Shrink costs the world’s retailers $98.6 billion

Large figure equivalent to an annual ‘tax” on honest consumers of $287.70 per household
in the U.S. and Europe

The first edition of the Global Retail Theft Barometer, conducted by the Centre for Retail Research in Nottingham, United Kingdom, and sponsored by Checkpoint Systems, Inc., offers the first attempt to put a price tag on retail theft across the globe. The study reveals new facts about actual levels of retail shrinkage and crime in 32 countries around the world, including 25 countries in Western and Central Europe, as well as the U.S., Canada, Australia, India, Japan, Singapore and Thailand.

Eight hundred and twenty retail companies, operating 138,603 stores with sales of U.S. $948 billion, provided the data used in this study. The retailers taking part represented 16% of total European retail sales, 13% of North American retail sales and 5% retail sales in Asia-Pacific.

The results from the 32 countries surveyed show that global retail shrinkage (stock loss from crime or waste expressed as a percentage of retail sales) cost retailers $98.6 billion, representing an annual ‘tax’ on honest consumers of $287.70 per household in the U.S. and Europe.

At the same time, the global costs of retail crime (the cost of theft by customers, disloyal employees, and suppliers and vendors, plus the cost of loss prevention) were $108.1 billion.

The largest source of shrinkage was Customer theft (shoplifting), responsible for 42.0% of losses, or $41.5 billion. Employee theft accounted for 35.2% ($34.6 billion), while 16.5% ($16.2 billion) of the global cost was caused by internal errors and administrative failures (e.g., pricing or accounting mistakes). Supplier or vendor theft and fraud are responsible for the remaining 6.3% ($6.2 billion). In the U.S., Canada and Australia, retailers reported that employee theft was higher than theft committed by customers.

The largest source of shrinkage was Customer theft (shoplifting), responsible for 42.0% of losses, or $41.5 billion. Employee theft accounted for 35.2% ($34.6 billion), while 16.5% ($16.2 billion) of the global cost was caused by internal errors and administrative failures (e.g., pricing or accounting mistakes). Supplier or vendor theft and fraud are responsible for the remaining 6.3% ($6.2 billion). In the U.S., Canada and Australia, retailers reported that employee theft was higher than theft committed by customers.

Retailers have apprehended almost 6 million store thieves during this year, and 87.5% of these thieves were customers. North American retailers apprehended the largest number of employee thieves, while the majority of customer thieves (3,481,490) were caught in Europe.

“The results show that in all countries there are retailers who have managed to reduce shrink, while shrink has risen for others, regardless of regional location," explains Joshua Bamfield, Director of the Centre for Retail Research. “This suggests that lower rates are the outcome of strategy, policy and investment, not of factors related to the national environment.”

“The phenomenon of shrink must be taken seriously in the context of a global economy,” notes George Off, CEO, Checkpoint Systems, Inc. “Shrink cost has an immediate impact on the margins of the global retail industry - an industry on which the world’s economy, particularly in many developing or recently developed regions, depends for growth and stability. Retailers worldwide are coming to the same conclusion: investing in shrink management solutions is seen as a priority and can provide a significant return on investment.”

The Most Frequently Stolen Merchandise From Global Retailers

Top 5 Merchandise            N. America            Europe            Asia-Pacific

1. Cosmetics & Skincare            Alcohol            Alcohol

2. Ladies’ Apparel            Cosmetics & Skincare            Cosmetics & Skincare

3. Perfumes & Fine Fragrances            Ladies' Apparel            Ladies’ Apparel

4.Alcohol            Perfumes & Fine Fragrances            Perfumes & Fine Fragrances

5.Designer Apparel            Razor Blades High Cost & Specialty Food (e.g. meat, cheese, seafood)

Internal Theft

North American retailers apprehended a larger total and proportion of employee thieves than retailers elsewhere. The number of retail thieves in North America was 2.3 million (28.6% were fraudulent employees). Asia-Pacific retailers apprehended 110,000 thieves (9.1% of which were dishonest employees) and European retailers apprehended 3.55 million thieves (only 1.9% of which were dishonest employees).

The average cost of admitted or proven theft for shoplifters in North America was $622. In Europe and Asia-Pacific it was $112 and $54 respectively. However, the average employee theft incident in Europe cost $5,145 (reflecting large financial frauds), compared with $206 for employee thieves apprehended by Asia-Pacific retailers. During the survey period, theft and fraud by employees (internal fraud) cost U.S. retailers $18.3 billion and Canadian retailers $1.6 billion.

Responses from U.S. retailers indicated that 24.6% of internal theft was believed to take place at the checkout or cash desk, 43.2% on the sales floor, and 32.2% in the back office, delivery bay or stockroom.