Global Theft Costs Retailers and Consumers US$104 Billion Annually


By: Jim Kouri, CPP

The level of global retail theft reached $104.5 billion in the past year, leading to increased costs for both retailers and consumers alike. The second annual Global Retail Theft Barometer found that while global retail shrinkage as a percentage of total sales has declined slightly in the past 12 months, the overall cost of retail crime has increased substantially.

“The cost of retail shrinkage is not just borne by retailers, but by consumers and society at large,” said Rob van der Merwe, President and CEO of Checkpoint Systems, Inc., which sponsored the study. “Shrinkage is a serious threat to retailers’ bottom lines, and amounts to a hidden ‘tax’ on consumers who are already dealing with the strain of tightening household budgets during the economic downturn.”

The Global Retail Theft Barometer (GRTB) is an annual survey conducted by the Center for Retail Research in Nottingham, UK, and sponsored by Checkpoint Systems. This year’s survey, the most complete analysis of global shrink ever conducted, reports key findings on retail shrinkage and crime in 36 countries and on five continents, based on data from a confidential survey of 920 large retailers with combined sales of US $814 billion and 115,612 operating retail outlets. All figures in the report relate to the twelve-month period ending in June 2008.

Global Costs of Retail Crime

Global retail shrinkage (stock loss from crime or waste expressed as a percentage of sales) cost retailers $104.5 billion over the past year, equivalent to 1.34% of retail sales. In North America, shrink totaled $42.338 billion, or 1.48% of sales, with the US accounting for the majority of that figure.

While the global figure represents a marginal decline in shrinkage of $1.56 billion (-1.5%) compared to 2007, due in part to the increase in survey respondents and a slight decline in shrink, the overall cost of crime to retailers has increased by $4.7 billion since last year. The cost of retail crime, calculated on the basis of crimes by customers, employees and suppliers/vendors (excluding internal error), plus the costs of loss prevention, were $112.78 billion in 2008, compared to $108.1 billion last year.

“This sum represents a tax imposed on honest people by retail criminals of $229.73 per household, or $71.12 for every individual person in the 36 countries surveyed,” said Professor Bamfield, Director of the Center for Retail Research.

Who’s to Blame?

Employee theft is the largest source of shrinkage for retailers in North America and Latin America (46.3% and 42.0%, respectively), while customer theft is the leader in the Asia-Pacific region and Europe (53.8% and 46.8%, respectively).

Globally, customer theft, including shoplifting and organized retail crime, remained the largest source of shrinkage loss in most individual countries, totaling more than $43 billion (41.2% of total shrinkage). Employee theft accounted for 36.5% of shrinkage ($38.15 billion), while supplier/vendor theft and supply chain fraud represented 5.8% of shrinkage ($6.09 billion). Internal errors and administrative failures (such as pricing, process or accounting mistakes) accounted for 16.5% of loss ($17.22 billion).

The level of customer theft is increasing in North America and Asia-Pacific, where the percentage of customer shrink has increased 3.1% and 2.3%, respectively. In contrast, employee theft in Europe rose from 28.6% to 30.5% in this period.

Retailers reported that stolen merchandise accounted for 38.4% (or $14.6 billion) of internal fraud, while almost one-quarter (23.8%) of internal losses were in the form of stolen cash, coupons, vouchers or gift cards (more than $9 billion).

Current loss prevention systems and processes helped retailers apprehend nearly 5.3 million customer and employee thieves in 2007-2008, the majority of which were customers (84.6%). The average amount stolen or admitted per customer theft incident was $328. Employee theft sums were more than 5.6 times greater per incident, averaging $1,842. The total value recovered, including customer and employee theft, was $3 billion.

“The primary role of most Shrink Management Systems is to create a strong deterrence for theft by making the risk and reward analysis less attractive for would-be thieves,” said Per Levin, President, Shrink Management Solutions, Checkpoint Systems. “People are used to a certain ‘lifestyle’ and will try to maintain it even if they lose their job or find themselves with a lower paying job due to the recession. The reported $3 billion recovered from over 5 million individuals sends a strong deterrence message to society at large. In the next few years, systems and processes will need constant improvements to increase the risk of detection for likely thieves.”

Retailers in Europe and North America apprehended the largest numbers of thieves (2.8 million and 2.1 million, respectively), with North America reporting the largest percentage of employee thieves at 32.3%.

Refund frauds and false markdowns rose substantially, comprising 19.7% of internal fraud ($7.5 billion) — an increase of 34% since last year. Collusion represented 10.3% of losses ($3.9 billion). Large financial frauds, also on the rise, accounted for 7.8% of internal fraud ($2.97 billion).

North America also reported the highest average dollar amount stolen by customers, at $747 per incident. The high average in North America is thought to reflect the impact of organized retail crime. Average amounts stolen per apprehension in other regions are much lower — $108 in Europe and $35 in Africa, for example. However, in Europe the average amount stolen per employee thief was $3,145 (compared to $1,391 in North America). In Asia-Pacific, the average amount stolen by employees was $395.

“With the uncertainty surrounding our current climate, we believe the industry can learn quite a bit from the data revealed in this year’s GRTB,” noted van der Merwe. “We suspect the increase in organized retail theft uncovered in the study could be directly attributed to the downturn in our economy.”

Most Vulnerable Merchandise

“Another interesting fact revealed in the survey is that retailers on average provided no specific protection for almost one-third [30.3%] of their top fifty most-stolen product lines,” continued van der Merwe. “This represents an immediate opportunity for improvement. As the recession increases pressure on shrink, we are partnering with retailers to help solve their biggest challenges. Most of them see the need to improve their shrink management programs and it is critical to develop a targeted approach for the most vulnerable products to protect their bottom lines in 2009.”

