Retail Theft Is Up—Can RFID Help?

The Global Retail Theft Barometer Study finds retail theft reached $115 billion worldwide. There are areas where RFID can make a difference.
Published: November 11, 2009

The Centre for Retail Research has released its third annual Global Retail Theft Barometer report, and the news is not good. The 2009 survey, which covers 1,069 corporations worldwide with a total revenue of $822 billion, finds that theft costs companies $115 billion globally—a 5.9 percent increase over last year.

The study, sponsored by Checkpoint Systems, examined the costs of shrinkage and crime in the global retail industry from July 2008 to June 2009. It found that the rise in shrinkage occurred in all regions surveyed. The greatest increases were in North America (8.1 percent), the Middle East-Africa (7.5 percent) and Europe (4.7 percent). The categories with the highest shrinkage rate, according to the survey, are apparel accessories (3.85 percent of sales), fashion clothing (3.64 percent) and meat in supermarkets (3.38 percent).

The increase in theft is attributable to the global recession and cutbacks in spending on security (the survey found retailers spent $900 million less on security due to recessionary pressures). Globally, shrinkage costs retailers approximately 1.43 percent of sales, which accounts for about $208 per family—the cost of theft is passed on to the consumer, after all.

Can RFID help? I think it can, in several ways. Bulky electronic article surveillance (EAS) devices serve as a strong deterrent to crimes of opportunity. That is, a person who enters a store without the intention of stealing something might take an item if the opportunity were to present itself—but he might refrain if he saw an EAS device.

If an item with an EAS device is stolen, RFID can help by identifying what was taken. Currently, a retailer might hear an alarm when someone steals something, but not know what has been stolen. By combining RFID and EAS, a company can deter crimes of opportunity and know what was stolen by identifying it with RFID. That enables a retailer to replenish goods and not lose sales due to items being out of stock but inventory systems thinking they are still on a shelf.

But EAS devices do not deter workers or professional thieves. The 2009 Global Retail Theft Barometer found that employee theft is the biggest problem faced by North American retailers, as it results in 44 percent of all losses. According to the report, the average employee in North America stole nearly $1,900 per incident.

Apparel companies such as Falabella found that theft can be reduced just by tagging inventory, because employees know a company is tracking its inventory more effectively. Businesses that take inventory regularly can begin to match the loss of items to the specific employees working at the time they were taken, and then hone in on who is doing the stealing. And companies can combine RFID with closed-circuit television (CCTV) cameras in order to reduce theft.

Sony Logistics has deployed such a system at its largest European distribution warehouse, located in Tilburg, the Netherlands. When employees pick orders from warehouse shelves for specific retailer customers, these orders—individual boxes containing DVD players or cameras, for instance—are marked with a delivery label containing an RFID transponder and displaying a delivery address, a unique parcel number and a bar code.

Sony Europe creates a short video showing each pallet being wrapped and placed on a truck. The RFID reads are burned into the video to prove that pallet’s identification. The computer system saves the video, and if a retailer claims the ordered items never arrived, claims handlers can search a database for a specific tagged box or tagged pallet number, pulling up the related video. This allows the partners to investigate where the theft might have occurred.

No technology is ever going to fully eliminate theft. But the data analysis and visibility RFID provides can enable companies to fire those workers suspected of theft, and video surveillance can greatly reduce the incidence of such thievery. If privacy advocates have a problem with you watching your staff in order to prevent them from stealing, they can tell that to families who have to pay an additional $208 every year, just because some people help themselves to five-finger discounts.

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark’s opinions, visit the RFID Journal Blog or click here.