Global Theft Costs Retailers and Consumers US$104 Billion Annually
HONG KONG, Nov. 12 /Xinhua-PRNewswire-AsiaNet/ --
Cost Represents an Annual 'Tax' on Honest Consumers of Nearly US$230 Per
Household
The level of global retail theft reached $104.5 billion in the past year,
leading to increased costs for both retailers and consumers alike. The second
annual Global Retail Theft Barometer found that while global retail shrink as a
percentage of total sales has declined slightly in the past 12 months, the
overall cost of retail crime has increased substantially.
"The cost of retail shrink is not just borne by retailers, but by consumers
and society at large", said Rob van der Merwe, President and CEO of Checkpoint
Systems, Inc., which sponsored the study. "Shrink is a serious threat to
retailers' bottom lines, and amounts to a hidden 'tax' on consumers who are
already dealing with the strain of tightening household budgets during the
economic downturn."
The Global Retail Theft Barometer (GRTB) is an annual survey conducted by the
Centre for Retail Research in Nottingham, UK, and sponsored by Checkpoint
Systems. This year's survey, the most complete analysis of global shrink ever
conducted, reports key findings on retail shrinkage and crime in 36 countries and
on five continents, based on data from a confidential survey of 920 large
retailers with combined sales of U.S. $814 billion and 115,612 operating retail
outlets. All figures in the report relate to the twelve-month period ending in
June 2008.
Global Costs of Retail Crime
Global retail shrinkage (stock loss from crime or waste expressed as a
percentage of sales) cost retailers $104.5 billion over the past year, equivalent
to 1.34% of retail sales. In North America, shrink totaled $42.338 billion, or
1.48% of sales, with the U.S. accounting for the majority of that figure.
While the global figure represents a marginal decline in shrinkage of $1.56
billion (-1.5%) compared to 2007, due in part to the increase in survey
respondents and a slight decline in shrink, the overall cost of crime to
retailers has increased by $4.7 billion since last year. The cost of retail
crime, calculated on the basis of crimes by customers, employees and
suppliers/vendors (excluding internal error), plus the costs of loss prevention,
were $112.78 billion in 2008, compared to $108.1 billion last year.
"This sum represents a tax imposed on honest people by retail criminals of
$229.73 per household, or $71.12 for every individual person in the 36 countries
surveyed", said Professor Bamfield, Director of the Centre for Retail Research.
Who's to Blame?
Employee theft is the largest source of shrinkage for retailers in North
America and Latin America (46.3% and 42.0%, respectively), while customer theft
is the leader in the Asia-Pacific region and Europe (53.8% and 46.8%,
respectively).
Globally, customer theft, including shoplifting and organized retail crime,
remained the largest source of shrinkage loss in most individual countries,
totaling more than $43 billion (41.2% of total shrinkage). Employee theft
accounted for 36.5% of shrinkage ($38.15 billion), while supplier/vendor theft
and supply chain fraud represented 5.8% of shrinkage ($6.09 billion). Internal
errors and administrative failures (such as pricing, process or accounting
mistakes) accounted for 16.5% of loss ($17.22 billion).
The level of customer theft is increasing in North America and Asia-Pacific,
where the percentage of customer shrink has increased 3.1% and 2.3%,
respectively. In contrast, employee theft in Europe rose from 28.6% to 30.5% in
this period.
Retailers reported that stolen merchandise accounted for 38.4% (or $14.6
billion) of internal fraud, while almost one-quarter (23.8%) of internal losses
were in the form of stolen cash, coupons, vouchers or gift cards (more than $9
billion).
Current loss prevention systems and processes helped retailers apprehend
nearly 5.3 million customer and employee thieves in 2007-2008, the majority of
which were customers (84.6%). The average amount stolen or admitted per customer
theft incident was $328. Employee theft sums were more than 5.6 times greater per
incident, averaging $1,842. The total value recovered, including customer and
employee theft, was $3 billion.
"The primary role of most Shrink Management Systems is to create a strong
deterrence for theft by making the risk and reward analysis less attractive for
would-be thieves", said Per Levin, President, Shrink Management Solutions,
Checkpoint Systems. "People are used to a certain 'lifestyle' and will try to
maintain it even if they lose their job or find themselves with a lower paying
job due to the recession. The reported $3 billion recovered from over 5 million
individuals sends a strong deterrence message to society at large. In the next
few years, systems and processes will need constant improvements to increase the
risk of detection for likely thieves."
Retailers in Europe and North America apprehended the largest numbers of
thieves (2.8 million and 2.1 million, respectively), with North America reporting
the largest percentage of employee thieves at 32.3%.
Refund frauds and false markdowns rose substantially, comprising 19.7% of
internal fraud ($7.5 billion) -- an increase of 34% since last year. Collusion
represented 10.3% of losses ($3.9 billion). Large financial frauds, also on the
rise, accounted for 7.8% of internal fraud ($2.97 billion).
