THE GLOBAL RETAIL THEFT BAROMETER
The Global Retail Theft Barometer
Contents
Foreword
Executive Summary
Part I
The Global Report
Part II
North America
Part III
Europe
Part IV
Asia-Pacific
Appendix
Survey Methods
FOREWORD
A GLOBAL PERSPECTIVE ON SHRINK
In 2000, the Centre for Retail Research released the first European Retail Theft
Barometer, dedicated to measuring retail shrink in Europe. Now, seven years later,
Joshua Bamfield and his team, sponsored by Checkpoint Systems, Inc., have published
the first Global Retail Theft Barometer: a comparative study of retail crime in 32
different countries worldwide.
As a company dedicated to facilitating interaction between different participants in an
inter-continental supply chain, Checkpoint has been at the forefront of developing
solutions that deliver benefits globally. Over the last decade we have seen our business
adapt to the new realities of global retail: technology driven applications to protect and
identify fast-moving consumer packaged goods can be applied in one continent, tracked
while shipped across another, and used to deliver benefits for consumers in stores in yet
another. The decision to make this annual study global is a reflection of these new
realities. We can no longer think of our business within isolated markets: everything is
connected.
Sponsoring a global survey is an indication of Checkpoint’s commitment to furthering the
flow of information between the cardinal points of retail worldwide. The phenomenon of
shrink must be taken seriously in the context of a global economy. According to the
results revealed in this study, shrink cost the world’s retailers $98.6 billion, representing
an annual ‘tax’ on honest consumers everywhere of $287.70 per household. This is a
substantial figure with an immediate impact on the margins of the global retail industry
— an industry on which the world’s economy, particularly in many developing or
recently developed regions, depends for growth and stability.
What can we hope to learn from a comparative study of retail theft on a global level?
How do cultural, economic and social factors impact shrink through theft? How do
retailers in each region react to the phenomenon of shrink? Identifying global trends in
such a complex, multi-faceted environment is challenging, but this study provides some
fascinating indications. The phenomenon of shrink and its impact on percentage of
turnover is remarkably similar worldwide. Of course, there are significant variations
between specific countries, but overall the differences are less than many would expect
given the massive amount of global retail and countries as culturally diverse as, for
example, Switzerland and Thailand.
There are different reasons for this: among them is the fact that application of retail
security solutions has become endemic across different national and vertical markets. The
results show that in all countries there are retailers who have managed to reduce shrink,
and others where shrink has risen regardless of regional location, which suggests that
lower rates are the outcome of strategy, policy and investment, not of factors related to
the national environment.
This fact is also supported by the results regarding investments that global retailers are
making in security spending, which are very similar in spite of country, continent or
region. The report proves that retailers worldwide are coming to the same conclusion:
investing in security technology is seen as a priority and can provide a significant return
on investment. For example, the study shows that up to 46 percent of retailers worldwide
expect to increase open merchandising of products in the next two years. In order to
avoid a rise in shrink while using open merchandising to increase sales, retailers will be
presented with some interesting challenges to protect their products. One solution
retailers are employing to control shrink globally is the application of EAS tags at source.
According to the study, more than 65 percent of retailers expect to use this method of
protection within the next two years.
Other data from this Barometer has been noted with interest. Internal theft continues to be
an alarming phenomenon and remains the area where least impact has been made over
the last few years - particularly in North America - and where more research is needed.
Shrink through theft or error along the supply chain is also increasing worldwide, and has
now reached up to 7 percent of the total. This underlines the need for additional security
efforts along the entire retail distribution chain, which is becoming increasingly important
for successful business in a global market.
So, what can we expect to see in the future? With the right approach from manufacturers,
retailers and solutions providers, technology can keep pace with the new risks and
opportunities that are arising in an increasingly global retail environment.
I would like to thank Professor Bamfield and all the retailers worldwide who participated
in this unique study. I hope you find the information contained in this first global shrink
barometer as interesting and enlightening as I have.
