How Big is the Problem?

In today’s challenging retail environment, shrink — a loss of inventory related to theft, shoplifting, error or fraud — continues to take a bite out of the bottom line. Whether perpetrated by a dishonest employee or organized retail criminals, shrink costs retailers about 1.33% of sales, on average — a total impact on the overall U.S. retail economy of $46.8 billion in 2017. The 2018 National Retail Security Survey includes positive signs, as some of the spikes in the 2017 survey returned more to historical norms. However, overall shrink continues its upward trend — especially for those who see it as a higher percentage of sales. In 2015, only 17.1% of respondents reported shrink at 2% of sales or more. That is up to 20% in the 2018 survey.

Adding to the difficulties: Tools used to deter both internal and external crime have dropped in use and retailers are not investing in the more technologically advanced methods of preventing shrink. When dishonest employees are caught, punitive actions continue to decline. On the positive side: The average dollar loss from robberies continues a three-year decline and now result in losses of about half of what they were in 2016. Yet robberies netting $10,000 or more accounted for one-third of incidents in this report, which is higher than previous years. Another bright spot for loss prevention: More than a third of participants saw increases in staffing and overall budgets, with fewer experiencing declining budgets. But a tremendous gap remains. Those surveyed say they need eight additional LP employees to keep up. And that comes as skill demands have increased. There is a continued need for more investigatory and analytical skills, as well as regional LP managers. It becomes clear that there is more pressure on LP than ever before to combat crime, and the expectations continue to expand. LP professionals help play a role in combating cybercrime, meeting at least quarterly with IT and cybersecurity colleagues to discuss threats and crisis management plans. But there is room for improvement: While the majority of retailers have cybersecurity incident response plans in place, they do not always involve LP teams.

The Response

Partnerships between law enforcement and retail investigators are forming to combat the problem.  These Alliances share cross jurisdictional information to identify, disrupt, and apprehend Organized Retail Crime (ORC) crews.