Retailers made progress last year in limiting losses due to inventory shrink, but such practices cost North American retailers about $44 billion in lost revenue.
According to the National Retail Federation and University of Florida’s annual National Retailer Security Survey, the $44 billion constituted about 1.38 percent of retail sales, the lowest shrink percentage in the survey’s history, according to its authors.
Among the components counted as part of shrink, shoplifting accounted for the largest percentage of the total, about 38 percent, followed closely by employee and internal theft at 34.5 percent. Administrative and paperwork errors made up 16.5 percent of the shrink loss, vendor fraud or error 6.8 percent and unknown loss 6.1 percent.
Retailers are continuing to put more money into preventing losses of these kinds, with 39.4 percent of those surveyed reporting increases in loss prevention budgets last year versus 36.6 percent who had “similar” budgets in 2014. The percent of respondents who had lower allocation of dollars budgeted for prevention last year was 23.9 percent.
“Loss prevention professionals have done a commendable job of elevating the issue of shrink and retail fraud within their own companies and with industry insiders and the public,” said Richard Hollinger, criminology professor at the University of Florida and lead author of the study for the past 24 years, “but the battle wages on to find ways to contain further losses to their businesses.” He recommended continued and increased collaboration among stores as “retail issues like shrink and security become more complex.”
Bob Moraca, vice president of loss prevention at NRF, said, “A common misperception about shoplifting is that retailers can ‘afford’ the loss of a candy bar or a pair of jeans, but the truth is that the industry loses billions of dollars each year at the hands of callous criminals that could be put towards human capital, promotions and other necessary business operations.”
The survey included responses from 100 senior loss prevention executives gleaned in March and April.
The report was released in conjunction with NRF’s NRF Protect Loss Prevention conference, which concludes its three-day run in Long Beach, Calif., Thursday.