percent of total shrinkage for a cost of $51.5 billion, internal employee fraud also played a major role and was responsible for approximately 35 percent of reported shrink at a cost of $41.7 billion.

Dishonest employees also cost retailers more on average at $1,697 per incident compared to just $202 per incident for the average shoplifter.

Despite the disparity, Bamfield said that retailers, for the most part, are probably putting more resources into stopping shoplifting.

"My own feeling is that retailers probably put more resources into combating shoplifting because this is an area which does seem to need extra resources because people steal in so many different ways," he explained. "In addition, because organized retail crime tends to turn up as increased shoplifting, the only way to combat organized retail crime is obviously to take more precautions against shoplifting. It's not to say that ORC doesn't involve employee theft as well, but in some ways the impact is rather less."

Retailers in North and Latin America also saw employee theft as their greatest shrink problem, indicating that it was responsible for 44.1 percent and 42.6 percent of total shrink respectively. In Europe and the Asia-Pacific region, however, customer theft was seen as the bigger issue, with retailers reporting that it accounted for 47.7 percent and 53.3 percent respectively.

Bamfield said that cultural differences and the ability to apprehend shoplifters are factors in how these geographic regions view employee theft and shoplifting.

"It's possible that in the U.S. retailers are much more successful at apprehending fraudulent or dishonest employees. Whereas in Europe, there's been much less attention until recently on dishonest employees so they're not as good at arresting them so they may well believe that employee theft is much less than it is," Bamfield said. "In many European countries, retail is something that you need a certificate to work in. It's more a long-term career. They're more likely to be full-time and as a result, they may well have a different attitude to their employers than somebody, who say is a part-time worker in the UK or the U.S. and perhaps expects to be doing something else in six months' time or a year's time."

While shrink around the world may be on the rise, retailers have not sat idly by and watched it happen as many are implementing new policies and technologies to address the problem. According to the study, 95 percent of retailers had enhanced their employee training to help spot and deter theft and 88 percent planned to do more employee training. In addition, 55 percent of retailers have introduced new crime prevention hardware and software in the last three years, 30 percent have implemented pre-employment screenings and 34 percent hired more in-store loss prevention employees. Bamfield said that U.S. retailers are spending more than $12 billion a year on loss prevention efforts.

As in past years, shoplifters tended to focus on a wide variety of expensive, branded products such as razor blades, cosmetics, electronics, smartphones, watches, sunglasses, infant formula, and shoes among others items. Retailers, however, seem to be doing a better job of protecting these targeted items. According to the study, between 2009 and 2011, "the proportion of retail 'Top Fifty' most stolen product lines with no specific protection fell from 28 percent to 24 percent."

Bamfield said that some legislative efforts to help curb organized retail theft have managed to put a dent into the crime, but he indicated that much more still needs to be done. "Probably the whole problem will be eliminated if they get a fair number of perpetrators and give them prison sentences," he said.

Bamfield said that people also need to realize the costs of retail theft on consumers.

"The costs of retail crime are considerable. We estimated that its $446 per family in the U.S. When the ordinary family realizes how much they're paying for retail crime... then perhaps they'll get onto law enforcement and politicians to say 'why don't we do something about this?'" he said. "What is needed is a comparable response from the criminal justice system and interest in penalizing and increasing the sanctions against thieves because at the moment, often being found shoplifting is the equivalent of a bad day in the office. That's no deterrent to people stealing from shops."