Retail losses from theft and fraud have reached an all time high. In 2006, companies lost 1.61 percent of sales to theft and fraud, according to the National Retail Security Survey, released during the National Retail Federation's Loss Prevention Conference and EXPO in San Diego this summer.
That proportion is nearly unchanged from 1.6 percent in 2005. 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.
"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 survey, the majority of retail shrinkage last year was due to employee theft, at $19.5 billion, which represented 47 percent of losses. Shoplifting accounted for $13.3 billion. On top of this, administrative error accounted for $5.8 billion, or 14 percent, of shrinkage. Vendor fraud accounted for another $1.7 billion.
The survey suggests that the phenomenon of organized retail crime is gaining more awareness. As retailers' understanding regarding the impact of these crimes continues to grow, roughly half of companies said 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, an overwhelming 95.7 percent of retailers' loss prevention systems include burglar alarms, 87.1 percent use visible closed circuit televisions, and 84.9 percent employ digital video.
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 National Retail Security Survey, now in its fifteenth year, is an annual survey of loss prevention executives that benchmarks retail shrinkage and operational information about how retailers are combating losses.
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