Mr. George. W Off
CEO and Chairman of the Board
Checkpoint Systems, Inc.
EXECUTIVE SUMMARY
The Global Retail Theft Barometer reports on levels of retail shrinkage and crime in 32 countries
in North America, Europe and Asia-Pacific. Eight hundred and twenty retail companies,
operating 138,603 stores with sales of U.S. $948 billion, provided the data used in this study. The
survey covered a period of 12 months to June 2007. The retailers taking part represented 16% of
total European retail sales turnover, 13% of North American retail sales, and 5% of retail sales in
Asia-Pacific. The sample response rate was 22.8%. The Global Retail Theft Barometer is the
largest survey of retail crime and loss in the world.
The Report is prepared by the Centre for Retail Research, Nottingham, England, and is funded by
an independent grant from Checkpoint Systems, Inc. as a contribution to discussion within the
sector.
GLOBAL REPORT
 Total global shrinkage (stockloss from crime or waste expressed as a percentage of retail
sales) cost retailers in the 32 countries $98,630 million, equivalent to 1.36% of retail sales.
The countries with the highest shrinkage rates were India, Thailand, and the U.S., while
Austria, Switzerland and Iceland had the lowest rates.
 One-half of the 32 countries suffered increased rates of shrinkage between 2006 and 2007,
although Asia-Pacific retailers reduced shrinkage by 4.6%. Globally, the average shrinkage
rate increased by 1.5%, an increase from 1.34% to 1.36%.
 The largest source of shrinkage was customer theft (shoplifting), responsible for 42.0% of
shrinkage or $41,504 million. Disloyal employees cost 35.2% of shrinkage or $34,671
million, internal error and administrative failure (e.g. pricing or accounting mistakes) was
16.5% ($16,248 million), and supplier or vendor theft and fraud was 6.3% of shrinkage
($6,207 million). Retailers in the U.S, Canada, Australia, and Iceland reported that employee
theft was higher than customer theft.
 Retailers apprehended almost 6 million store thieves in 2007, 87.5% of whom were customer
thieves and 743,499 were employee thieves. Most employee thieves were apprehended by
North American retailers, while the majority of customer thieves (3,481,490) were
apprehended by European retailers. The average amount stolen or admitted by apprehended
customer thieves was $270, while employee thieves stole an average of $1,967, seven times
more than customer thieves.
 30.9% of internal losses suffered by retailers occurred at the checkout or cashpoint, 36.5% in
the back office, stockroom, or delivery bay, and 32.6% on the sales floor. The most common
method of internal fraud was theft of merchandise, representing 41.1% of internal losses;
cash, coupons, and vouchers, 26.5%; refund fraud and false markdowns 15.3%; collusion,
10.2%; and large financial frauds, 6.9% of internal fraud.
 Global loss prevention costs were $25,590 million, 0.35% of retail sales. Revenue costs were
$17,303 million and capital costs $8,287 million. Security employees accounted for 54.6% of
loss prevention spending, while spending on security equipment was 32.4% ($8,290 million).
 The global costs of retail crime, based on the costs of thefts by customers, disloyal employees
and suppliers and vendors plus the costs of loss prevention were $108,093 million, equivalent
to $283.61 per household.
 The most-stolen items of retail merchandise within the 32 countries included branded and
expensive products: cosmetics and skincare, alcohol, womenswear/ladies’ apparel, perfume
and fine fragrances, and designerwear. Other highly stolen lines included razor blades,
DVDs/CDs, video games and video consoles, small electric items, and fashion accessories.
 Retailers protected only 61% of their ten most-vulnerable product lines (including spirits,
perfumes and razor blades). Electronic article surveillance was the single most-used
protection method (used on 35.4% of lines) and safers and locked boxes were used on 11.3%
of products.
