Shrink Shrinks: Global Retail Theft Barometer Finds Shrink Down 5.6 percent Worldwide

Increased loss prevention spending of 9.7 percent globally contributed to lower shrink rates, study finds; theft's costs to US shopping families equal to an average of $422.68

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Thorofare, NJ — October 19, 2010 — Global retail theft declined over the past year as increased loss-prevention spending lowered losses due to shoplifting, employee crimes and administrative errors, according to the latest edition of an annual study of shrink in the retail sector.

The Global Retail Theft Barometer, a study sponsored by an independent grant from Checkpoint Systems, monitored the costs of shrink in the global retail industry between July 2009 and June 2010, and found that shrink decreased in all regions surveyed.

Retail theft totaled $107.3 billion during the period, representing a 5.6 percent decrease from the prior year across all regions. The biggest decrease was in North America, at 6.8 percent. Still, the proportion of global retailers that reported increased actual or attempted shoplifting in 2010 was 31.1 percent (36.7 percent in the U.S.).

"Even with the shrink decrease, retail crime cost the average family in the 42 countries surveyed an extra $186 on their shopping bill," said Professor Joshua Bamfield, director of the Centre for Retail Research and author of the study. "In the U.S., that number was $422.68, a phenomenal figure."

Increased Security, Decrease in Theft

The 2010 study also found that retailers increased their spending on loss prevention and security by 9.7 percent over 2009, to $26.8 billion globally; in the U.S. the increase in loss prevention spending over 2009 amounted to 12.5 percent.

"The correlation between increased security spending and a global 5.6 percent decrease in theft is very significant," said Bamfield. "It 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."

"In 2008 at the start of the economic downturn, the temptation for retailers was to reduce their loss prevention spending," noted Rob van der Merwe, chairman, president and CEO of Checkpoint Systems. "This typically leads to an increase in shrink, and that is what we saw with the 2009 Theft Barometer study."

Van der Merwe said that retailers quickly realized the need to correct this trend and began to invest in smart deployments that could be quickly implemented with high ROIs, such as increased protection of high-theft merchandise, as well as more employee training and store audits. This resulted in a short-term win and a decrease in shrink.

"As we continue to slowly recover from the recession," he continued, "it is perhaps the right time to combat shrink with a more comprehensive path and begin looking to the merging technologies that will carry retailers through to the future. Examples include the newest generation of EAS and also RFID technology to additionally provide better tracking and visibility of inventory across the supply chain, leading to the elimination of out-of-stocks and increased sales."

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Global Retail Shrink Rates

The cost of shrink to retailers during the study period, at $107.3 billion, represented 1.36 percent of global retail sales. This is down from 1.43 percent the previous year. The country with the highest rates of shrink as a percentage of sales was India (2.72 percent of retail sales). The lowest rate of shrink was found in Taiwan (0.87 percent). The US rate was 1.50 percent.

While shrink is down overall, some of the most stolen items have suffered increased shrink since last year, including children's wear, outerwear, shaving products, luxury cooked meats and infant formula.

The study also found that shrink varies according to business type, vertical market and country. In 2010, some of the highest average shrink rates were found in apparel/clothing and fashion/accessories (1.72 percent); and cosmetics/perfume/beauty supply/ pharmacy (1.70 percent).

Customer theft, including shoplifting and organized retail crime caused the greatest shrink loss in most countries at 42.4 percent of shrink, followed by employee theft at 35.3 percent.

"Although retailers have made considerable progress in introducing new anti-shrink policies, more than 25 percent of the retail 'top 50' most-stolen product lines still have no specific protection," said van der Merwe. "So our industry needs to accelerate innovation to help better protect retailers and consumers."

More U.S. Highlights

North American retailers are different from the rest of the world in regarding employee theft as their greatest shrink problem, causing 43.7 percent of shrink. The second largest source was shoplifting at 35 percent. Some 47.8 percent of U.S. retailers reported that they experienced increased losses from organized retail crime (ORC).

In addition, the highest average rates of shrink were in cosmetics/perfume/beauty supply/pharmacy (1.88 percent), auto parts/hardware/building materials retail (1.75 percent) and apparel/clothing/fashion and accessories (1.69 percent).

Started in 2001 in Europe and expanded in 2007 globally, the Global Retail Theft Barometer is an annual survey conducted by the Centre for Retail Research in Nottingham, UK, and sponsored by Checkpoint Systems. This study stakes a claim as the largest and most comprehensive survey of retail theft and crime in the world.

The study covers key trends in retail shrink and crime in 42 countries and regions across the world, including the U.S., China, India, Europe, Japan and Australia. Russia is included for the first time this year. This report has been prepared from a confidential details provided by 1,103 of the largest retailers with combined sales of $873.8 billion, representing a cross-section of countries and retail vertical markets.

A summary of the report is available here.