Retail crime cost U.S. retailers $41.7 billion in 2011

Shoplifting, employee or supplier fraud, organized retail crime and administrative errors cost the retail industry $41.7 billion in the United States in 2011, representing 1.6% in sales, according to the Global Retail Theft Barometer released Tuesday by Checkpoint Systems. Of that, $18.4 billion was attributed to employee theft, $14.9 billion to shoplifters, $6.6 billion to internal error and $1.8 billion to suppliers.

Internal shrink appears to be a more significant issue -- 697,000 employees were caught in 2011 after having stolen an average of $1,764.76 per incident. More shoplifters were nabbed in 2011 -- 1.7 million -- but the average amount stolen per incident was much lower at $373.64. However, it may be difficult to draw a hard line between internal and external thievery, the author of the report suggested, as employees may be a part of an organized retail crime group and may in fact have sought employment with the sole purpose of stealing for such a group.

“Although there are commentators who view retail crime as a harmless or intriguing social phenomenon, or simply as a cost of doing business, this ignores the impact of criminal gangs, growing levels of violence against employees and customers, and the links between retail crime and drugs, fraud and extortion,” said Joshua Bamfield, director of the Centre for Retail Research and author of the study. “Moreover, retail crime on average cost families in the 43 countries surveyed an extra $200 on their shopping bill, up from $186 last year. In the [United States], that figure was $435.”

The overall shrink rate was 6% higher across the United States in 2011 versus 2010, and represented the highest percentage recorded by the survey since it began in 2007. The study monitored the cost of shrink (loss from shoplifting, employee theft and administrative errors) in the global retail industry between July 2010 and June 2011. It found that shrink increased in all regions surveyed. Customer theft, including shoplifting and organized retail crime, was up 13.4% globally and was cited as the primary cause for shrink in most countries -- 43.2%, or $51.5 billion, worldwide was attributed to theft.

The 2011 study also found that while retailers increased their spending on loss prevention and security by 5.6% over 2010 to $28.3 billion globally, loss-prevention equipment's share of total loss-prevention expenditures actually declined slightly.