 Electronic article surveillance source tagging (ST, applying tags during manufacture or the
logistics chain) was used by 39.8% of retailers, including 45.2% in North America, 39.7% in
Europe and 27.4% in Asia-Pacific. A further 25.5% of retailers expected to introduce source
tagging within the next two years, implying that by the end of the decade 65.3% of retailers
will use source tagging. The average number of product lines that were source tagged was
268 (providing 16.4% of retail sales). In North America, source tagging had much higher
levels of penetration, responsible for 21.3% of sales.
There are some commentators who view retail crime as a harmless or intriguing social
phenomenon or simply as a ‘cost of doing business’. This ignores the impact of criminal gangs,
international organized crime often linked to trafficking, drug-related retail crime, fraud, extortion
and growing levels of violence against staff. It also ignores the cost of retail crime to the general
public, which in the 12 month period to June 2007 cost every household $283.61.
The support provided for the Global Retail Theft Barometer from Checkpoint Systems,
Inc. is gratefully acknowledged.
In the Global Retail Theft Barometer values are given as U.S. ($) or euros (€) and other
currencies have been converted into these currencies based on the rate of exchange on 1 July
2007. The US$:€ rate used is $1:€0.734305, so a cost of $1million is equivalent to €0.734 million
and €1million would be equivalent to $1.362 million.
Part I of the Global Retail Theft Barometer provides global comparisons for all the 32 countries
surveyed, followed by regional surveys of North America (Part II), Europe (Part III) and AsiaPacific (Part IV). Details of survey methods and the number of retailers surveyed in every country
can be found in the Appendix. So that each regional survey can be read independently without
having to read the whole Barometer, some information about the study’s methods and findings is
repeated.
NORTH AMERICA
Data was provided by 196 U.S. and 32 Canadian retail corporations with combined sales of U.S.
$341 billion.
Retail Shrink and Loss
 U.S. shrink as a percentage of sales was 1.52% in the 12 months to June 2007 (an increase of
2.0% or $786 million at current prices compared with 2006) and cost a total of $39.854
billion. All shrink figures are expressed against retail selling prices.
 Shrink in Canada at 1.49% was slightly lower than the U.S., but had increased by 4.2%.
Canada’s total cost of shrink was $3.63 billion.
 In North America, the highest shrink rates were found in cosmetics/perfume/beauty
supply/pharmacy (1.89%), auto parts/hardware/building materials retail (1.83%) and
supermarkets/large grocery (1.63%). The lowest rates were in liquor/wine/beer (0.61%),
books/newspapers/stationery (0.85%) and toys and games/hobbies and craft (0.92%).
The Causes of Shrink
 Disloyal employees were seen as the greatest source of loss: 46.0% of losses in the U.S. and
43.5% in Canada. Next were shoplifters, 32.3% in the U.S. and 35.2% in Canada,
administrative error, 16.3% in the U.S. and 16.6% in Canada and vendor theft and fraud
estimated to be 5.4% in the U.S. and 4.7% in Canada.
 Employee theft cost U.S. retailers $18.3 billion and in Canada $1.57 billion. Shoplifting
crime was estimated to be $12.87 billion in the U.S. and $1.28 billion in Canada.
 North American retailers apprehended 2.3 million store thieves in the period 2006-2007,
0.664 million of these being fraudulent employees, 28.6% of the total apprehended.
Loss Prevention Spending
 Loss prevention spending in North America was $12.77 billion, equivalent to 29.3% of total
shrink. U.S. revenue spending on loss prevention (LP) was $8.1 billion and capital LP was
$3.67 billion; in Canada the figures were $0.7 billion and $0.27 billion respectively. U.S.
spending by retailers on loss prevention represented 0.45% of retail sales and 0.40% in
Canada. Capital spending was 0.14% of sales in the U.S. and 0.11% in Canada. These figures
exceed LP spending in most other countries. Payroll costs accounted for 55.4% of total LP
spending in North America.
