Study: Major Retailers Misperceive Shrink

No standard for shrink measurement in LP, belief that problem is worse for competition


CAMBRIDGE, Mass. -- Most major retailers perceive wrongly that shrink is a bigger problem for their competitors than for their own organizations, according to a new research report by the Loss Prevention Research Council sponsored by IntelliVid.

According to the study of more than 100 major US retailers, only 10 percent characterized their shrink as high compared to their competitors, while 65.5 percent said it was average. Twenty-four and half percent said their annual shrinkage was lower than average. One reason for this misperception may be there is no agreed-upon shrink measurement method, according to the survey. While 42.9 percent of respondents said their companies measure shrink “at cost,” some 57.1 percent reported their companies measure shrink “at retail price.” The differences exist within and between retail segments.

According to Dr. Read Hayes, director of the Loss Prevention Research Council, “Our research indicates retailers often believe shrink isn’t a serious problem for them. But, it’s a major issue that retailers measure their shrink differently. They use so many different minute calculations regarding product pricing and distribution center levels. And if you compare apples to oranges, you are likely to obtain illogical results. That’s why our research team strongly encourages retailers to standardize how they really measure shrink, preferably using the retail method.”

In addition, the report found 86 percent of study respondents said they spend the most or second-most time working on loss problems related to internal product theft. Some 62 percent said they spend the most or second-most time working on loss problems related to internal cash theft. And 32 percent said that they spend the most or second-most time working on external theft, including organized retail crime.

“The study points to the fact that anti-shrink solution providers should continue to help retailers address external shrink threats such as organized retail crime, while assisting them in using technology to combat internal sources,” said Patrick Sobalvarro, president and CEO of IntelliVid. IntelliVid is a leading provider of intelligent video analysis software for retail loss prevention. “Other studies confirm the extent of the internal theft problem, and in this regard, retailers are correctly applying resources toward internal product theft.”

In addition to these findings, the 20-question study also looked at other issues, including the use of loss prevention technologies. While all respondents said their organizations have digital recording systems, just over one-fifth (21.4 percent) of these respondents say in-store personnel monitor CCTV cameras continuously. More than one-fifth (21.4 percent) of those with CCTV systems say in-store personnel rarely monitor cameras. Importantly, almost two-thirds (65.5%) of respondents think implementing new technology is very important for their companies’ loss prevention endeavors.

The loss prevention survey targeted a sample of 107 major US retailers selected from mass merchants, department stores, pharmacy/drug stores, apparel, grocery and specialty stores (books, auto parts, home technology, and others). The project was conducted by the Loss Prevention Research Council under the direction of Dr. Michael J. Scicchitano, Dr. Tracy L. Johns and Dr. Read Hayes, all researchers associated with the University of Florida.

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