The State of the Loss Prevention Industry

Shoplifters and dishonest employees continue to steal in record numbers from U.S. retailers. Our recently completed 18th Annual Retail Theft Survey, which covers 24 major retail companies, representing 13,313 stores, with retail sales exceeding $519 billion (2005), reports thieves stole over $5.8 billion from these retailers in 2005. Even though our survey participants practice true loss prevention strategies, this group of retailers still apprehended over 670,000 shoplifters and dishonest employees in 2005, and recovered more than $127 million from those apprehensions, a 17.3% increase over their 2004 recovery dollars.

The recovery dollars were amazing this year, as recoveries from both shoplifters and dishonest employees were up over 16% each from 2004 (16.85% and 17.87% respectively). The dollar recoveries (per case) are staggering as well, with an average shoplifting case value of $126.87 (up 21.5% over 2004), and an average dishonest employee case value of $724.15 (an increase of 5.72% over 2004).

Below are some of the highlights from our 18th Annual Retail Theft Survey:

• While total apprehensions of shoplifters and dishonest employees decreased slightly in 2005 by 2.4% (693,177 vs 676,451); the total dollar recoveries from those apprehensions exceeded $127 million, an increase of 17.3% over 2004.
• Only 2.7 percent of total retail theft losses resulted in a recovery. This means for every dollar recovered by our surveyed companies, another $37.05 was lost to retail theft.
• Survey participants apprehended 607,457 shoplifters in 2005, reflecting a decrease of 3.78% from the previous year.
• For the fifth straight year, the dollars recovered from those apprehended shoplifters ($77.0 million) increased. In 2005, this increase was an amazing 16.9%, over 2004's shoplifter recoveries. (The dollars recovered from shoplifters where no apprehension was made increased 14.2% in 2005; this was the ninth consecutive year of increases.)
• One in every 26.5 employees was actually apprehended for theft from their employer in 2005. (Based on over 1.8 million employees.)
• Both the number of dishonest employees apprehended (68,994) and the dollars recovered during those apprehensions ($49.9 million) increased for the 2nd straight year in 2005 (11.4% and 17.8% respectively).
• On a per case average, dishonest employees steal approximately 5.7 times the amount stolen by shoplifters ($724.15 vs $126.87).

So why did shoplifting apprehensions decrease, while recovery dollars increased in 2005? We asked the survey participants and they gave us four primary reasons:

• They are focusing more on case quality, instead of case volume/quantity.
• They focused more on organized external theft (shoplifting), rather than on individual cases.
• They had fewer loss prevention people on the floor looking for shoplifters.
• CCTV proved to be a beneficial deterrent to theft in their highest loss areas/department.

Our survey participants also provided the following reasons why they experienced a major increase in both dishonest employee apprehensions & recovery dollars in 2005.

• They had new or improved Point-of-Sale exception reporting software which helped them to more readily identify dishonest employees.
• They focused more of their LP resources on internal theft cases, rather than on shoplifting.
• Their employees and loss prevention personnel were better trained, aware and educated in theft prevention and detection.

So what do we see in the near and distant future? On the shoplifting side, without a doubt more efforts are needed on both the local and federal level for dealing with Organized Retail Theft (ORT). Although in January 2006, President Bush signed into law legislation to establish an FBI Organized Retail Theft Task Force and to create a database for organized retail theft; this is really just the first step. More retailers need to establish dedicated Tasks Forces within their own companies, focused on this growing $30 billion problem. The training of LP personnel and sales people/staff within this area is greatly needed. This is a relatively new type of thief that does not operate as a typical shoplifter.

In addition, retailers and suppliers need to work more closely together on better theft preventative fixtures, to stop the quick theft of multiple items, so product can continue to be openly displayed. The issue of source tagging (embedding the EAS tag in the actual product or packaging) needs to be continually pushed with the manufactures.

On the internal side, the first step to reducing employee theft starts at the point-of-hire; do not hire the "bad apple". The use of pre-employment screening measures (ie. criminal background checks, drug testing, honesty testing, previous employer references, etc.) seems to have leveled off over the past few years. This is an area that needs more focus/attention by many retailers, as a company is only as good as its employees. It’s better to spend the money "up front" identifying and hiring the best available candidates than to spend that money (or likely more) later on trying to get rid of a dishonest or unproductive employee. The use of Point-of-Sale exception based monitoring programs continues to grow as does the use of training and awareness programs to reduce employee theft. CCTV interface with POS exception based software should continue to grow in the coming years.

From both an external and internal theft viewpoint, the use of CCTV with remote monitoring will continue to find favor with retailers, as CCTV is great for both prevention and detection of theft.

In summary, the annual theft losses from shoplifters and dishonest employees are a much greater problem than most people realize. Those retailers and companies who continue to invest in their employees and in proactive and prevention oriented loss prevention systems will have the best chance to win the war on theft.

About the author: Mark R. Doyle is president of Jack L. Hayes International Inc., and has more than 20 years experience in the loss prevention field. He has consulted with some of the finest retail, wholesale and manufacturing companies in the world. Hayes International has been in the loss prevention/shrinkage control consulting business for over 28 years, and is recognized on an international level as one of the foremost loss prevention and inventory shrinkage control consulting firms in the world.

About the Survey:

PARTICIPANTS

• 24 Large Retail Companies
• 13,313 Stores (representing an excellent cross-section of the United States)
• $519,973,820,000 in Annual Retail Sales (2005)