Retail shrink, including shoplifting and internal theft, has hit its highest level since 2007, according to a recent study that saw the shrink rate hit $119 billion worldwide.
Shoplifting, employee fraud and organized retail crime are on the rise, according to the Global Retail Theft Barometer, an annual independent survey underwritten by Checkpoint Systems Inc., which monitored the cost of shrink (including losses from shoplifting, employee theft and administrative errors) at retailers from July 2010 to June 2011.
The survey found that retailers increased spending on loss prevention and security by 5.6 percent—or $28.3 billion globally—over last year. However, much of that money went to security personnel and training, said Joshua Bamfield, director of the Centre for Retail Research in Nottinghamshire, England, and author of the study.
“Security employees represent the largest share of the security dollar, and retailers have emphasized the renewed importance of training,” Bamfield said. “Security-equipment spending tends to be ‘lumpy’—meaning that a retailer decides to buy equipment for, say, one-half its stores but then may not spend much for 18 months. Retailers spent a great deal on security equipment in 2010. Because this was capital spending (i.e., the equipment would last for several years) they do not need to keep spending but can spend on other areas such as checking new employees.”
Bamfield said retailers who reported a decline in shrink “worked across their operations to systematically combat shoplifting, employee theft, vendor loss and administrative errors.” An overwhelming majority—96 percent—employed audit programs to ensure loss-prevention policies were being followed and increased their loss-prevention spending nearly twice as much as the global average, he said.
“As global economic growth stalled in the past year, retailers did not increase capital equipment expenditures at the same rate as the rest of their loss-prevention expenditures,” said Farrokh Abadi, president of shrink-management solutions for Checkpoint Systems.
“The result, unfortunately, may be seen in higher shrink numbers. The retailers who most successfully combated shrink last year invested judiciously in comprehensive loss-prevention solutions.”
Apparel and accessories are among the categories with the highest losses, according to the report.
“Apparel is normally at the top of the list,” Bamfield said. “Top-end merchandise, baby clothes and accessories face particular problems. Since the recession, apparel retailers have been under pressure, and the rise in shrinkage is yet another source of cost that retailers could do without.”
Shrinkage rates were greater for high-end merchandise than low-end, Bamfield said, adding, “But all types of apparel retailers suffered [from organized retail crime] and shoplifting.”
The top losses were due to customer theft, including shoplifting and organized retail crime, which accounted for 43.2 percent, or $51.5 billion worldwide. Employee theft accounted for 35 percent, or $41.65 billion worldwide. In North America and Latin America, employee theft accounted for the top losses. Internal theft in North America accounted for 44.1 percent of shrink. In Latin America, internal theft accounted for 42.6 percent. The report also found the “average amount admitted stolen by employees was more than eight times the average stolen by shoplifters.”
Bamfield offered a checklist of advice for retailers looking to reduce theft, including:
• “Retailers need to create a good working environment in which employees feel that they are treated fairly and adequately remunerated.”
• “[Perform] checks on new employees to ensure that the bad apples are kept out.”
• Provide training to ensure that employees know the systems and procedures.
• “Employees should know that there are penalties for trying to cheat the system. EAS [electronic article surveillance] systems can be used to prevent goods being illegally moved by employees to the wrong area (where they can steal).”
• Conduct employee searches at the end of a shift.
• Establish a reporting hot line.
• “Use training and publicity to ensure that the issue of shrinkage (and shrinkage reduction) is a ‘hot’ issue on a permanent basis.”
The Centre for Retail Research launched the “Global Retail Theft Barometer” study in 2007 after conducting a similar survey for Europe for six years. The study covers trends in retail shrink and crime in 43 countries and regions, including the United States, China, India, Europe, Russia, Japan and Australia. This year, South Korean retailers were added for the first time. The report surveyed 1,187 largest retailers (representing more than 250,000 retail outlets). Of the respondents, 15 percent were apparel specialists, and 5 percent included apparel-focused department stores.
The Global Retail Theft Barometer is underwritten by an independent grant from Checkpoint Systems, global provider of shrink management, merchandise visibility and apparel-labeling solutions. Checkpoint solutions included a broad mix of apparel-labeling solutions, RFID (radio frequency identification) applications, high-theft solutions and the company’s Web-based Check-Net data-management platform.—Alison A. Nieder
For more information: http://www.apparelnews.net/news/retailing/112111-Retail-Spending-on-Anti-Theft-Technology-Lumpy-Study-Finds/