SHRINK LOSSES GREW TO 2.24% OF SALES IN 1997, SURVEY SAYS

DEENA AMATO-McCOY

LOS ANGELES -- Supermarkets' shrink losses climbed to 2.24% of retail sales in 1997, up 11% from the 2.01% reported in 1996. Shrink has remained over 2% for the past five years, according to a survey released this earlier this month.

While areas traditionally contributing strongly to shrink, shoplifting and employee theft, declined slightly, the survey did note an increase in losses from back-door receiving practices, including vendor dishonesty. Cashier "sweethearting" also increased by 16% in 1997 compared with the previous year.

Although employee theft declined by 1% in 1997 from the previous year, it remained the leading component of supermarket shrink for the ninth consecutive year, representing 54% of all reported losses. Shoplifting, the second largest source of shrink, also dipped somewhat, to 26% in 1997.

These were among the key findings of the 1998 Supermarket Shrink Survey, based on 319 companies representing 7,259 chain and independent stores. The survey was conducted by the National Supermarket Research Group, Centerville, Ohio.

While shrink from employee theft and shoplifting decreased slightly in 1997, one area inching upward is losses due to back-door receiving practices. Back-door receiving shrink amounted to 9% of all losses last year, up from 8% in 1996.

Receiving errors by either the retailer or the vendor comprised 44% of shrink in this area; 56% was attributed to acts of vendor dishonesty, the survey said.

The 69% of retailers using automated direct store delivery had a lower shrink rate than non-DSD companies, 2.16% compared with 2.5%. In addition, companies using an automated DSD system detected eight incidents of vendor dishonesty per month, compared with 10 incidents per month for those not using an automated system.

In the employee-theft category, the 27% of cashier-caused shrink represented half of the activity. According to the survey, 1997 marks the first year cashier-caused shrink was greater than shoplifting losses.

Cashier-caused shrink was fueled by a dramatic 16% increase of "sweethearting," which reached a level of 9.9% last year. This figure is up from the 8.5% reported in 1996. In addition, the survey reported that average weekly losses due to cashier dishonesty were $84.25 per store.

Retailers who implemented automated cashier performance monitoring systems reported lower levels of cashier losses in 1997. According to the study, the 45% of retailers using such applications had an overall shrink level of 1.83%. The remaining 55% had a 2.35% level.

Loss-prevention methods such as closed-circuit television systems and electronic article surveillance are helping retailers cut shoplifting losses.

The 79% of companies using CCTV systems reported a 2.16% shrink rate, compared with 2.46% shrink rates for those not using such systems.

EAS, used by 23% of respondents, helped them achieve a shrink rate of 2.14%, compared with 2.25% for those that do not employ EAS systems.

The National Supermarket Research Group has conducted the survey based on supermarket shrink losses for the past nine years. Corporate sponsors for the 1998 study include the National Grocers Association, Reston, Va.; MidSouth Data Systems, Taylors, S.C.; NCR, Dayton, Ohio; IBM Corp., Raleigh, N.C.; Sensormatic Electronics, Boca Raton, Fla.; Trax Software, Centerville, Ohio; and Senn Delaney, a unit of Arthur Andersen, Chicago. The survey indicated that 52% of supermarket sales are paid for by check, and that 1% of all checks processed are returned as bad checks. The face value of the average bad check was $48.30.