LP Magazine

JUL-AUG 2018

LP magazine publishes articles for loss prevention, asset protection, and retail professionals covering shrinkage, investigations, shoplifting, internal theft, fraud, technology, best practices, and career development.

Issue link: http://digital.lpportal.com/i/1004777

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Page 41 of 68

THE WORLDWIDE IMPACT OF SHRINK Kim Warne Kim Warne, vice president and chief marketing officer for Tyco Retail Solutions, explained that fashion merchandise is always in high demand, which is part of the reason why loss due to shrink in this vertical totaled more than $4 billion in 2017. "By definition, fashion changes with the season, and these products are relatively higher priced and are highly brand specific," Warne said. "The latest hot fashion items such as athletic shoes or purses being promoted are also the most likely to be stolen as the relative higher unit value makes them more attractive to thieves." The leading source of shrink will likely come as no surprise to US retailers. Nearly 36 percent of losses were reported to have come from external shrink, a figure that is slightly above the global average. Shoplifting was the main source of external losses at 51.5 percent. Return fraud was reported for 26 percent of external shrink cases, and organized retail crime (ORC) ranked third at 20 percent. Internal shrinkage, including employee theft, was rated the second-highest source of shrink in the United States, at about 25 percent. Vendor and supplier losses totaled just over 21 percent of shrink, while administrative losses accounted for less than 19 percent. Interestingly, the rates of shrink in certain US verticals ran contrary to those in the rest of the world. A prime example is the shrink rate for consumer electronics stores in the US (1.84%) versus the global rate (1.93%). This is a strong indication that US retailers have fully recognized the threat of shrink at high-value electronics stores and responded by installing effective loss prevention tools. Factors Driving Retail Shrink For many brands, effectively combatting shrink means first understanding the factors that drive it. The survey authors point to four factors driving increased shrinkage rates worldwide—growing urban population densities, difficult economic conditions, limited workforce pools, and the growth of online shopping. In many countries and in areas throughout the US, expanding city populations and difficult economic conditions are conspiring to give employees and shoppers alike the motives for theft. Meanwhile, a shortage of retail workers and the proliferation of the Internet are creating greater opportunities for stealing products. Keenan says the Internet has dramatically changed the landscape for external and internal thieves in the US. Perhaps that's why employee theft of merchandise was the largest overall contributor of internal shrinkage losses at 41.6 percent, much greater than vendor and supplier losses and administrative losses. Meanwhile, shoplifting was by far the biggest source of external shrink in the US, accounting for more than 50 percent of such losses. "When you think about what really drives external theft, it's actually the capability to offload the product," he said. "Prior to the Internet, the primary way you were able to sell large amounts of stolen merchandise was through a fence. The Key Insights into US Shrink Performance 1 rank in losses wordwide $42.49 BILLION 9th largest shrink rate globally 1.85% LARGEST CONSUMER MARKET IN THE WORLD The rate of retail shrink in the United States—1.85 percent—is only slightly above the global rate of 1.82 percent. However, since the United States is the largest global consumer market, its total losses are much higher than any other nation ($42.49 billion). 41 LP MAGAZINE | JULY–AUGUST 2018

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