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Retail Inventory Shrinkage Has Shrunk

Employee theft, shoplifting, organized retail crime and administrative error are the main sources of retail loss . / Credit: Shoplifting image via Shutterstock

Sticky-fingered shoppers, larcenous employees and crooks of all stripes are finding slimmer pickings in the retail industry. Retailers have tightened up their security and loss-prevention practices, which has resulted in reduced inventory shrinkage this year, new survey data shows. But retail shrinkage still represents a major hit on the corporate bottom line.

Employee theft, shoplifting, organized retail crime and administrative error are the main sources of loss affecting retailers, according to a survey conducted by the University of Florida with a grant from Tyco International, a provider of security products and services.

Total inventory shrinkage last year was 1.42 percent, down from 1.49 percent the previous year, the survey showed.  This translates into an approximate loss of $35.28 billion as a direct consequence of preventable inventory issues, with 44.2 percent of that loss attributed to employee theft, 25.8 percent to shoplifting and organized retails crime and 12.1 percent to administrative error.

Actively safeguarding merchandise allows retailers to keep costs down and increase their ability to offer better prices to their customers, while potentially improving internal business practices.

"The decrease in retail theft indicates retailers are implementing effective loss prevention solutions in order to diligently protect their assets," said Richard Hollinger, a University of Florida criminologist who conducted the survey. "The holiday season is an important time for retailers to evaluate their security solutions, and the growing adoption and awareness of better loss prevention strategies has continued in the recent trend of reduced retail losses and improved profitability."

According to the National Retail Federation, 2012 holiday sales are on track to increase 4.1 percent to $586.1 billion, confirming retailers need to ensure their shrinkage is low in order to capitalize on increased sales. With improved technologies and a large number of consumers accessing retailers’ inventories from multiple touch points, inventory visibility and accuracy are critical for loss prevention this holiday season.

"With the holidays and 2013 planning in full swing, it’s important for retailers to take a look at these statistics and evaluate security strategies accordingly," said Michael Creedon, vice president of retail sales and operations at Tyco Integrated Security. "While theft is down this year, organized retail crime is on the rise and loss prevention solutions remain very important to help shrinkage continue to decline and operations run more efficiently and effectively."

Reach BusinessNewsDaily senior writer Ned Smith at nsmith@techmedianetwork.com. Follow him on Twitter @nedbsmith.We're also on Facebook & Google+.

Ned Smith

Ned was senior writer at Sweeney Vesty, an international consulting firm, and was Vice President of communications for iQuest Analytics. Before that, he has been a web editor and managed the Internet and intranet sites for Citizens Communications. He began his journalism career as a police reporter with the Roanoke (Va.) Times, and was managing editor of American Way magazine and senior editor of Us. He was a Captain in the U.S. Air Force and has a masters in journalism from the University of Arizona.