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Employee theft, shoplifting/organized retail crime (ORC) and administrative error are the top sources of loss impacting retailers, according to an annual survey by the University of Florida with a funding grant from security systems integrator Tyco Integrated Security and Tyco Retail Solutions, a global provider of retail performance and security solutions.
The 2011 National Retail Security Survey found that retail shrinkage in 2011 was 1.42 percent, down from 1.49 percent in 2010. This works out to an approximate $35.28 billion annual loss to retailers because of preventable inventory issues, with 44.2 percent due to employee theft, 25.8 percent to shoplifting and ORC, and 12.1 percent to administrative error. Despite the fact that overall shrink was down, which University of Florida criminologist Richard Hollinger, who conducted the survey, attributed to retailers’ implementation of effective loss prevention solutions to protect their assets, the most affected industry, supermarket/grocery, reported a loss of 2.54 percent, 1.12 percent above the average.
“Of the major causes of shrinkage reported by retailers, grocery stores and supermarkets reported 44 percent attributed to employee theft, 33.3 percent to shoplifting/ORC, 9.9 percent to administrative error, and 6.3 percent to vendor fraud,” Lee Pernice, director of business development, national accounts for Boca Raton, Fla.-based Tyco Integrated Security, told Progressive Grocer.
“Due to their multifaceted supply chains, as well as diverse store operations and departments, the level of risk and exposure of supermarkets to loss are often higher,” continued Pernice. “Additionally, during a down economy, high unemployment and tight budgets typically generate a rise in the shoplifting of essentials like food, as some consumers turn to this activity to help feed their families, or organized retail crime rings sell items on the black or gray market to those in need. In addition, baby formula is, and has always been, one of the most frequently stolen items.”
When asked what store operators could do about this problem, Pernice replied: “There are a number of solutions being used today in the industry to lower shrinkage and improve ROI, and, as it relates to technology, implementing IP video, along with sophisticated analytics, is the best solution to help retailers curb theft in their stores without increasing labor costs.”
According to the Washington, D.C.-based National Retail Federation, 2012 holiday sales are on track to increase 4.1 percent to $586.1 billion, which means that retailers should ensure their shrinkage is low so they can capitalize on higher sales. With better technologies and many consumers accessing retailers’ inventories in various ways, inventory visibility and accuracy are crucial to loss prevention during the holidays.
“With the holidays and 2013 planning in full swing, it’s important for retailers to take a look at these statistics and evaluate security strategies accordingly,” said Tyco Integrated Security VP, Retail Sales and Operations Michael Creedon. “While [overall] theft is down this year, organized retail crime is on the rise, and loss prevention solutions remain very important to help shrinkage continue to decline and operations run more efficiently and effectively.”
Added Creedon, “Actively safeguarding merchandise allows retailers to keep costs down and increase their ability to offer better prices to their customers, while potentially improving internal business practices.”