View Slideshow

The number-one cause of inventory loss, or shrinkage, in 2003 was employee theft, accounting for 47 percent of unrecovered merchandise. Shoplifting was second at 32 percent, followed by administrative and paper error, 15 percent, and vendor fraud, 6 percent. The data for 2003 was provided by the National Retail Security Survey prepared by the University of Florida’s Center for Studies in Criminology and Law. The center has been quantifying retail shrinkage and its causes since 1991. The total tally for shrinkage last year was 1.65 percent of annual sales or $33.6 billion. Shoplifting cost retailers $10.7 billion. The losses are passed on to consumers.

This story first appeared in the July 22, 2004 issue of WWD. Subscribe Today.

  1. APPAREL SPECIALTY STORES
    46 percent of shrinkage due to shoplifting

    Shoplifting accounted for the majority of inventory loss in specialty stores. Employee theft, at 37 percent, was below the industry average of 47 percent. In general, specialty stores reported above-average shrinkage with a total of 3.7 percent, against a mean of 1.65 percent for all stores.
  2. MEN’S, WOMEN’S AND CHILDREN’S APPAREL STORES
    38.3 percent

    Employee theft accounted for 46.4 percent of inventory loss for stores selling clothing for the entire family. Shoplifting was a substantial piece of the shrinkage pie. Retailers are trying to cut down on shoplifting and employee theft with Radio Frequency Identification (RFID). Wal-Mart is requiring its top 100 vendors to deliver tagged merchandise by 2005 and other stores are jumping on the bandwagon.
  3. DEPARTMENT STORES
    37.8 percent

    Shoplifting in department stores took a slightly smaller bite out of inventory loss than employee theft, 40 percent. The latter is in part due to the transient and part-time nature of the work force. Department stores are employing larger security staffs and increasingly using technology to combat both problems.
  4. SHOE STORES
    34.6 percent

    Footwear is a popular target for shoplifters. Employees also helped themselves to shoes, accounting for 54.3 percent of shrinkage. Cameras, electronic sensors and frequent inventory checks are helping to shut down the leaky faucet that is employee theft. Better customer service can help deter shoplifting.
  5. SPORTING GOOD STORES
    34.4 percent

    The industry publication Sporting Goods Business called these stores “candy for thieves” because they sell expensive and easily concealed items such as sunglasses, watches and binoculars. Shoplifting and employee theft in 2003 were both above the industry-wide average of 32 percent and 47 percent, respectively.

  6. OPTICAL STORES
    32 percent

    Glasses and sunglasses were a popular target for dishonest employees and sticky-fingered customers. The percentage of merchandise loss due to shoplifting was equal to the average rate for all stores. Total shrinkage in this product category was below the 2003 industry-wide average of 1.1 percent.
  7. DRUGSTORES
    31.6 percent

    Drugstores are easy targets for shoplifters and unscrupulous workers since much of the merchandise is small and easily concealed. Vendor fraud accounted for 15 percent of inventory loss and administrative error was responsible for 13.3 percent. Some drugstore suppliers have started tagging products with antitheft labels prior to shipping.
  8. CARD, GIFT AND NOVELTY STORES
    31.4 percent

    The shoplifting rate at card, gift and novelty stores was just below the 32 percent average for all stores. Inventory loss due to employee theft was 54.3 percent. That’s a lot of birthday cards and Beanie Babies.
  9. DISCOUNT STORES
    30.3 percent

    The most popular items to steal at discount stores are lingerie and compact discs. Chains are coming up to speed on RFID and surveillance techniques. They’re also working to reduce employee theft, which took a 44 percent chunk out of total inventory loss, but was still below the average rate of 47 percent for all types of retail.
  10. OFFICE SUPPLY AND STATIONERY STORES
    30 percent

    Workers pinched paper clips and pilfered pushpins at office supply and stationery stores; employee theft was to blame for half of shrinkage. Office supply and drug stores had the highest rate of inventory loss due to vendor fraud, 15 percent. In general, stores that rely on outside vendors to stock merchandise are most vulnerable to this type of fraud.
  11. AUTO PARTS, TIRE AND ACCESSORIES STORES
    30 percent

    Tucking a tire under a coat may be a bit unwieldy, but someone was stealing lots of chamois and vinyl cleaner. Administrative error had a 20 percent share of total shrinkage. Vendor fraud and employee theft each accounted for 10 percent.
  12. SUPERMARKETS AND GROCERY STORES
    28.8 percent

    Food stores are closing in on shoplifters. Self-checkout technology equipped with electronic article surveillance features — an alarm rings if a shopper tries to leave without paying for a product — is being installed in more and more stores. If the weight of a scanned item doesn’t match the weight in a shopping bag, an attendant is alerted. But stores should also keep an eye on employees, who absconded with 51.3 percent of inventory lost to shrinkage.

  13. CONSUMER ELECTRONICS AND APPLIANCE STORES
    28.8 percent

    Organized shoplifters heavily target a few select retail segments such as electronics and appliance stores. Low pay, which is common in the industry, hurts retention and breeds disloyalty. Best Buy ceo Brad Anderson put his own money in where his mouth is. Anderson, who in 2003 earned $3.2 million in pay, turned 200,000 stock options with a potential value of $7.5 million over to nonexecutive employees.
  14. JEWELRY STORES
    27.5 percent

    Baubles locked behind glass and burly security guards at the doors of jewelry stores discourage gems from leaving in the hands of shoplifters. Administrative error was to blame for 25.7 percent of shrinkage. Put a burly guard inside the vault; employee theft was responsible for 41.2 percent of inventory loss.
  15. HOME CENTERS, HARDWARE AND GARDEN STORES
    22.5 percent

    Hardware and home center chains were ahead of the curve in deploying source tags as theft devices. Chains such as Home Depot, Lowe’s and Wal-Mart also have some of the most sophisticated surveillance systems including digital closed-circuit TVs that detect even the slightest movement near theft-prone items.

SOURCE: UNIVERSITY OF FLORIDA 2003 NATIONAL RETAIL SECURITY SURVEY, FINAL REPORT; RICHARD C. HOLLINGER, PH.D., DIRECTOR, CENTER FOR STUDIES IN CRIMINOLOGY AND LAW; LYNN LANGTON, M.A., GRADUATE RESEARCH ASSOCIATE *SIGNIFIES A TIE