Global retail theft totaled US$107.3 billion in 2010, representing a 5.6-percent decrease from the prior year with 6.8 percent in the U.S., according to the fourth annual edition of the Global Retail Theft Barometer, a report from the Center for Retail Research.
The study, sponsored by an independent grant from Checkpoint Systems, monitored the costs of shrink including loss from shoplifting, employee crimes and administrative errors in the global retail industry from July 2009 to June 2010, and found that shrink decreased in all regions surveyed. The biggest decrease was in North America. The proportion of global retailers that reported increased actual or attempted shoplifting in 2010 was 31.1 percent, dropping from 36.7 percent in the U.S.
“Even with the shrink decrease, retail crime cost the average family in the 42 countries surveyed an extra $186 on their shopping bill,” said Professor Joshua Bamfield, Director of the Center for Retail Research and Author of the study. “In the U.S., that number was $422.68, a phenomenal figure.”
The 2010 study also found that retailers increased their spending on loss prevention and security by 9.7 percent over 2009, to $26.8 billion globally; in the U.S. the increase in loss prevention spending more than 2009 amounted to 12.5 percent.
“The correlation between increased security spending and a global 5.6-percent decrease in theft is very significant,” Bamfield said. “It highlights the importance of continued advancement and improvement of loss prevention programs, as reducing theft is key to the success and growth of retailers' businesses.”
“In 2008 at the start of the economic downturn, the temptation for retailers was to reduce their loss prevention spending,” said Rob van der Merwe, Chairman, President and CEO, Checkpoint Systems. “This typically leads to an increase in shrink and that is what we saw with the 2009 Theft Barometer study. Retailers quickly realized the need to correct this trend and began to invest in smart deployments that could be implemented with high ROIs, such as increased protection of high-theft merchandise, more employee trainings and store audits. This resulted in a short-term win and a decrease in shrink.
“As we continue to slowly recover from the recession,” Rob van der Merwe said, “it is perhaps the right time to combat shrink with a more comprehensive path and begin looking to the merging technologies that will carry retailers through to the future. Examples include the new generation of EAS and RFID technology to additionally provide better tracking and visibility of inventory across the supply chain, leading to the elimination of out-of-stocks and increased sales.”
Global Retail Shrink Rates
Shrink cost retailers $107.3 billion during the study period, representing 1.36 percent of global retail sales. This is down from 1.43 percent the previous year. The country with the highest rates of shrink as a percentage of sales was India with 2.72 percent of retail sales. The lowest rate of shrink was found in Taiwan with 0.87 percent. The US rate was 1.50 percent.
Items with Increased Shrink Rates
While shrink is down overall, some of the most stolen items have suffered increased shrink since last year, including children's wear, outerwear, shaving products, luxury cooked meats and infant formula.
Shrink by Global Vertical Markets
Shrink varies according to business type, vertical market and country. In 2010, some of the highest average shrink rates were found in apparel, clothing and fashion and accessories with1.72-percent shrink; and cosmetics, perfume, beauty, supply and pharmacy accounting for 1.70 percent.
Origins of Shrink
Customer theft including shoplifting and organized retail crime caused the greatest shrink loss in most countries at 42.4 percent of shrink, followed by employee theft at 35.3 percent.
“Although retailers have made considerable progress in introducing new antishrink policies, more than 25 percent of the retail ‘top fifty' most-stolen product lines still have no specific protection,” van der Merwe said. “So our industry needs to accelerate innovation to help better protect retailers and consumers.”
More US Highlights
North American retailers are different from the rest of the world in regarding employee theft as their greatest shrink problem, causing 43.7 percent of shrink. The second largest source was shoplifting at 35 percent.
Some 47.8 percent of US retailers reported that they experienced increased losses from organized retail crime.
The highest average rates of shrink were in cosmetics, perfume, beauty supply and pharmacy with 1.88 percent, auto parts, hardware, building materials retail at 1.75 percent; apparel, clothing, fashion and accessories with1.69 percent.