The final results of the National Retail Security Survey were released to industry executives just a few days ago. The quick findings: retail shrinkage averaged 1.51 percent of retail sales in 2008, up from 1.44 percent in 2007. Total merchandise losses increased to $36.3 billion, up from $34.8 billion in 2007.
Instead of walking through all the findings—which retailers, law enforcement, and members of the media can request for free—I wanted to share five of the most interesting takeaways from the report.
1) Collusion is key. As a percentage of shrink, employee theft is down and shoplifting is up. Additionally, findings suggest that employees may be conspiring with people outside of the company to steal. This year’s survey found 14% of internal cases involved collusion between employees and outside actors, which further validates our opinion that external co-conspirators play a greater role than once thought. When we factor in collusion by outside actors we now have clear data to show external theft leads as the primary cause of shrinkage in retail stores. (Read a Security Director News article from this week which sheds more light on this issue.)
2) Fewer cases but more theft. While the number of employee theft cases decreased last year, the average case nearly doubled to $2,672. This could very well be a direct result of less loss prevention and management personnel, reduced employee training hours and the reduction in core loss prevention controls in an effort to “streamline” operations. (Read a recent STORES article on this topic for more info.)
This was also the case for shoplifting: the number of cases was down, but retailers reported a 59% increase in the average shoplifting case last year. Because dollar loss is a factor in deciding prosecutions, more shoplifting suspects were taken to court. With an average of $549 per case, even the most liberal prosecution thresholds would be met.
3) Thieves are getting more physical. Retailers reported internal and external suspects were more aggressive in the amount of product stolen per incident. It has been widely discussed that retail criminals are becoming more violent in nature, placing our employees, consumers, security and law enforcement at greater risk of injury.
As a result, retailers must spend more time on employee training covering company policies about apprehending suspected shoplifters, offering specific guidance on what to do (and what not to do) in each situation. Also, now that this trend is clearly documented, retailers will need to examine where program recovery efforts or new spending will need to occur.
4) Burglaries and robberies quadrupled. Retailers are also reporting an alarming rise in burglary and robbery incidents, which were four times higher than 2007. (This is a trend also noted in the FBI’s latest Uniform Crime Report.) And these crimes are costly: retailers lost an average of $5,000 each time a store was hit. The increase of burglary and robbery activity is particularly disturbing because these losses are not necessarily reflected in the total shrinkage loss estimates.
5) Budgets are shrinking, but… Many retailers made deep spending cuts across the board last year and loss prevention professionals were not immune. To avoid a setback in the shrink improvements the industry has experienced over the past five years, the loss prevention expertise will be more important now than ever.
That said, even though retailers’ LP budgets were being cut, companies still spent an estimated $8.2 billion on loss prevention expenses. Need a comparison to realize just how huge that number is? It’s similar to the annual revenues of major retailers like Nordstrom and Whole Foods.