The Costs of Retail Crime
 The 2007 costs of retail crime were estimated to be $45.16 billion for the U.S. and $4.0
billion for Canada, a total of $49.16 billion. This is an annual charge that has ultimately to be
paid by retailers and honest customers, equivalent to a tax of $394.04 for every American
family and $322.69 for every Canadian household. This figures comprised total retail crime
plus loss prevention costs. In 2007, these were: shoplifting $14.15 billion, employee theft
$19.9 billion, vendor fraud $2.3 billion and LP costs $12.77 billion.
Methods of Internal Theft
 U.S. retailers estimated that 24.6% of internal theft occurred at the checkout, 32.2% in the
stockroom/delivery bay and 43.2% on the sales floor. These figures were reversed in Canada,
where 44.5% of internal theft was thought to occur at the checkout, 31.8% in the
stockroom/delivery bay and only 23.7% on the sales floor. The most significant method of
internal theft in North America was thought to be merchandise theft ($9.77 billion or 49.1%
of the total), followed by cash thefts (24.7% of the total) (including coupons and vouchers),
refund fraud/markdowns (13.1%), collusion (9.5%) and large financial fraud (3.7%).
Methods of Protecting the Most-stolen Merchandise
 Almost two-thirds (62.5%) of the 10 most vulnerable lines were individually protected, which
means that 37.5% of the most-stolen items were not protected. The most heavily-protected
items were DVDs (only 10.3% of which were unprotected), razors and video games. The
most significant security method used was electronic article surveillance (EAS) protecting
38.0% of the most vulnerable lines (8.8% of which was provided by tags applied at source),
safers and locked boxes (9.5%), empty carton and ticket systems (6.2%), locked cabinets and
shelves (5.4%) and chains, cables and loop alarms (3.4%).
EAS Source Tagging and Open Merchandising.
 North American retailers led the application of EAS source tagging, which was used by
45.2% of retail corporations. The percentage of non-users that expected to introduce ST in the
next two years was 23.5%. Among North American ST users, 21.3% of their sales came from
ST items, compared to 15.9% in Europe and 6.1% in Asia-Pacific.
In the 12 month period to June 2007, retail crime cost every household $394.04 in the United
States and $322.69 in Canada.
EUROPE
The European data is based on information from 489 European retailers from 25 countries of
West and Central Europe. They operated 43 276 stores with a combined sales turnover of
€371 453 million ($505 billion). The €:US$ rate used was €1=$1.3618. The Global Retail Theft
Barometer replaces what would have been the seventh European Retail Theft Barometer.
Retail Shrinkage and Loss
 Europe’s shrinkage rose in 2007 to 1.26% of turnover (measured against retail selling prices),
an increase of 1.6% (costing €454 million) over last year’s average rate of 1.24%. This
reverses the four-year trend of regular decreases. Shrinkage cost European retailers and
consumers a total of €29 285 million.
 Countries with the lowest shrinkage rates were: Austria (0.94%), Switzerland (0.96%) and
Iceland (1.00%). The highest shrinkage rates were the Baltic States (Latvia, Lithuania and
Estonia) (1.42%), the Czech Republic (1.41%), and Greece, Slovakia and Hungary (all
1.36%).
The Causes of Shrinkage
 European retailers believed that their major source of theft was customers (including
organised retail gangs), who were responsible for 48.5% of shrinkage (€14 188 million) and a
small number of disloyal employees that caused 28.6% of shrinkage losses (€8 389 million).
Other sources of loss were suppliers (6.9% or €2 019 million) and pricing errors and
administrative failures (16.0% or €4 689 million).
Security Spending
 Spending on security and loss prevention in Europe reduced slightly by 0.3% to a total of
€7 821 million, but capital spending on security equipment and technology increased to
32.6% of this total, emphasising how ‘smart’ loss prevention is of growing importance.
However, security spending as percentage of retail sales was 23% lower in Europe than in
North America. Staffing costs accounted for 51.7% of security spending.
The Costs of Retail Crime
 The 2007 costs of retail crime in Europe were estimated to be €32 417 million in the 12
months to June 2007, an increase of €417.5 million. This charge on retailers and honest
customers was equivalent to a tax of €168.51 upon every household in Europe. Customer
theft was €14 188 million, employee theft €8 389 million, supplier fraud €2 019 million and
security costs €7 821 million.
