Global Retail Theft Barometer Study Finds Shrink Cost Retailers $128 Billion Worldwide, Averaging 1.29 Percent of Sales
Retail Loss “Penalty” Costs Average US Household $403 Annually; Cost of Retail Crime as Percentage of Revenue Rose 27 Percent in US
THOROFARE, NJ — Nov. 6, 2014 – Shrink, comprised of shoplifting, employee or supplier fraud and administrative errors, cost the global retail industry more than $128 billion last year, $42 billion in the US alone, according to the latest Global Retail Theft Barometer. This represents 1.29 percent of retail sales, on average.
Per household retail crime across the 24 countries surveyed ranged from $74 to $541. The annual cost of shrink to US shoppers, as passed on from retailers, averaged $403 per household.
The study, underwritten by an independent grant from Checkpoint Systems, Inc. (NYSE: CKP), was carried out in 2014 by The Smart Cube and Ernie Deyle, a retail loss prevention analyst. It was based upon in-depth phone and written survey interviews conducted in 24 countries among 222 retailers representing $744 billion in sales in 2013.
According to the study, shrink is down slightly in most countries. The lowest shrink rates were recorded in Norway (.83 percent of retail sales), followed by Japan. The US came in at 1.48 percent of retail sales, down slightly from 1.50 percent. The highest rates were recorded in Mexico (1.70 percent) and China (1.53 percent). The overall reduction in shrink was attributed to an increased focus on loss prevention methods and a slightly improved economic outlook, particularly in North America. In addition, there was increased loss prevention spending in countries with the best shrink improvements.
While shoplifting is the biggest cause of all retail shrink in 16 of the 24 countries surveyed, in the US, employee theft ranked first at 42.9 percent, with shoplifting next at 37.4 percent.
Cost of Retail Crime Up
Even as the US shrink rate lowered slightly, the cost of retail crime (employee theft, shoplifting, loss prevention spend) as a percentage of revenue, rose 27 percent, to 1.74 percent last year (from 1.37 percent in 2012). That increase is primarily attributed to a surge in shoplifting and dishonest employee theft incidences in the country, along with lower loss prevention spending by US retailers.
US discounters (2.78 percent), pharmacies/drugstores (2.16 percent) and supermarkets/grocery retailers (1.38 percent) witnessed the highest shrink rates because of the widespread prevalence of organized retail crime and lower loss prevention spending for some of them. Almost all types of retail stores in the US were affected by dishonest employee theft and shoplifting.
Most Stolen Merchandise
Shoplifters and dishonest employees in the US primarily targeted products that were easy to conceal and resell in the market, including fashion and mobile phone accessories. Other frequently pilfered products include power tools, wines and make-up products.
The use of source tagging RF labels prior to arriving at retailers has increased globally and continues to build momentum according to respondents, while 50 percent of US retailers plan to increase or maintain the number of source tagged SKUs.
According to The Smart Cube, “This report provides detailed descriptions of the sources of shrink and helps retailers understand the most cost-effective ways of addressing their problems. A number of best practices emerged from our research, including appropriate spending ranges to address the issue.”
“We are pleased to support this global statistical research for the thirteenth year,” said Per Levin, President and Chief Sales Officer Shrink Management & Merchandise Visibility Solutions, Checkpoint Systems. “Our hope is that retailers can learn more about the causes of shrink and work with their suppliers and solutions partners to create joint programs to reduce shrink and associated costs.”
Interested parties can obtain a copy of the latest Global Retail Theft Barometer report and see a video overview of the study at http://www.GlobalRetailTheftBarometer.com. In addition, an in-depth review of the study will be available via a webinar hosted by Loss Prevention Magazine today at 11 a.m. EST.
Retailers wishing to participate in next year’s Global Retail Theft Barometer study may register here.
About The Smart Cube (www.thesmartcube.com)
The Smart Cube is a global professional services firm that specializes in delivering custom research and analytics services. The firm helps organizations make critical decisions based on bespoke intelligence and insight. Founded in 2003, The Smart Cube has conducted more than 19,000 studies through its global network of 500 analysts. The firm is headquartered in London and has professionals throughout Asia Pacific, the United States, Europe, and Latin America. Follow The Smart Cube on LinkedIn at http://www.linkedin.com/company/the-smart-cube or on Twitter @TSCInsights.
About Checkpoint Systems (www.CheckpointSystems.com)
Checkpoint Systems is a global leader in merchandise availability solutions for the retail industry, encompassing loss prevention and merchandise visibility. Checkpoint provides end-to-end solutions enabling retailers to achieve accurate real-time inventory, accelerate the replenishment cycle, prevent out-of-stocks and reduce theft, thus improving merchandise availability and the shopper’s experience. Checkpoint’s solutions are built upon 45 years of radio frequency technology expertise, innovative high-theft and loss-prevention solutions, market-leading RFID hardware, software, and comprehensive labeling capabilities to brand, secure and track merchandise from source to shelf. Checkpoint’s customers benefit from increased sales and profits by implementing merchandise availability solutions to ensure the right merchandise is available at the right place and time when consumers are ready to buy. Listed on the NYSE (NYSE: CKP), Checkpoint operates in every major geographic market and employs more than 4700 people worldwide.
George Cohen (for Checkpoint)