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Cost of retail crime skyrockets nearly 30 percent

Maria Korolov | Nov. 10, 2014
Overall jump linked to increase in employee theft and higher security spending.

retail theft
Credit: Checkpoint / GRTB

Higher proportions of employee theft and shoplifting as a share of all retail losses, combined with higher spending on loss prevention, resulted in a 27 percent increase of the cost of retail crime in the United States, according to the latest global theft report.

The US also had the third-highest shrinkage rate of any country in the world, according to the latest Global Retail Theft Barometer released Thursday by underwriter Checkpoint Systems and Chicago-based research firm The Smart Cube. Shrinkage includes not only theft but also other losses, such as accounting and pricing mistakes, and does not include prevention costs.

Of the 22 countries surveyed, Mexico had the highest shrinkage rate, at 1.7% of total retail revenues, followed by China at 1.53% and the U.S. at 1.48%. Norway reported the lowest shrinkage rates, at 0.83%.

One contributing factor is that many other countries spend significantly more on loss prevention, according to the report.

In 2013, the U.S. spent just 0.42% on retail loss prevention, or about half of the global average of 0.80%.

"While still spending much less than other countries, US retailers increased their spending on loss prevention this year, resulting in an increased cost of retail crime," Ranjan Arora, a researcher at The Smart Cube, told CSO Online.

The optimal level of cost prevention spending was around 0.91%, which resulted in an average shrinkage rate of around 1.15%, according to retail loss prevention analyst Ernie Deyle.

"The US witnessed a slight improvement in shrinkage this year," said Arora. "However, the share of crime-related losses increased, especially dishonest employee thefts, making it the biggest source of shrinkage."

Globally, shrinkage rates fell 5%, from 1.36% in 2012 to 1.29% in 2013.

According to the report, part of the reason is better tracking, allowing retailers to know exactly which merchandise has the highest shrinkage, allowing them to take very specific steps.

In addition, in some regions loss prevention is a key business issue.

"in some countries, such as Spain, universities have introduced special courses to provide education on the subject," said the report. "Retailers are also aware of the need for store employee training and are starting to invest in online training for employees at point of sales in supermarkets for instance."

North America also stood out as the region with the highest proportion of employee thefts, where this type of loss accounted for 43% of all shrinkage. By comparison, employee theft accounted for 24% of shrinkage in Latin America, 22% in Europe, and 16% in Asia-Pacific. 

"Dishonest and fraudulent employees were responsible for $18.01 billion by value of shrinkage," said the report. "Key reasons of dishonest employee theft include ineffective pre-employment screening, less employee supervision, and easy sale of stolen merchandise."


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