Methods of Internal Theft
 In Europe, retailers estimated that 34.2% of internal (employee) theft occurred at the
checkout, 41.7% in the stockroom/delivery bay, and 24.1% on the sales floor. The most
important method of internal theft in Europe was thought to be cash thefts (32.6% of the
total) (including coupons and vouchers), followed by merchandise (24.5%), refund
fraud/markdowns (18.3%), collusion (12.6%), and large financial fraud (12.0%).
EAS Source Tagging and Open Merchandising.
 EAS source tagging was used by 39.7% of large European retailers. 29.6% of European nonusers expected to introduce ST in the next two years.
In the 12 month period to June 2007, retail crime cost every household in Europe €168.51.
ASIA-PACIFIC
Data was provided by 103 retailers from Australia, India, Japan, Singapore, and Thailand with
combined sales of US$65,418 million.
Retail Shrinkage and Loss
 Shrinkage in Australia, India, Japan, Singapore and Thailand was an average of 1.24% of
retail sales in the 12 months to June 2007 (a fall of 4.6%) and cost retailers a total of $15,264
million. All shrinkage figures are expressed against retail selling prices in this Report.
 Shrinkage was highest in India (2.90%), followed by Thailand (1.65%), Australia (1.39%),
Singapore (1.25%), and lowest in Japan (1.04%). Although Singapore and Australia’s shrinkage
increased by 5.0% and 2.2% respectively, significant reductions were seen in India (-9.4%),
Thailand (-6.3%), and Japan (-4.6%).
 In the five countries of Asia-Pacific, the highest shrinkage rates were found in vehicle
parts/hardware/building materials (1.80%), cosmetics/perfume/beauty supply/pharmacy
(1.70%), and apparel/clothing and fashion/accessories (1.69%). The lowest rates were in
footwear/shoes/sports & sporting goods (0.68%), liquor, wine, beer (0.84%), and
jewellery/watches (0.88%).
The Causes of Shrinkage
 Customer theft was seen as the greatest source of loss for the five Asia-Pacific countries
amounting to 52.6% of shrinkage ($8,031 million). Next were employee thieves (21.9% or
$3,335 million), administrative error (18.1% or $2,764 million), and supplier/vendor theft and
fraud estimated to be 7.4% ($1,134 million). Australian retailers estimated that employee theft
was their largest source of shrinkage (45.8%).
 The five countries surveyed apprehended 108,720 customer thieves and 10,929 employee
thieves (employees were 9.1% of the thieves apprehended). More than one-half of the thieves
apprehended were caught in India.
Loss Prevention Spending
 Loss prevention (LP) spending in Asia-Pacific was $2,169 million, equivalent to 14.2% of
total shrinkage. Revenue LP spending was $1,292 million (0.11% of retail sales) and capital
$877 million (0.07% of sales). Apart from Australia (which spent 0.35% of sales on LP),
Asia-Pacific expenditure on LP as a percentage of retail sales was lower than the European
average (0.34%) and the North American average of 0.45% of sales. Payroll costs accounted
for 48.9% of total LP spending.
Methods of Internal Theft
 Asia-Pacific retailers believed that 33.1% of internal theft occurred at the checkout, 33.4% in
the stockroom/delivery bay, and 33.6% on the sales floor. The most important method of
internal theft in Asia-Pacific was thought to be merchandise theft (50.0% of the total), followed
by refund fraud/markdowns (18.6%), cash thefts (16.5% of the total) (including coupons and
vouchers), collusion (6.7%), and large financial fraud (8.3%).
EAS Source Tagging and Open Merchandising.
 EAS source tagging was used by 27.4% of large retailers in the Asia-Pacific region (including
40% in Australia). The percentage of non-using retailers in Asia-Pacific who expect to introduce
ST in the next two years was 19.9%.
