Retail shrink rose to all-time high in 2019
Buoyed by increased incidents and new ways to steal, theft, fraud and losses from other retail “shrink” rose to $61.7 billion in 2019, according to the National Retail Federation’s (NRF) annual “National Retail Security Survey.” The record haul by thieves was up a whopping 21.9 percent higher year-over-year.
According to the report, shrink averaged 1.62 percent of sales during 2019 after hovering around 1.4 percent over the past few years.
Among the emerging areas of concern as expressed by participants in the survey were:
- Increasing boldness on the part of shoplifters due to bail and criminal justice reforms;
- More attempted theft without fear of consequences;
- Gift card scams;
- Merch theft in fitting rooms;
- Self-checkout, mobile checkout;
- Heightened frequency of phone scams, including activation of gift cards;
- Opioid addiction, mental health challenges and economic conditions.
The number of shoplifting, organized retail crime and employee theft incidents all increased. Of challenges that have grown in priority for loss profession (LP) teams over the past five years, 61 percent cited organized retail crime, 59 percent e-commerce and cybercrimes, 58 percent internal theft and 54 percent return fraud.
One hurdle identified in the study was that rising incidents of theft have coincided with a period when states have amended laws to increase the dollar threshold that constitutes a felony, which is more likely to be prosecuted than a misdemeanor. With members of ORC gangs often making multiple small thefts and staying below the felony threshold to avoid prosecution, NRF has called for repeat offenses to be aggregated and counted toward felony thresholds to reflect the serious nature of organized theft.
The study also found a decreasing number of LP professionals actively involved with cybersecurity teams. Fewer than one in five LP professionals meets with cyber teams always or very often, down from three in 10 the previous year.
To fight losses, retailers reported increased use of technology, such as point-of-sale analytics, security cameras, wired alarms on high-value merchandise and online training for employees. Among tried-and-true methods making a comeback, new hire orientation and code of conduct were both up significantly, along with use of anonymous hotlines and bulletin board notices.
- Retail shrink totaled $61.7 billion in 2019 amid rising employee theft and shoplifting/ORC – National Retail Federation
- National Retail Security Survey 2020 – National Retail Federation
DISCUSSION QUESTIONS: Does it make sense that technology has so far been acting more as an enabler than an inhibitor of retail shrink? What tech and old-school solutions offer the most promise to counter rising shrink rates?
Ralph JacobsonGlobal Retail & CPG Sales Strategist, IBM
Ralph JacobsonGlobal Retail & CPG Sales Strategist, IBM
Ralph JacobsonGlobal Retail & CPG Sales Strategist, IBM
Ralph JacobsonGlobal Retail & CPG Sales Strategist, IBM
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15 Comments on "Retail shrink rose to all-time high in 2019"
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Retail Solutions Executive, Teradata
Surveillance is only as good as the monitoring of it, usually a limited number of people. It becomes descriptive (after the fact) more than a deterrent or prevention.
AI will help solve a lot of this problem, especially around cashierless checkout, and areas of the store that are considered “hot spots” assuming you have advanced video analytic capabilities.
But training store associates with more knowledge won’t solve this. If criminals are brazen enough not to worry about jail time, a store associate poses minimal deterrent … plus putting store associates in harm’s way without any way of preventing this behavior is senseless.
President, b2b Solutions, LLC
I agree. No technology is going to prevent ORC gangs or the flash mobs who loot a store and know they will not be prosecuted because they committed a misdemeanor.
Strategy & Operations Delivery Leader
Unfortunately retail shrink and employee-led schemes are going to continue to be one of the main loss areas for retail companies. Technology, especially AI can help identify, predict, and help prevent employee theft, yet the problem has to be mitigated during the hiring and training processes.
Employees with bad intentions will steal without fear of consequences regardless of any advanced preventative technologies. While shrink could never truly be eliminated, establishing the right culture of trust, transparency, and accountability will help to mitigate shrink. The preventative measures are only as good as the execution and dedication to this initiative.
Ideally, increasing the wages of the employees may lead to less turnover and higher job satisfaction which should decrease internal theft. Right? Isn’t that the idealist thought?
Hopefully it plays out that way.
Board Advisor, Light Line Delivery
As of June 2020, the United States had the highest number of incarcerated individuals worldwide, with more than 2.12 million people in prison. So, I would need more time to reconcile that fact with the first two bullets. The last bullet, “Opioid addiction, mental health challenges and economic conditions”, should have been the first, they are the root causes; the rest are criminal tactics. However, I think that retailers should focus on increased surveillance deterrents, flexible payment options, truly making associates partners and not just employees, and community outreach.
Managing Partner Cambridge Retail Advisors
Technology is a two edged sword. When you implement self-checkout you obviously open yourself up to a higher shrink risk. One real solution lies in the promise of advanced Business Intelligence (BI) that not only tells you what happened (descriptive BI), why it happened (diagnostic BI), what will happen (predictive BI) but what we should do about it (prescriptive BI). Prescriptive BI leverages task management with closed loop notification and escalation capability that insures follow up on an analytic insight. This technology holds the most promise to reduce shrink.
President/CEO, The Retail Doctor
Employees are still your number one guard against shrink and cause for it. People who are de-motivated, untrained, and allowed to stay find ways to help themselves. Has been the truth since the Wanamaker stores.
Managing Partner, Retail Consulting Partners
Co-Founder at Where and Share
Internal theft is a challenge. Incentivising honesty with employees is probably the most effective approach. Training will only go so far, especially with high turnover rates. Reprimanding thieves with current punishments isn’t a deterrent for internal or outside theft, as the statistics have shown. Utilizing more technology such as RFID/Sensors (which many retailers have already implemented) will give them more transparency to where theft is occurring. Utilizing technology to get data/insights on what’s going on in the storefront in real-time will be huge moving forward. Real-time data = real-time action.
Vice President, Research at IDC
CFO, Weisner Steel
“Mental health challenges”? I don’t doubt that the survey participants know more about the issue than I do, but I’m still thinking no small amount of guessing is going on, which makes finding a solution — or solutions, really, as shrink isn’t some monolith of situations and actors — difficult, since one can’t “solve” what one doesn’t really understand. And to the extent that theft is “big business,” timid suggestions like “bulletin board notices” seem particularly inadequate.
Ultimately though, this is an issue of cost: just as you have to “spend money to make money” you also have to spend it to avoid losing it; more security and yes, sometimes “eyes and ears” that spot things rather than automation I don’t think technology has been unhelpful (what about sensor tags and wheels locks?) as much as it’s adopted without a full consideration of what’s involved. How often here on RW have we seen commenters wax enthusiastically about something like remote checkout, while a small group of us keeps muttering “…what about theft?”
Global Retail & CPG Sales Strategist, IBM
Surprise, surprise. Record unemployment = more theft, both internal and external. Bottom line, minimize the opportunity and implement effective deterrents, both technological and process-driven.