Don't Call It Shrink

Surveillance technology and security systems are more advanced than ever, but the reality is that retail theft is at an all time high. The National Retail Federation (NRF) estimated in 2007 that retail theft was up to $41.6 billion according to a survey by the NRF and the University of Florida.

Although shrinkage as a percentage of sales stayed nearly the same, total retail dollar losses increased due to higher retail sales in 2006 compared to 2005. Product categories that experienced the highest degrees of shrinkage include cards, gifts and novelties; specialty accessories; and crafts and hobbies.

"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," says Dr. Richard Hollinger, 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."

The survey estimates that the majority of retail shrinkage that occurred last year was due to employee theft, at $19.5 billion, which represents nearly half of losses (47 percent). Shoplifting accounted for $13.3 billion, or about one-third (32 percent) of losses. Other losses included administrative error ($5.8 billion and 14 percent of shrinkage) and vendor fraud ($1.7 billion and four percent of shrinkage).

"Retail theft does not only affect the bottom line," says 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."

A Closer Look at LP
Loss prevention is the retail industry's response to the disappearance of merchandise and currency. The most common causes of shrinkage includes employee theft, shoplifting and paperwork error. Other reasons include business losses, such as robbery, burglary and vandalism.

Despite the large investments that retailers make in loss prevention technology, the numbers show work still needs to be done. Shrink will never be completely eliminated in stores, but retailers can invest in tools that drive shrink rates down. These tools include exception-based reporting and security cameras. According to the NRF survey, most retailers' loss prevention systems include burglar alarms (95.7 percent), visible closed-circuit televisions (87.1 percent) and digital video (84.9 percent). Retailers also use check screening (60.4 percent), armored cars (69.8 percent), operate POS data mining software (69.1 percent), and deploy hidden closed-circuit TV (57.6 percent).

Tween Reduces Store Shrink
Tween Brands, an apparel chain for girls, wanted to reduce shrink in its two brands, Limited Too and Justice. To help with this effort, it implemented Micros-Retail's XBR Loss Prevention and Store Analytics and went live in spring 2007. The system was deployed at the corporate office and made accessible to users via the Web.

Since deployment,  the retailer estimated that case volume increased 27 percent over the previous year. Per-unit loss hit the lowest percentage it had in seven years.

"During our first year using XBR, we showed significant reductions in shrink both as a percent of sales and in terms of unit shrink," says Rob LaCommare, director of loss prevention at Tween Brands. 

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