For the first time in four years, the rate of retail loss has increased, according to a new University of Florida retail study. Retail shrinkage, defined as a combination of employee theft, shoplifting, vendor fraud and administrative error, was 1.6 percent of total annual sales in 2005, up from 1.54 percent in 2004, according to the National Retail Security Survey, which analyzed data from 146 of the largest U.S. retail chains.
The annual survey conducted by the University of Florida, with a funding grant from ADT Security Services, found that retailers lost more than $37.4 billion due to theft. "The increase may seem small," says Rex Gillette, vice president of retail national accounts for ADT, "but it reverses a three year downward trend, and even a small percentage increase translates to millions of dollars in additional losses."
"Retail theft really impacts everyone, with the consumer ultimately hurt in the form of higher prices," says Gillette. "Shoplifters also target popular merchandise, which means items on customers' lists are less likely to be available."
One of the biggest findings from this year's survey was the dramatic increase in the average dollar loss per incident. That rose by a whopping, over 320 percent, from $265 per incident in 2003 to $854 per incident in 2005.
Organized Retail Theft (ORT) is the most likely cause for the overall rise and the dramatic per incident increase in retail loss, according to University of Florida criminologist Richard Hollinger, Ph.D., who has directed the National Retail Security Survey for the past 16 years. "ORT, in which criminals work in organized groups to steal merchandise from stores or warehouses, is a growing problem for retailers," says Hollinger.
"The average loss per ORT incident is now more than $46,000. These crime rings work in small organized groups, and they can do a lot of damage in very little time," he adds. "So it looks like that is what is driving up the statistics."
The survey shows that while employee theft is still the largest source of loss for retailers, that proportion is going down. The average loss per incident of employee theft in 2005 was $1,053, down from $1,762 in 2003.
Gillette attributes the decrease in employee theft largely to an increased use of technology by retailers. "There are a number of very good tools for catching and deterring employees from stealing, and retailers are turning more and more to these technologies," he says.
"Cameras monitoring cash registers and storage areas are very effective at limiting an employee's ability to walk away with merchandise. One of the latest technology advances is smart software," he adds, "that can automatically alert security personnel to suspicious activities."
While retailers are beginning to recognize the Organized Retail Theft problem, the survey shows that many are not yet prepared. Only one third of retailers say they are tracking ORT data, and just 10 percent have an ORT task force as part of their loss prevention efforts.
"There is new technology out there for combating Organized Retail Theft, and we are seeing more and more retailers asking for it," Gillette says. "Retailers are especially interested in new intelligent camera systems that pick up unusual behaviors or patterns and can alert store employees to possible organized crime activities." More than 40 percent of the retail chains responding to the survey indicated that they planned to increase their use of digital video recording and video monitoring over the Internet.
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