Weak global economy contributed to $112 billion loss from retail theft

High unemployment and lower wages were major contributors to an uptick in retail crime last year that cost the industry more than $112 billion worldwide, according to the latest global theft report.

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On average, losses from shoplifting, employee and supplier fraud, organized crime and administrative errors amounted to 1.4 percent of retail sales, according to the latest Global Retail Theft Barometer released Tuesday by underwriter Checkpoint Systems. Overall, the study showed that losses, called shrinkage in the retail industry, were on the rise in the 16 countries covered in the 2012 study.

Shrinkage grew a tenth of a percent on average compared to 2011. U.S. retailers reported the same increase.

In general, the weak global economy was a key contributor to the rise in shoplifting, employee theft and organized crime.

"There are a lot of families, a lot of people, with smaller budgets and they're trying to maintain the same lifestyle," Dan Reynolds, vice president of sales and customer service for Checkpoint, told CSOonline.

"For the most part, people are paying for the necessities, but anything that's high value or high resale is getting a lot of attention (by thieves)."

The most popular items were fashion accessories, jeans, footwear, lingerie, Apple products, electronic games, GPS gadgets and cases and earphones for mobile devices.

However, retailers also reported an increase in the number of criminal gangs entering stores and stealing large quantities of razor blades, baby formula, nonprescription drugs, and cosmetics, Reynolds said. The products are typically sold on the black market for as much as a 30 percent discount.

Countries with the highest shrinkage rates were Brazil and Mexico with 1.6 percent. The U.S. was close behind with 1.5 percent, which cost shoppers $300 per household. Japan had the lowest rate at 1 percent.

The study is based on phone interviews and written surveys conducted with retailers covering 160,000 stores worldwide and $1.5 trillion in sales.

Retailers agreed that there was no single loss prevention method that was 100 percent effective and no one-size-fits-all solution. Therefore, a combination of methods was seen as the most useful.

Staff training was essential to prevent theft. "Motivated and qualified employees are able to detect and deter theft, conduct rigorous checks on supplier deliveries, follow inventory and pricing procedures and are not prone to stealing themselves," the report said.

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Other effective methods listed by retailers included radio frequency identification (RFID) tags for tracking inventory, source tagging used to prevent in-store theft and data mining and analytics.

While spending on loss prevention was mostly flat, retailers who reported strong spending on loss prevention typically had shrinkage rates well below their respective country's average. Countries where many retailers reported a correlation between higher spending and lower theft included the U.K. and Germany.

This story, "Weak global economy contributed to $112 billion loss from retail theft" was originally published by CSO.

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