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The $42 Billion Problem

Shrinkage continues to plague retailers. RFID is no silver bullet, but it can be part of the solution.
By Mark Roberti
Jun 18, 2007Each year, the University of Florida conducts its National Retail Security Survey to determine losses suffered by retailers due to shoplifting, employee theft, administrative error and vendor fraud—together described as "shrinkage." The preliminary results of the latest survey were released last week at the National Retail Federation's Loss Prevention Conference and EXPO—and the news is not good.

Although retailers have deployed more sophisticated anti-theft technologies in their stores—95 percent have burglar alarms, 87 percent visible closed-circuit televisions and 60 percent hidden cameras—losses from theft and fraud have reached an all-time high. Richard Hollinger, a professor at the University of Florida, found that retail shrinkage last year in the United States averaged 1.61 percent of retail sales, up slightly from 1.60 percent in 2005.

The good news is that as a percentage of sales, shrinkage stayed virtually the same. Total retail losses increased to $41.6 billion due to higher retail sales in 2006, compared to 2005.

Some people believe RFID could eventually be combined with, or even replace, Electronic Article Surveillance tags. They say RFID could reduce theft by alerting retailers when unusual activity occurs at the shelf, such as the swiping of multiple lingerie items—one of the most shoplifted products—or 10-packs of razors. By detecting a possible theft at the shelf, systems could alert security to make sure all items are paid for before customers leaves the store.

Gillette tested the technology a few years ago, but RFID is still unproven as a theft deterrent or antitheft technology. And until many packages of individual items have tags, smart shelves are not going to have a big impact on shoplifting.

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