North America also reported the highest average dollar amount stolen by
customers, at $747 per incident. The high average in North America is thought to
reflect the impact of organized retail crime. Average amounts stolen per
apprehension in other regions are much lower -- $108 in Europe and $35 in Africa,
for example. However, in Europe the average amount stolen per employee thief was
$3,145 (compared to $1,391 in North America). In Asia-Pacific, the average amount
stolen by employees was $395.
"With the uncertainty surrounding our current climate, we believe the
industry can learn quite a bit from the data revealed in this year's GRTB", noted
van der Merwe. "We suspect the increase in organized retail theft uncovered in
the study could be directly attributed to the downturn in our economy."
Most Vulnerable Merchandise
"Another interesting fact revealed in the survey is that retailers on average
provided no specific protection for almost one-third (30.3%) of their top fifty
most-stolen product lines", continued van der Merwe. "This represents an
immediate opportunity for improvement. As the recession increases pressure on
shrink, we are partnering with retailers to help solve their biggest challenges.
Most of them see the need to improve their shrink management programs and it is
critical to develop a targeted approach for the most vulnerable products to
protect their bottom lines in 2009."
Thieves are remarkably consistent in their choice of goods, regardless of
geographic region, favouring merchandise such as razor blades/shaving products,
cosmetics/face creams/perfumes, alcohol, fresh meat/expensive foodstuffs, infant
formula, CDs and DVDs, fashion, electronic games, cellular phones and watches.
Retailers estimated that on average they lost between 2% and 5% of new
product lines to theft. Popular products such as the Harry Potter books,
electronic games, and recent DVDs reached loss levels of up to 8%, causing supply
shortages.
Loss Prevention and Impact of EAS Technology
Global loss prevention costs were $25.47 billion or 0.33% of retail sales, a
decline from last year's 0.35%.
Electronic article surveillance (EAS) was the main method of protecting high-
theft items (used for 38.3% of product lines). Other means of protection included
keepers/safers, display in locked cabinets or locked shelves, cables or loop
alarms, and dummy cartons or ticket systems (4.1%).
North American and Latin American retailers had higher loss prevention costs
as a percentage of sales (0.43%) compared to their counterparts in other regions,
and were more likely to utilize EAS technology.
EAS was used in North America and Latin America for 43.5% of vulnerable
lines, compared to 36% in Europe and 31.3% in Asia-Pacific/Africa. EAS source
tagging was used on 13.7% of vulnerable lines in North America and Latin America,
compared to 7.9% in Europe and 3.6% in Asia-Pacific/Africa.
"We hope retailers will use this year's Global Retail Theft Barometer as a
tool to better understand current global shrink trends", concluded van der Merwe.
"During a weak economic climate, shrink is more likely to increase, so it is even
more important for retailers to remain vigilant. Our goal in sponsoring this
report is to help the retail industry and loss prevention professionals formulate
new and more advanced responses to combat shrink in an ever-changing global
economy."
The Survey
A total of 212 corporations in North America (combined sales of $328
billion), 502 from Europe ($416 billion sales), 131 from Asia-Pacific ($52
billion), 57 from Latin America ($14 billion) and 18 from Africa ($3.3 billion)
responded to the questionnaire sent to 3,900 major retailers covering all major
types of retail business in the 36 countries surveyed. The response rate was
23.6%. This year, the survey was also expanded to include data from Argentina,
Brazil, Mexico, South Africa and Malaysia.
The Centre For Retail Research
The second edition of the Global Retail Theft Barometer has been produced by
Professor Joshua Bamfield, Director of the Centre for Retail Research (
The CRR is an independent organization providing research and consultancy for the
retail sector dealing with the changing face of retailing and focusing upon
retail fraud and crime. It has carried out extensive studies dealing with the
costs of crime and the application of electronic and computerized systems to
combat shop theft and fraud in many parts of the world.
Checkpoint Systems, Inc.
Checkpoint Systems, Inc. is the leading supplier of retail shrink management
solutions. Checkpoint's global team helps retailers -- and their suppliers --
reduce theft, increase inventory visibility and provide consumers with greater
merchandise availability through the company's rapidly evolving RF technology,
expanding shrink management offerings and Check-Net labeling solutions. Listed on
the NYSE (NYSE: CKP), Checkpoint operates in every major geographic market and
employs 3,900 people worldwide. For more information, visit
Notes for Editors/Producers: For additional information, a PDF of the report,
theft images for TV, pictures and interviews, please contact Checkpoint's press
relations department mentioned above.
For additional information, contact:
Natalie Chan
Checkpoint Systems
Tel: +852-2995-8350
Email: Natalie.chan@checkpt.com
SOURCE Checkpoint Systems
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