Survey Finds Shoplifting And Employee Theft Cost Retailers Billions

November 26, 1997

GAINESVILLE — The nation’s retailers lost an estimated $25.7 billion last year from employee theft, shoplifting, administrative error and vendor fraud, according to the seventh annual National Retail Security Survey. The survey of retail security executives by researchers at the University of Florida was released today.

The losses, known as inventory shrinkage, were 1.77 percent of total 1996 retail sales, down slightly from the year before, according to the survey. Employee theft made up 41.4 percent of the total losses, shoplifting 35.1 percent, administrative error 17.6 percent and vendor fraud 5.9 percent.

With more than three-quarters of the losses coming from employee theft and shoplifting, survey respondents said hi-tech electronic systems to monitor employees and merchandise were more likely to be used in the coming year.

“The survey respondents tended to show greatest interest in the newer, more technologically advanced alternatives,” said Richard C. Hollinger, director of UF’s Security Research Project, which conducts the survey.

“The national retail market is extremely competitive, and retailers appear to be looking to sophisticated electronic systems to reduce losses and increase profit margins,” Hollinger added. Closed circuit televisions at the registers and electronic security tags embedded in products and packaging by the manufacturer were among the “hottest new items,” the survey said.

“More retailers and vendors are starting to have security labels installed at the manufacturer by embedding them in the product itself or in primary packaging” said Joe Ryan, vice president of Global Source Tagging for Sensormatic Electronics Corp., theworld’s leading manufacturer of electronic security systems. “This process, called source tagging, is one of the fastest growing areas of retail security.”

Although observation mirrors, cables, locks and chains, and armed security guards still were among the most common deterrent strategies, they also were among those most likely to see decreased usage in the next year, the survey said.

One of the most dramatic findings of the survey was a 42 percent increase in the number of empty packaging found on shelves, from 893.6 to 1,270 empty boxes per $100 million sales. For example, a large discounter with $34 billion in annual sales could have as many as 431,800 empty packages found in its stores in a year’s time.

Ryan of Sensormatic said the increase in empty boxes was evidence of shoplifters’ increasing efforts to defeat anti-shoplifting labels applied to the outside of packages that sound alarms if removed from the store without being deactivated.

Among the survey highlights:

Some of the highest losses were reported for books, cards, gifts and novelties, as well as toys and hobbies, while some of the lowest were reported for furniture, optical items and consumer electronics.

Above-average losses were reported in women’s apparel, while below-average losses were reported in men’s apparel.

Retailers reported apprehending an average of 256 shoplifters per $100 million in sales but only 32.8 employee theft apprehensions per $100 million.

Retailers lost an average of $172.28 per shoplifting incident, compared with $919.29 per employee theft incident.

Retailers were nearly nine times more likely to seek prosecution of shoplifters (109 prosecutions per $100 million in sales) than cases of employee theft (12.5 prosecutions per $100 million).

The survey was based on 227 anonymous responses to a questionnaire returned by a cross section of retailers representing 24 different marketing categories. The typical respondent was a larger retail firm, but researchers said the poll of respondents was typical of the size and distribution of retailers in the United States.
Retail market segments reporting above-average shrinkage percentages were books and magazines (4.12 percent); cards, gifts and novelties (2.69 percent); toys and hobbies (2.44 percent); jewelry (2.27 percent); cameras (2.05 percent); shoes (2.02 percent) and women’s apparel (1.96 percent). Market segments reporting below-average shrinkage were men’s apparel (1.70 percent); household furnishings (1.69 percent); full-line department stores (1.60 percent); discount stores (1.58 percent); sporting goods (1.55 percent); convenience stores (1.52 percent); supermarket and grocery (1.47 percent); liquor, wine and beer (1.28 percent); consumer electronics (0.9); optical (0.7) and furniture (0.32).

The University of Florida’s Security Research Project mission is to provide a reliable and unbiased source of research, statistics and information on topics related to private security and retail loss prevention.

Sensormatic provided principal financial support for the survey project in the form an unrestricted research grant. Sensormatic is the world leader in providing electronic security systems to retail, commercial and industrial markets.