Retail Losses Hit $41.6 Billion Last year

Even though shrinkage as a percentage of sales stayed virtually the same, total retail losses increased last year to $41.6 billion due to higher retail sales in 2006 compared to 2005, according to preliminary results of a National Retail Federation survey.

“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,” said Dr. Richard Hollinger, lead author of the report and a criminology professor at the University of Florida. “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.”

According to the 15th annual National Retail Security Survey, the majority of retail shrinkage last year hit was due to employee theft, at $19.5 billion, which represented 47 percent of losses. Shoplifting accounted for $13.3 billion, or about 32 percent, of losses. Other losses included administrative error ($5.8 billion and 14% of shrinkage) and vendor fraud ($1.7 billion and 4% of shrinkage).

The survey suggests that the phenomenon of organized retail crime is gaining more awareness within the industry. As retailers’ understanding regarding the impact of these crimes continues to grow, roughly half of companies say they are now tracking organized retail crime activity.

To combat criminals’ brazen actions, retailers have been investing in new technologies to deter, detect and convict criminals. According to the survey, most retailers’ loss prevention systems include burglar alarms (95.7%), visible closed circuit televisions (87.1%), and digital video (84.9%). Retailers also conduct check screening (60.4%), use armored cars (69.8%), operate point of sale data mining software (69.1%), and hidden closed circuit televisions (57.6%)

Product categories that experienced the highest degrees of shrinkage include cards; gifts and novelties; specialty accessories; crafts and hobbies; and supermarket and grocery items.

The annual survey of loss prevention executives benchmarks retail shrinkage and operational information about how retailers are combating losses. The study, which surveyed 139 retailers in the first half of 2007 and uses data from 2006, is a partnership between the University of Florida and the National Retail Federation.

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