PhotoRetailers call it “shrink.” What it is -- actually -- is stealing. And its a serious and expensive problem.

According to a new study from NRF Protect, the retail industry’s largest loss prevention event, retailers lose billions of dollars to shoplifting, employee and vendor theft and administrative error – collectively known as inventory shrink.

The National Retail Federation/University of Florida National Retail Security Survey (NRSS) found that retailers say inventory shrink averaged 1.38% of retail sales -- or $44 billion -- in 2014. The report was sponsored by The Retail Equation.

Specifically, retailers surveyed estimate shoplifting accounted for the largest part of reported shrink last year -- 38% -- followed by employee/internal theft (34.5%), administrative and paperwork errors (16.5%), vendor fraud or error (6.8%) and unknown loss (6.1%).

“Retail loss prevention professionals have one of the hardest jobs in the industry -- protecting their customers, employees and merchandise from the threat of harm and fraud, and the results of this survey prove the enormity of their task,” said National Retail Federation President and CEO Matthew Shay. “Retailers will continue to review best practices and work to better educate decision makers in Washington about the burdens these crimes place on consumers, retail companies, their employees and the economy.”

No big deal?

“A common misperception about shoplifting is that retailers can ‘afford’ the loss of a candy bar or a pair of jeans, but the truth is that the industry loses billions of dollars each year at the hands of callous criminals that could be put towards human capital, promotions and other necessary business operations,” said NRF Vice President of Loss Prevention Bob Moraca. “Though we are encouraged by the partnerships forged with law enforcement over the years and advances in technology that will help deter a crime before it happens, criminals continue to thwart much of the progress retailers have made thus far.”

When it comes to loss prevention budgets, 39.4% of those surveyed say their budget for 2015 increased over last year; just over one-third (36.6%) said their budgets would be similar to what they were last year -- leaving 23.9% of respondents with decreased resources.

Dr. Richard Hollinger, criminology professor at the University of Florida and lead author of the NRSS for the past 24 years, notes this year’s shrink percentage is the lowest seen in the survey’s history.

“Loss prevention professionals have done a commendable job of elevating the issue of shrink and retail fraud within their own companies and with industry insiders and the public, but the battle wages on to find ways to contain further losses to their businesses,” said Hollinger. “As retail issues like shrink and security become more complex, retailers should continue to work together as an industry to ensure continued partnerships, with the end goal of finding the most effective asset protection solutions possible.”


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