Retailers Say Shrinkage Rose in 2011

Globally, losses from shoplifting, employee theft, vendor fraud and administrative error rose by more than 6 percent over last year's rate.
Published: October 26, 2011

After several years of decline, retail shrinkage is on the rise. Retailers report that shoplifting, employee theft, supplier fraud, organized retail crime and administrative errors cost the retail industry $119 billion this year, or approximately 1.45 percent of sales, according to the Global Retail Theft Barometer, an annual study underwritten by an independent grant from Checkpoint Systems, a supplier of electronic article surveillance (EAS) and radio frequency identification systems. The global shrinkage rate is up by 6.6 percent (6 percent in the United States) over the previous year’s rate, and is the highest percentage recorded by the survey since its launch in 2007.

The survey of nearly 1,200 retailers, conducted from July 2010 to June 2011, found that shoplifting and theft by organized crime groups rose by 13.4 percent, and was the biggest factor in the rising shrinkage rate in most countries. This type of theft cost retailers $51.5 billion, accounting for 34 percent of shrinkage.

Theft by employees resulted in losses of $41.7 billion, or 35 percent of shrinkage. In North America and Latin America, employee theft was greater than that committed by customers and gangs, and the average amount stolen by workers was more than eight times that taken by shoplifters.

I find this interesting, as it brings to mind a recent article I wrote about American Apparel‘s RFID deployment (see StorefrontBacktalk Misses the Point About RFID and Theft). Stacy Shulman, who leads the retailer’s RFID efforts, reported that the technology had reduced internal shrinkage by an average of more than 50 percent at stores in which the technology had been deployed. That would amount to an average global savings of more than $20 billion for the retail industry, based on the Global Theft Barometer.

The survey also reveals that in 2011, apparel and accessories experienced a shrinkage rate of 1.87 percent—the highest of any retail category (cosmetics, perfume, health and beauty, and pharmaceuticals came in second). Theft of outerwear increased by 31 percent to a shrinkage rate of 2.94 percent, with footwear shrinkage declining by 57 percent to a rate of about 1 percent.

The fifth edition of the Global Retail Theft Barometer—the eleventh edition for Europe—was produced by Joshua Bamfield, the director of the Centre for Retail Research, an independent organization providing research and consultancy for the retail sector, dealing with the changing face of retailing and focusing on retail fraud and crime.

It’s unclear, of course, whether other retailers will see the same decline in shrinkage that American Apparel has experienced. But if RFID really can reduce theft—in addition to improving inventory accuracy—that will only make return on investment easier to calculate.

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, the Editor’s Note archive or RFID Connect.