Shrink cost retailers $100B last year
Loss of inventory due to shoplifting, employee theft or other errors collectively cost retailers almost $100 billion worldwide, or about 1.82% of global sales, last year, according to the Sensormatic Global Shrink Index from Tyco Retail Solutions and PlanetRetail RNG, the former of which is a solutions firm focused on loss prevention.
The percentage of sales lost in the U.S. stood at 1.85%, slightly higher than the global number, though because the U.S. market is much bigger than other markets measured, that percentage translates to a total of more than $42 billion in shrinkage for U.S. retailers, or more than 40% of global dollars lost.
The 2018 Sensormatic Global Shrink Index surveyed 1,100 retail decision makers across four regions, 14 countries and 13 retail segments. The companies they represented operate more than 229,000 stores that took in an estimated $1.56 trillion during 2017-2018, accounting for 80% of total global retail sales.
The biggest factor in shrinkage among U.S. retailers, the study found, is external theft/shoplifting, including organized retail crime (ORC), which accounted for 35.6% of all lost sales last year. Internal factors, such as employee theft, accounted for 24.5% of losses.
The report also stated that retailers of fashion and accessories make up the sector vertical with the highest rate of shrinkage — 2.43% of sales. These kinds of losses are not at all a new issue for the retail sector. Retailers have been aware of these problems for years, and have adopted a variety of different measures — video cameras, electronic article surveillance (EAS), RFID — and sometimes all at the same time to try to combat external and internal theft.
For example, Sephora adopted EAS more than three years ago in an attempt to reduce large losses. More recently, RFID, which unlike EAS actually allows retailers to keep tabs on an individual item by giving it a unique ID, has become a more commonly adopted technology for loss prevention. Retailers such as Target, Levi Straus and Lululemon have talked openly about the benefits of RFID, not just as a theft deterrent — though that is clearly a big driver for deployment — but also as an inventory management solution and an enabler of new fulfillment strategies, such as ship-to store.
One concern some retailers have raised about investing in new loss prevention technology is that it's sometimes tough to get a full buy-in from high-level executives, but that could be changing. This study arrives not long after research firm IDC found that about 80% of retailers have allocated budget to invest in in-store visibility platforms, including those that rely on RFID technology, as a measure to deter theft and provide better inventory accuracy.