Loss prevention investments are costing retailers £3.3 billion to keep shrink down

London, England: Shrink, comprised of shoplifting, employee theft, vendor or supplier fraud, and administrative errors cost the retail industry more than £81 billion worldwide in 2013 , £2.7 billion in the UK alone, according to the latest Global Retail Theft Barometer. This represents 0.97% of all UK retailer sales, on average.

The report, underwritten by an independent grant from Checkpoint Systems, Inc. (NYSE: CKP), was carried out in 2014 by The Smart Cube and Ernie Deyle, a retail loss prevention analyst, based on in-depth phone and written survey interviews conducted in 24 countries among 222 retailers representing £475 billion in sales.

The average cost of retail crime per person across the 24 countries surveyed, which unlike shrink is based on dishonest employees, shoplifters, fraudulent suppliers plus the cost of Loss Prevention, ranged from £46 to £338. The annual cost of retail crime to UK shoppers, as passed on from retailers, averaged £80.00 per person.

According to the study, shrink is down slightly in most countries. The lowest shrink rates were recorded in Norway (.83 percent of retail sales), followed by Japan and the UK (.97 percent). The US came in at 1.48 percent of retail sales, down slightly from 1.50 percent last year. The highest rates were recorded in Mexico (1.70 percent) and China (1.53 percent).

Russell Holland, VP Sales UK & EMEA Distributors, said: “Over the last year, retailers in the UK have been making great strides and investments in the fight against retail crime. Many UK retailers reported that improved security methods have helped them to keep losses under control. We’re also seeing retailers invest in their employees’ education and understanding of loss prevention, marking an encouraging step in the fight against retail crime in the UK.”

While shoplifting remains the biggest cause of all retail shrink in 16 of the 24 countries surveyed, in the UK, administrative and non-crime losses ranked first at 36.5 percent, with shoplifting next at 25.3 percent.

Most Stolen Merchandise

The most-stolen items across Europe are products that were easy to conceal and with a good resale value, including fashion accessories and wine and spirits. Other frequently stolen products included power tools, mobile accessories and make-up products.

Source Tagging, the use of applying EAS or RFID labels prior to arriving at retail stores has increased globally, according to respondents. Currently used on high value and high theft items such as meat, health and beauty products and alcohol, 80 percent of UK retailers are source-tagging between 0-10 percent of products, and a further 20 percent source-tagging over 20 percent of all merchandise. In addition, 50 percent of European retailers plan to increase the number of source tagged SKUs.

According to The Smart Cube, “This report provides detailed descriptions of the sources of shrink and helps retailers understand the most cost-effective ways of addressing their problems. A number of best practices emerged from our research, including appropriate spending ranges to address the issue.”

“We are pleased to support this global statistical research for the thirteenth year,” said Per Levin, President and Chief Sales Officer Shrink Management & Merchandise Visibility Solutions Checkpoint Systems. “Our hope is that retailers can learn more about the causes of shrink and work with their suppliers and solutions partners to create joint programs to reduce shrink and associated costs.”