How to Combat the Growing Retail Shrink Fiasco

All retailers know that combating shrink is one of their biggest challenges and one of the biggest financial sinkholes for their businesses. A new study reveals the severity of the problem globally, but also offers solutions for preventing theft. Shrink – comprised of shoplifting, employee or supplier fraud, organized retail crime and administrative error – cost the retail industry more than $112 billion globally last year, according to the 2012-2013 Global Retail Theft Barometer, On average, theft represented 1.4 percent of retail sales globally. Since the Barometer is likely basing its numbers on reported crimes and retailer surveys, we think the global shrink problem is much worse. Among the most stolen merchandise reported by the retailers were fashion accessories, jeans, footwear and lingerie/intimate apparel, high-value electronics such as Apple products, consumer health products such as allergy treatments, milk formula, electronic games and satellite navigation/GPS, and mobile device accessories such as cases and earphones. According to the study conducted by Euromonitor International and underwritten by an independent grant from Checkpoint Systems, shrink is on the rise in most countries thanks to lagging economic recoveries and organized retail crime. The highest shrink rates were recorded in Brazil and Mexico (representing 1.6 percent of retail sales), while the U.S. shrink rate hit 1.5 percent of total retail sales. In Australia, where stores lost $2.4 billion in stolen goods and stocktaking and till errors, shopper theft was more common than employee theft. Checkpoint Systems Australia Managing Director Mark Gentle said the internet sales boom was making shoplifting more attractive to some thieves because they can often sell the stolen goods online, The Telegraph reported. Retailers that are combating theft well are deploying RFID-based solutions that combine protection with visibility at the item level. “This type of strategic platform, combined with investments in people and processes, opens up new horizons to reduce out of stocks, improve merchandise availability for consumers and increase sales,” said Per Levin, president and chief sales officer for Checkpoint Systems. Of the 50 most stolen products, the number of items protected from theft through Electronic Article Surveillance (EAS) source tagging has increased from 60% in 2007 to 75% in 2011. More retailers are also using display solutions such as keepers for small, valuable goods, such as shavers. The most effective retailers also have a company policy that is strongly focused on shrink prevention, and implement a wide variety of loss prevention measures in combination. There are no “one-type-suits-all” solutions to loss prevention, according to a Checkpoint statement. Retailers also need to have a strong loss prevention team in place, maintain “human monitoring”, and partner with loss prevention specialists. “Constant balance is needed between protecting merchandise and ensuring pleasant customer experience in-store,” according to the statement.    

Suggested Articles

Costco changes up its menu items, and Alibaba and Guess partner for a physical store.

Janey Whiteside, Walmart's new chief customer officer, is well acquainted with the importance of customer service in modern retail.

Whole Foods will offer deals on Amazon's Prime Day, and tariffs against China are causing pricing hikes.