Retailers Reach Record in Losses Due to Theft and Fraud

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Retailers Reach Record in Losses Due to Theft and Fraud

SAN DIEGO -- Despite a continuing investment in new programs and technology to combat crime in stores, retailers' dollar losses from theft and fraud reached an all-time high of $41.6 billion in 2006, according to a national retail security survey conducted by the National Retail Federation (NRF) and the University of Florida.

Companies' retail shrinkage -- defined as inventory losses occurring from employee theft, shoplifting, organized retail crime, administrative error and vendor fraud -- averaged 1.61 percent of retail sales in 2006, according to the survey.

Shrinkage as a percentage of sales stayed virtually the same between 2006 and 2005, increasing 0.01 percent. Meanwhile, total retail losses increased due to higher retail sales in 2006 compared to 2005, the survey found.

"Though total retail losses continue to rise in correlation with industry sales, it is encouraging that shrinkage as a percentage of sales has stayed flat," Dr. Richard Hollinger, lead author of the report and a criminology professor at the University of Florida, said in a written statement. "Retailers seem to be putting a dent in the amount of criminal activity in their stores, though they acknowledge they have a lot of work left to do."

The majority of retail shrinkage was due to employee theft, at $19.5 billion, making up 47 percent of losses, according to the survey. Shoplifting accounted for $13.3 billion, or 32 percent of losses. Administrative error -- totaling $5.8 billion and 14 percent of shrinkage -- and vendor fraud -- $1.7 billion and 4 percent of shrinkage -- also contributed to retail shrinkage.

In addition, the survey stated that organized retail crime is gaining more awareness within the retail industry. Nearly half of companies surveyed stated they are now tracking organized retail crime activity, according to the survey.

To fight crime in stores, retailers have embraced new technology. Security measures in place at retailers include: burglar alarms (95.7 percent); visible closed circuit televisions (87.1 percent); digital video (84.9 percent); check screening (60.4 percent); armored cars (69.8 percent); point-of-sale data mining software (69.1 percent), and hidden closed-circuit televisions (57.6 percent).

"Retail theft does not only affect the bottom line," said Joe LaRocca, NRF's vice president of loss prevention. "When criminals steal from retailers, consumers pay higher prices, the safety of innocent employees can be compromised, and shoppers looking for popular merchandise often cannot find it. Retailers will continue to invest in new technologies to prevent and prosecute crimes."

Further, product categories that saw the most retail shrinkage include cards, gifts and novelties; specialty accessories; crafts and hobbies, and supermarket and grocery items.