The State of the Loss Prevention Industry: 2007 Update

We recently completed our 19th Annual Retail Theft Survey, and for just the second time in the past 9 years, the participating retailers reported both the apprehensions and recovery dollars from shoplifters and dishonest employees increased in 2006. Shoplifting apprehensions and recovery dollars were up an amazing 11.2 percent and 13.9 percent respectively, while employee theft apprehensions increased almost 7 percent and their recovery dollars were up over 16 percent. The losses are simply staggering!

The 19th Annual Retail Theft Survey covers 23 major retail companies, representing 14,118 stores, with retail sales exceeding $537 billion (2006), and reports thieves stole over $6.0 billion from these retailers in 2006. It should be noted that the survey participants are large retail companies who practice true loss prevention strategies, yet they still apprehended over 530,000 shoplifters and dishonest employees in 2006, and recovered more than $116 million from those apprehensions, an increase of 10.6 percent and 15.15 percent respectively. [Full table data appears at the bottom of this article.]

Below are some of the highlights from our 19th Annual Retail Theft Survey:

• In 2006, survey participants apprehended 463,682 shoplifters, reflecting a sizeable increase of 11.21 percent from the prior year (416,956).
• Dollars recovered from those shoplifter apprehensions totaled over $59.6 million in 2006, an amazing 13.96 percent increase over 2005 recoveries ($52.3 million). This was the 6th straight year of shoplifting recovery increases.
• Dollars recovered from shoplifters where no apprehension was made increased for the 10th consecutive year. In 2006, this increase was 2.43 percent.
• The average shoplifting case value in 2006 was $128.71, which was a 2.48 percent increase over 2005's average case value ($125.60).

Employee Theft
• In 2006, survey participants apprehended 66,507 dishonest employees, an increase of 6.57 percent over 2005's apprehensions.
• Dollars recovered from dishonest employee apprehensions totaled over $56.6 million in 2006, a substantial increase of 16.44 percent over 2005's recovery dollars ($48.6 million).
• One out of every 27.9 employees was apprehended for theft from their employer in 2006. (Based on comparison data of over 1.85 million employees.)
• The average dishonest employee case value in 2006 was $851.44, a 9.26 percent increase over 2005 ($779.27).

Why did shoplifting apprehensions and recovery dollars both increase so dramatically in 2006? We asked the survey participants and they gave us four primary reasons:

• With an increase in organized retail theft, they focused more attention on the shoplifting issue.
• They had additional loss prevention personnel on the floor looking for shoplifters.
• There was more of a focus on and much better use of CCTV in their highest loss departments and areas.
• More emphasis on employee training and awareness and award programs for reporting possible shoplifting activities, resulted in more calls/leads from the sales floor.

We also asked our survey participants why they experienced an increase in both dishonest employee apprehensions and recovery dollars in 2006. They gave us the following five primary reasons:

• They had new or improved Point-of-Sale exception reporting software which helped them to more readily identify dishonest employees.
• They focused more time and effort on internal theft cases.
• An increase in the training and education of their loss prevention personnel in regards to identifying employee theft cases.
• Promoted their award programs for employees who report dishonest activities/employees.
• A poorer quality of applicants resulted in more dishonest employees being hired in their companies.

With shoplifting apprehensions and recovery dollars up substantially, retailers need to re-focus their efforts on the prevention side of shoplifting, and then the apprehension side when prevention doesn't work. Retailers need to continue working with the Federal Government and each other in an effort to combat organized retail theft (ORT). This growing problem requires a team-effort approach and sharing of data between retailers. The level of training for both loss prevention personnel and sales floor associates needs to be heightened to combat ORT. These shoplifters are not typical thieves; instead they work in 'teams' to defeat the very best of systems/controls and sales staff service techniques. Physical deterrents such as fixtures which limit access to large quantities of a product; or more products being protected with an EAS tag through items being source tagged by the manufacturers are areas that we need to continue pursuing and addressing.

The first step to reducing employee theft starts at the point-of-hire; that is, do not hire the "bad apple". A company's pre-employment screening process needs to be at least as thorough as their competitor's or they will find themselves hiring applicants who have been rejected by other companies who are doing a better job in the screening process. A company is only as good as it's employees, so it is wise to spend the money 'up-front' screening out the "bad apples", than it is to spend it later trying to catch or identify the dishonest employees. A thorough pre-employment screening process (ie. "honesty testing", criminal background checks, drug testing, previous employer reference checks, credit check, SSN trace/verification, etc.) is the first and most beneficial step to reducing employee theft. Training, awareness and award programs for reporting dishonest activities have proven very effective in reducing employee theft for a number of years. In addition, the use of Point-of-Sale exception based monitoring programs continues to grow as does the interface of CCTV with these programs.

In summary, the seriousness of retail theft is a much greater problem than many people realize. The theft losses experienced by retailers are driving consumer prices higher, hurting our economy, and even forcing some retailers to close stores or go out of business. Therefore those retailers who continue to invest in their employees, theft prevention systems, and give the area of loss prevention the focus and attention it deserves, will keep one step ahead of the thieves.

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, Inc. has been in the Loss Prevention/Shrinkage Control consulting business for over 29 years, and is recognized on an international level as the foremost loss prevention and inventory shrinkage control consulting firm in the world.

  2005 2006   #/$    Pct.
Apprehensions 479,364   530,189 50,825 10.60%
Recoveries  $101,003,146 $116,307,051 $15,303,905 15.15%
Avg. Case Value $210.70 $219.37      $ 8.67       4.11%

  2005 2006   #/$    Pct.
Apprehensions 416,956 463,682 46,726 11.21%
Recoveries  $52,370,605 $59,680,223 $7,309,618  13.96%
Avg. Case Value $125.60   $128.71 $ 3.11 2.48%
Per Apprehension*
71.13 57.12   (19.70%)
(No Apprehension Made)
$16,010,450 $16,399,403    $388,953 2.43%

  2005 2006   #/$    Pct.
Apprehensions 62,408   66,507  4,099 6.57%
Recoveries  $48,632,541   $56,626,828 $7,994,287  16.44%
Avg. Case Value $779.27  $851.44   $72.17    9.26%