Employee Theft:The Largest Source of Shrink in North America

By Carlton Purvis


Most shrink occurs in cosmetics and beauty supply, clothing, and auto parts and building materials, respectively. The lowest rates were in liquor and beer, electronics, and sporting goods. Vendor fraud accounted for less than five percent of shrink in North America.

Stores that specialize in certain items like electronics, beer, or sporting goods are often smaller with less area to protect than a Wal-Mart for example and have lower shrinkage rates, according to GRTB 2011.

Globally shrink increased almost seven percent over the past year to more than $119 billion, a figure that now represents 1.45 percent of global retail sales, according to the report. The country with the lowest shrinkage rate was Taiwan (.91 percent of retail sales). The highest was India (2.38 percent).

Another global trend says Bamfield, is that thieves tend to steal branded merchandise. “A retailer in Italy will have exactly the same complaints [as one] in Boston, Massachusetts, so it’s become relevant around the world,” he said. That said, regions still have their problem items. In the U.S., infant formula is stolen in large quantities, but this is less of a problem elsewhere. In Latin America and Asia, medical equipment is often stolen. And in Northern Italy a lot of Parmesan cheese is stolen, Bamfield says.

Shrinkage is lower now than it was at the beginning of the last decade, but it went up again after the recession when many companies had to make cuts to their loss prevention teams. After seeing shrinkage rise again, retailers began to implement new countermeasures. The overall shrinkage trend is downward though, Bamfield said. “What retailers are doing seems to be having an effect.”

photo by davithiel/flickr

GRTB 2011.pdf1.13 MB


How theft loss is determined

There is a basic flaw in the method used to determine overall loss due to shoplifting.  

When a shoplifter is apprehended, s/he has X dollars of merchandise that is recovered.  That is one shoplifter and X Dollar loss.

When an employee is apprehended, you have one employee and a total loss which is reconciled by the interviewer conducting the interview.  The theft history may go back years and the accumulative effect of each of those thefts are now summed for the $ loss for that employee.

If this were done with "comparative" numbers, the employee loss dollars would decrease dramatically.

Unfortunately, most shoplifters are not interviewed to determine prior theft history and it would be extremely difficult for a Loss Prevention Professional to even attempt this type of interview.

To quote the author, "Employees who get caught, admit to stealing almost five times that amount."  

I'd venture to say that you could multiply the $ recovered by a shoplifter by 2-3X and you'd probably have a more accurate number.

However, this is a non-tangible figure.

This type of study "suggests" that shoplifters were apprehended during their first shoplifting attempt without any prior thefts.  (Again, this would be impossible to prove unless the shoplifter "felt the desire"  to confess to her/his prior thefts.)

I agree

I completely agree with PChivers re the flaw.  I have been saying this for 20 years and I am so glad to see someone else state it.  Why this "flaw" is done is another matter.  Either out of ignorance, or many/most LP supervisors would rather do Employee Investigations then shoplifting, for many reasons.............

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