Study: Retail shrink topped $50B in 2018, remained flat as a percentage of overall sales

According to the annual National Retail Security Survey conducted by researchers at the University of Florida in partnership with the National Retail Federation, retail shrink totaled $50.6 billion in 2018, which is up from $46.8 billion the previous year. However, overall shrink averaged 1.38 percent of sales last year, up slightly from 1.33 percent in 2017, but the rate has held around 1.4 percent over the past few years.

So while the dollar amount loss from shrink has increased – due primarily to an overall growth in retail sales – the study, which was sponsored by Appriss Retail, found that shrink percentage calculated at retail has largely been unchanged since FY 2014, despite increasing opportunities and avenues for theft.

Among these new avenues include cyber-related crimes and fraud schemes. In fact, 30 percent of respondents to the survey, which polled more than 60 loss prevention and asset protection executives from a variety of retail sectors earlier this year, reported that their largest increase in fraud is happening with online sales while another 22 percent said that it was occurring with multi-channel sales, such as when a purchase is made online and picked up in store. Additionally, of the challenges that have increased in priority for LP teams over the past five years, cyber-related incidents are the top issue, according to 68 percent of those surveyed, followed closely by e-commerce crimes which was noted by 65 percent of respondents.

Despite the fact that nearly 89% of respondents felt there is increasing overlap between LP and cyber, most LP professionals are not actively involved in cyber issues within their organizations. In fact, only about three in 10 LP professionals say they are always or very often called upon to respond to cybersecurity issues and only about one in four are engaged in threat analysis.  

“These are changing times in retail and that means changes in loss prevention,” University of Florida criminology professor Richard Hollinger, said in statement on the survey’s findings. “As always, the challenge is for the honest to stay ahead of the dishonest.”     

“We are seeing dramatic changes in the risks faced by retailers, and loss prevention practices and priorities are evolving to meet those challenges,” added NRF Vice President for Loss Prevention Bob Moraca. “As criminals find new ways to steal, loss prevention teams are finding new ways to stop them. Increasingly, this is a battle focused on technology.”

Inside the Numbers

The largest losses per incident came from robberies at an average $2,885.15 (down from $4,237.02 in 2017), followed by employee theft at $1,264.10 (up from $1,203.16), and shoplifting/organized retail crime at $546.67 (up from $543.28). Robberies are comparatively rare, however, while shoplifting/ORC and employee theft together typically account for about two-thirds of shrink each year, with most of the remainder coming from vendor or paperwork errors.

However, both shoplifting apprehensions and prosecutions dropped by half last year. According to the survey, retailers reported an average of 509 apprehensions in FY 2018 compared to 1,105 in FY 2017. When it comes to prosecution of shoplifting cases, retailers said they referred about 370 to law enforcement officials on average in FY 2018 compared to 728 in FY 2017. These numbers are also significantly lower than FY 2015 in which retailers reported more than 3,300 apprehensions on average and over 1,900 cases referred to law enforcement for prosecution.

The survey also found that larger retailers — defined as those with more than 500 stores — had shrink rates that averaged twice that of those with fewer locations. For example, the average shrink rate for retailers with more than 500 stores was 1.81% and the median was 0.01%. For stores with 500 or fewer locations, the survey found that average shrink was 0.9%, with a median of .76%.

“It is apparent that larger retailers having greater variation of merchandise in their marketplace offer boosters a greater variety of products to steal than smaller specialty stores,” said Moraca.

The Technology Landscape

While there has been a push in recent years to get retailers to adopt video analytics, the survey found that these solutions have actually fallen out of favor with some in the market. In fact, only 22% of respondents reported using IP analytics, a decrease of 9.5 percentage points from last year’s survey and only 57% said they were using remote IP CCTV monitoring, a decrease of nearly 20 percentage points from the prior year. Theft deterrent devices, such as spider wraps, also dropped in use, according to the survey.

Among the technologies that have increased in use, according to study, include: Merchandise alarms/electronic security tags (used by 46% of retailers, a jump of 25 percentage points), acousto-magnetic security tags (35%, increase of nearly 13 percentage points, and DVRs (84%, increase of nearly 10 percentage points).

However, the survey pointed out that all LP tools have declined in use since the 2015 report was published, with the exception of the use of mystery shoppers, up from 23.3% to 31.8%, and POS exception-based CCTV interface, which remained mostly flat, from 32.9% to 33.3%.

 Click here to download a full copy of the survey results.