Retail Crime Rises as Economy Falters

A study by the National Retail Security Survey finds first upswing in store theft in six years.

The recession pressured many consumers to spend less in 2008, but it also led to an increase in those who prefer to make off with merchandise without spending anything at all, according to a study on retail theft and shoplifting released Tuesday.

This story first appeared in the June 17, 2009 issue of WWD.  Subscribe Today.

Preliminary results from the National Retail Security Survey, an annual study conducted by the University of Florida, showed an increase in the retail theft rate for the first time in six years. Its publishers blamed the rise squarely on the downturn.

“This year, both the dollar loss and rate of loss increased and the evidence shows that the economy and resulting cutbacks in staffing by retailers are creating an opportunistic environment for both individual shoplifters and organized retail criminals,” said the study’s lead author, criminology professor Richard Hollinger, in remarks that accompanied the numbers.

The survey, which is conducted through a partnership with the National Retail Federation and funded by a grant from ADT Security Services, polled loss prevention staff at 95 retailers nationwide to measure incidents such as shoplifting, employee theft and vendor fraud. The preliminary results showed that, in 2008, retailers lost $36.5 billion, or 1.5 percent of overall sales, to in-store theft. In 2007, the loss was $34.8 billion, or 1.4 percent of sales, the lowest rate in the 18-year history of the survey.

Employee theft and shoplifting accounted for the largest portion of losses, totaling $15.9 billion and $12.7 billion, respectively. Administrative error added another $5.4 billion and vendor fraud totaled $1.4 billion.

Hollinger added the data do not reflect the early months of 2009, which many observers classified as the deepest period of the recession.

The upswing spread beyond individual acts of theft and into organized retail crime.

In a separate study released last week, the NRF found that rates of retail crime committed by criminal rings rose 8 percent in the last year. In a poll of 115 retailers, 92 percent reported being targeted by organized theft as opposed to 84 percent in 2008.

Joe LaRocca, senior asset protection adviser at the NRF, said in the down economy, criminal gangs are targeting retailers for larger hauls and exploiting consumers at online auction sites, swap meets and other secondary markets.

“Organized retail criminal groups recognize that there’s a demand for those lower prices,” he said. “This is their peak season. What we’re seeing is these groups stealing at a rapid rate to supply that demand.”

He explained the downturn has also provided criminals an easier operating environment as stores reduce floor and other staff to make up for lagging sales.

“I don’t know too many companies that aren’t cutting back right now,” LaRocca said. “What we know is that good customer service and people in the stores naturally prevents theft from happening.”

Retailers spent an average of $215,000 a year to combat organized retail crime, according to the study. Among those polled, 42 percent said they were allocating more resources to address the problem.

LaRocca warned the rate of theft might climb higher yet.

“The problems are still getting worse, not better,” he said. “We haven’t seen the bottom yet. Hopefully we will, but we’re not there yet.”