The Global Cost of Theft

Shrink may be shrinking, but worldwide retail theft still amounted to $107.3 billion in 2010, according to the Global Retail Theft Barometer. Shrinkage in the U.S. declined 6.8 percent from the prior year, outpacing the global average of 5.6 percent, according to the report authored by Joshua Bamfield of the Centre for Retail Research in Nottingham, England.

Neither enhanced technology nor improved anti-theft tactics by retailers received as much credit for the decline as did global economic conditions. As economies have improved — some more than others, to be sure — “shrink levels have been consistently reduced,” the report notes.

Bamfield does, however, note that the reduced volume of shrink “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.”

Even with the shrink decrease, retail crime cost the average American family $422.68 during the year, an amount Bamfield described as “a phenomenal figure.”

Additionally, Bamfield estimates that during the recently completed holiday shopping season, crimes against U.S. retailers amounted to $2.77 billion. Contributing to this total, he says, was the fact that many retailers can’t, or don’t, take the time to screen and train seasonal employees who then steal merchandise, assist accomplices in thefts or steal shoppers’ credit card information.

Increased LP spending
Rob van der Merwe, head of Checkpoint Systems, says, “In 2008, at the start of the economic downturn, the temptation for retailers was to reduce their loss prevention spending. 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,” he says, “and began to invest in smart deployments that could be quickly implemented with high ROIs, such as increased protection of high-theft merchandise and more employee training and store audits.” Checkpoint Systems, headquartered in Thorofare, N.J., sponsored the Retail Theft Barometer report.

In the United States, retailers boosted their spending on loss prevention 12.5 percent between 2009 and 2010, far more than did their counterparts in the rest of the world (9.7 percent), the study found.

The study found retailers in the hardware/do-it-yourself market reported the highest shrink rates: 1.81 percent of category sales. A year ago, apparel was the highest-shrink category, but it dropped to second place this year (1.72 percent), followed by pharmacy/ cosmetics at 1.70 percent.

“There’s a more important story for retailers embedded under these high-level numbers for each industry,” Bamfield says. “In key markets such as apparel, food and health/beauty/pharmacy, there are a number of high-theft product lines that experience anywhere from two to four times the shrink rates for their overall markets.”

For example, in the apparel category, accessories experienced a 3.84 percent shrink rate globally, spiking to nearly 5 percent in North America and more than 4 percent in Europe. Other apparel classifications where shrink was higher than average include children’s wear, fashion and tailored clothing, outerwear and tops/sweaters.

In groceries, global shrink was only 1.22 percent, but in the fresh meat sub-classification, shrink was 2.86 percent globally, 5.2 percent in Latin America and 4.1 percent in North America. Also experiencing higher-than-average shrink rates were gourmet cooked meats, cheese, alcohol, candy, instant formula and high-end seafood.