Retail Shrink Increased to $48.9 Billion in 2016

Thefts from retailers and other inventory “shrink” grew to $48.9 billion in 2016 from $45.2 billion the year before even as budget constraints left retail security budgets flat or declining, according to the annual National Retail Security Survey released today by the National Retail Federation and the University of Florida. The thefts amounted to 1.44 percent of sales, up from 1.38 percent.

“Retailers are proactive in combating criminal activity in their stores but acknowledge that they still have a lot of work left to do,” says NRF vice president of loss prevention Bob Moraca. “The job is made much more difficult when loss prevention experts can’t get the money they need to beef up their staffs and resources. Retail executives need to realize that money spent on preventing losses is money that improves the bottom line.”

According to the report, 48.8 percent of retailers surveyed reported increases in inventory shrink, while only 16.7 percent said it remained flat. Shrink was divided into shoplifting and organized retail crime (36.5 percent), employee theft/internal (30 percent), administrative paperwork error (21.3 percent) and vendor fraud or error (5.4 percent).

Shoplifting continued to account for the greatest losses with an average of $798.48 per incident, up from $377 in 2015. Part of the increase came because some states have raised the threshold for crimes to be considered a felony, meaning that only larger thefts are reported. But the rise was also attributed to retailers allocating smaller budgets for loss prevention, leaving them with fewer security staff to fight the thefts.

Shoplifting was followed by an average loss of $1,922.80 from employee theft, up from $1,233.77 in 2015. The average cost of retail robberies dropped to $5,309.72 from $8,170.17 in 2015 but remained at more than double the $2,464.50 seen in 2014.

For the first time in the survey, retailers were asked about return fraud, reporting an average loss of $1,766.27.

“The seriousness of retail theft is much greater than most customers realize,” said Richard Hollinger, a veteran University of Florida criminology professor and the lead author of the report. “When criminals steal from retailers, consumers pay higher prices, the safety of innocent employees can be compromised and shoppers looking for popular merchandise often cannot find it. Retailers need to continue to invest in new technologies to prevent and prosecute these crimes.”

The survey of 83 loss prevention executives from a variety of retail sectors was conducted March 29 to May 1. The study is a partnership between Hollinger and NRF and is sponsored by The Retail Equation.