Thieves are remarkably consistent in their choice of goods, regardless of geographic region, favoring merchandise such as razor blades/shaving products, cosmetics/face creams/perfumes, alcohol, fresh meat/expensive foodstuffs, infant formula, CDs and DVDs, fashion, electronic games, cellular phones and watches.

Retailers estimated that on average they lost between 2% and 5% of new product lines to theft. Popular products such as the Harry Potter books, electronic games, and recent DVDs reached loss levels of up to 8%, causing supply shortages.

Loss Prevention and Impact of EAS Technology

Global loss prevention costs were $25.47 billion or 0.33% of retail sales, a decline from last year’s 0.35%.

Electronic article surveillance (EAS) was the main method of protecting high-theft items (used for 38.3% of product lines). Other means of protection included keepers/safers, display in locked cabinets or locked shelves, cables or loop alarms, and dummy cartons or ticket systems (4.1%).

North American and Latin American retailers had higher loss prevention costs as a percentage of sales (0.43%) compared to their counterparts in other regions, and were more likely to utilize EAS technology.

EAS was used in North America and Latin America for 43.5% of vulnerable lines, compared to 36% in Europe and 31.3% in Asia-Pacific/Africa. EAS source tagging was used on 13.7% of vulnerable lines in North America and Latin America, compared to 7.9% in Europe and 3.6% in Asia-Pacific/Africa.

“We hope retailers will use this year’s Global Retail Theft Barometer as a tool to better understand current global shrink trends,” concluded van der Merwe. “During a weak economic climate, shrink is more likely to increase, so it is even more important for retailers to remain vigilant. Our goal in sponsoring this report is to help the retail industry and loss prevention professionals formulate new and more advanced responses to combat shrink in an ever-changing global economy.”

The Survey

A total of 212 corporations in North America (combined sales of $328 billion), 502 from Europe ($416 billion sales), 131 from Asia-Pacific ($52 billion), 57 from Latin America ($14 billion) and 18 from Africa ($3.3 billion) responded to the questionnaire sent to 3,900 major retailers covering all major types of retail business in the 36 countries surveyed. The response rate was 23.6%. This year, the survey was also expanded to include data from Argentina, Brazil, Mexico, South Africa and Malaysia.

Retail Research

The second edition of the Global Retail Theft Barometer has been produced by Professor Joshua Bamfield, Director of the Center for Retail Research ( http://www.retailresearch.org/ ) with the cooperation of Checkpoint Systems, Inc. The CRR is an independent organization providing research and consultancy for the retail sector dealing with the changing face of retailing and focusing upon retail fraud and crime. It has carried out extensive studies dealing with the costs of crime and the application of electronic and computerized systems to combat shop theft and fraud in many parts of the world.

Checkpoint Systems, Inc. is the leading supplier of retail shrink management solutions. Checkpoint’s global team helps retailers — and their suppliers — reduce theft, increase inventory visibility and provide consumers with greater merchandise availability through the company’s rapidly evolving RF technology, expanding shrink management offerings and Check-Net labeling solutions. Listed on the NYSE (NYSE:CKP) , Checkpoint operates in every major geographic market and employs 3,900 people worldwide. For more information, visit http://www.checkpointsystems.com/ .



Jim Kouri, CPP is currently fifth vice-president of the National Association of Chiefs of Police and he’s a staff writer for the New Media Alliance (thenma.org). In addition, he’s the new editor for the House Conservatives Fund’s weblog. Kouri also serves as political advisor for Emmy and Golden Globe winning actor Michael Moriarty.

He’s former chief at a New York City housing project in Washington Heights nicknamed “Crack City” by reporters covering the drug war in the 1980s. In addition, he served as director of public safety at a New Jersey university and director of security for several major organizations. He’s also served on the National Drug Task Force and trained police and security officers throughout the country. Kouri writes for many police and security magazines including Chief of Police, Police Times, The Narc Officer and others. He’s a news writer for TheConservativeVoice.Com and PHXnews.com. He’s also a columnist for AmericanDaily.Com, MensNewsDaily.Com, MichNews.Com, and he’s syndicated by AXcessNews.Com. He’s appeared as on-air commentator for over 100 TV and radio news and talk shows including Oprah, McLaughlin Report, CNN Headline News, MTV, Fox News, etc. His book Assume The Position is available at Amazon.Com. Kouri’s own website is located at http://jimkouri.us

About The Author Jim Kouri, CPP:
Jim Kouri, CPP is currently fifth vice-president of the National Association of Chiefs of Police and he's a columnist for The Examiner (examiner.com) and New Media Alliance (thenma.org). In addition, he's a blogger for the Cheyenne, Wyoming Fox News Radio affiliate KGAB (www.kgab.com). Kouri also serves as political advisor for Emmy and Golden Globe winning actor Michael Moriarty. He's former chief at a New York City housing project in Washington Heights nicknamed "Crack City" by reporters covering the drug war in the 1980s. In addition, he served as director of public safety at a New Jersey university and director of security for several major organizations. He's also served on the National Drug Task Force and trained police and security officers throughout the country. Kouri writes for many police and security magazines including Chief of Police, Police Times, The Narc Officer and others. He's a news writer and columnist for AmericanDaily.Com, MensNewsDaily.Com, MichNews.Com, and he's syndicated by AXcessNews.Com. Kouri appears regularly as on-air commentator for over 100 TV and radio news and talk shows including Fox News Channel, Oprah, McLaughlin Report, CNN Headline News, MTV, etc. To subscribe to Kouri's newsletter write to COPmagazine@aol.com and write "Subscription" on the subject line.
Website:http://jimkouri.us

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