Shrinkage—whether intentional or accidental—cost the retail industry $48.9 billion last year.
The National Retail Federation’s 2017 National Retail Security Survey of 83 retailers found the average shrink rate was 1.44% for the 2016 fiscal year, up slightly from 1.38% in the prior year period.
At 1.36%, the shrinkage rate was slightly lower for specialty apparel retailers, which represented 26 of the stores polled. This was an increase over the 1.20% rate for 2015, given that the 30.8% who saw its rates decrease was off set by the 57.7% that reported shrinkage had grown.
Shoplifting, including organized crime, is the No. 1 culprit at 36.5% industry wide.
“The average cost per shoplifting incident doubled in 2017 to $798.48, perhaps due to decriminalization and the increase in the felony threshold in many states,” according to the report.
For apparel retailers, the threat is even worse at 41 percent and an average loss of $974.37.
The second most persistent issue is loss resulting from inside jobs. “Dishonest employees account for an average of $1,922.80 per act—up almost $400 in the past two years—with retailers attributing 30 percent of inventory shrinkage to inside jobs,” the report said.
Most troubling, the number of respondents who reported average losses of more than $2,000 increased from 20.3% in 2015 to 31.6% in 2016.
Again, this problem is worse for apparel stores, which said employees account for 35.5% of loss.
For the first time, the survey queried respondents on return fraud, specifically, and found the average cost was $1,766.27, with a median of $171. In this area, apparel stores saw the lowest average cost of $968.81.
Though the severity of the illegal acts has risen, the number of apprehensions industry wide was cut in half in 2017. Prosecutions and civil demands declined significantly as well.
The NRF found that two-thirds of budgets to combat the problem were flat or declined in 2016. To fight the problem more effectively, loss prevention managers would like to have up to seven more employees each with better skills than past hires.
“There is no denying the tight margins facing today’s retailers. Even incremental improvements against shrink could go a long way in improving results,” the report said. “But to combat the many facets of shrink, retailers must provide [loss prevention] professionals the resources to combat an increasingly sophisticated criminal, whether it is an employee who skims a bit off the top or a massive organized retail criminal operation that has mastered return fraud.”