Food Retailers Making a Dent in Shrink Rate

Food retailers used technology, surveillance, hotlines, and other tactics to decrease losses from theft and other forms of shrink to 1.69 percent of sales in 2005, down from 2 percent the previous year, according to the Food Marketing Institute's Supermarket Security and Loss Prevention 2006 report.

Shrink among the top performers was a median of 0.67 percent of sales in 2005, the report found. The most common methods to prevent theft in 2005 included:

*Closed-circuit television (CCTV), used by 97 percent of the retailers surveyed.

*Monitoring point-of-sale transactions, used by 76 percent.

*Employee hotlines, used by 70 percent.

*Biometric readers used in store check cashing, door entry, time clocks, and customer payments, employed by 23 percent.

"Retailers who reduce shrink are the most vigilant and foster a culture of low tolerance," observes FMI s.v.p. Michael Sansolo. "They detect more theft, worthless checks, counterfeit money, and fraud, yet the impact on their bottom line is lower because they recover more losses and prevent more crime."

Employee theft, shoplifting, and organized retail crime (ORC) ranked as the top three most serious causes of losses. ORC in particular is a growing problem, notes FMI. Over 60 percent of the retailers surveyed reported an increase in this method. Many large retailers have loss prevention units focusing exclusively on organized retail crime.

Nearly 40 percent of all shrink was attributed to stealing by store employees in 2005, averaging 4.3 cases per store -- a figure that has remained stable over the past five years. Losses from employee theft averaged $467 per store and $235 per incident. The cash register and service departments continue to be the most vulnerable, accounting for 62 percent of employee theft.

Retailers apprehended nearly one shoplifter per company per day in 2005, averaging 16 per store and $29.62 per incident. The most frequently stolen items were meat, over-the-counter medicines, health and beauty care products, razor blades, and baby formula.

Robberies and bad checks remain a costly problem for retailers as well. Six in 10 companies reported at least one robbery, costing retailers an average of $3,543 per incident. Supermarkets accepted more than a half-million worthless checks, resulting in a median loss of $57,567 per company in 2005.

A new form of fraud has surfaced as gift cards have grown in popularity. Criminals tamper with bar codes to increase the value on stolen cards and buy gift cards with worthless checks or stolen credit cards, effectively laundering them. Two-thirds of retailers selling gift cards experienced some form of tampering, fraud, or theft.

The report, sponsored by Checkpoint Systems, Inc., is available on the trade group's Web site.


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