Retail loss as a percentage of sales by market segment
This story first appeared in the April 3, 2003 issue of WWD. Subscribe Today.
No, it’s not that part of the anatomy George Costanza was referring to in a memorable “Seinfeld” episode. Shrinkage, in retail parlance, is inventory loss caused by employee theft, shoplifting, administrative errors and vendor fraud. Loss prevention experts put the total shrinkage dollar amount for 2001, the last year for which data is available, at $31.3 billion or 1.7 percent of the total $1.845 trillion in annual retail sales. Ultimately, it comes off the bottom line and charges are passed on to consumers.
The average jewelry theft is $1,500, compared with $85 for the average retail shoplifting incident, according to Integrated Assurance Services, which provides jewelers block coverage to retailers.
OTHER APPAREL STORES
The rates of employee theft and shoplifting are above average for “other apparel stores,” a catchall phrase that applies to stores that don’t fit into the men’s, women’s or children’s rubric.
CHILDREN’S APPAREL STORES
Shoplifting accounts for 25 percent of shrinkage of children’s apparel, well below the average rate of 32 percent. More alarming is employee theft, a source of 55 percent of lost merchandise.
WOMEN’S APPAREL STORES
To combat employee theft and shoplifting, retailers are asking their apparel suppliers to attach ever-more sophisticated paper hangtags and woven labels that incorporate antitheft sensors.
With small, easy to hide products such as cosmetics and hair accessories, drug stores have the highest level of shoplifting, 32 percent. This retail sector also has the most vendor fraud, 9.6 percent.
Discounters have had security devices embedded into shoes and electronic article surveillance flashers placed on jeans to stop shoplifters. Still, 52.1 percent of inventory loss comes at the hands of employees.
Stores that sell cards, gifts and novelties are prone to administrative error, which accounts for 17.9 percent of loss in the retail segment. Sticky fingered consumers contribute 34.3 percent.
HOME CENTERS/HARDWARE/GARDEN STORES
The cost of employee theft to home centers, hardware and garden stores is $1,146 per worker.
MEAN SHRINKAGE RATE (ALL STORES)
The average shrinkage rate of 1.7 percent in 2001 is significantly lower than the previous year’s rate of 1.8 percent. In the last decade the rate has hovered between 1.69 percent to 1.95 percent.
SPORTING GOODS STORES
Handheld radios, sunglasses and apparel are the most popular items for theives in sporting goods stores, where 32.1 percent of shrinkage is due to shoplifting.
Department stores are a favorite target for shoplifting, which accounts for 36.4 percent of shrinkage. High job turnover, part-time and seasonal help is associated with employee theft.
Despite sophisticated loss prevention technology that can be incorporated into shoes and activated by stores with security systems, 51.2 percent of missing footwear walks out with employees.
Theft by workers accounts for 59 percent of losses at supermarkets and grocery stores. Shoplifters steal cigarettes, meat and cosmetics, while theft rings take baby formula and batteries.
MEN’S APPAREL STORES
When inventory losses occur at a men’s apparel retailer, chances are it’s an inside job. Employees are to blame for 57.5 percent of merchandise missing from the sales floor.
Convenience stores are a hotbed of employee theft, which is responsible for a staggering 82.5 percent of the retail sector’s inventory losses.
OFFICE SUPPLY/STATIONERY STORES
Workers pilfer pads, pens and calculators at stores, making employee theft the cause of 57.4 percent missing merchandise.
Stores need to do a better job of bookkeeping. Administrative error, the biggest source of unexplained shrinkage, accounts for 30 percent of lost merchandise.
CONSUMER ELECTRONICS/APPLIANCE STORES
Luckily, thieves haven’t figured out an easy way to get refrigerators or big-screen televisions out of stores. This retail category has the industry’s lowest rate of shoplifting at 20.1 percent.