In the 12 month period to June 2007, retail crime cost every household in the five countries of
Asia-Pacific involved in the Barometer $182.34 in 2007.
THE GLOBAL RETAIL THEFT BAROMETER 2007
SURVEY INFORMATION
The Global Retail Theft Barometer 2007 reports on losses from crime and waste
suffered by the retail businesses of 32 countries in North America, Europe and AsiaPacific, having a total population of more than 2 billion people. Retailers in the countries
surveyed had combined sales of US$7,269,110 million ($7.3 trillion), making this the
largest survey of retail theft and crime in the world.
The Barometer covers all retail sectors and vertical markets in those 32 countries (see
Table 1.1 for further detail) in order to capture the scale of crime-related losses and
shrinkage and to examine trends in loss prevention policies adopted by retail
corporations.
Table I.1
GRTB Countries Surveyed
North America U.S.A. and Canada
Europe
Western Europe: Austria, Belgium/Luxembourg, Denmark, Finland, France,
Germany, Greece, Iceland, Ireland, Italy, Netherlands, Norway, Portugal,
Spain, Sweden, Switzerland, UK
Central Europe: Czech Republic, Hungary, Poland, Slovakia, Latvia,
Lithuania, Estonia
Asia-Pacific
Australia, India, Japan, Singapore, Thailand
The Global Retail Theft Barometer is divided into four sections. Part 1, The Global
Report, provides comparative data for all 32 countries. Parts II, III and IV give the results
relating to North America, Europe and the Asia-Pacific regions.
The results from the Global Retail Theft Barometer are derived from a confidential
structured survey of large retail companies in all types of business in the 32 countries
surveyed. The data is based on a 24-question confidential survey sent to the Loss Prevention or
Security Vice President or Chief Security Officer of 3,600 large retail corporations : useable
responses were received from 820 businesses (a 22.8% response rate) with combined
sales of $947,766 million and a total of 138,603 retail outlets. This response rate was
perfectly satisfactory for a survey of this kind. The participating retailers represented
13% of North American retail sales, 16% of European and 5% of Australian and Asian
retailers. Further information about the responses and the methods can be found in the
Appendix.
DEFINITIONS
All shrinkage figures in this Report are based on average selling (retail) prices. Average
shrinkage rates within each country are calculated as ‘weighted’ averages rather than simple
averages, with proportionally greater significance being given to larger companies and larger
countries. This may mean that comparisons with other crime surveys based on simple arithmetic
averages are difficult. The choice of countries to participate in the survey was designed to provide
an extensive spread of experience.
The values in this Report are converted into U.S. dollars at the rate of exchange applying on July
1, 2007. The European results have been calculated in Euros (with conversions from other
currencies, where necessary, at the rate of exchange applying on July 1, 2007).
References here to ‘North America’ refer exclusively to Canada and the United States. The term
‘Europe’ is used in this Report to include 25 countries of Western Europe and Central Europe that
are covered by this survey. It does not mean the European Union (EU), although a majority of
these countries are members. ‘Asia-Pacific’ in this survey refers to Australia, India, Japan,
Singapore and Thailand. The choice of countries to participate in the survey was designed to
provide an extensive spread of experience. The inclusion or non-inclusion of any country carries
no implications of good or bad loss prevention practice and no political implications are meant or
implied.
The data has been collected and processed by the Centre for Retail Research in Nottingham,
England, which has been carrying out international research on retail crime for almost 20 years
directed by Professor Joshua Bamfield. Further information about the samples and the methods
used in the survey can be found in the Appendix.
The Global Retail Theft Barometer is sponsored by Checkpoint Systems, Inc. as a contribution to
debate within the retail industry. Checkpoint’s support in developing this research is warmly
appreciated and acknowledged.
We are grateful to all LP managers who have participated in this Global Retail Theft Barometer.
Their contribution has helped to make this the largest survey of retail crime and shrinkage in the
world.
PART ONE: GLOBAL REPORT
GLOBAL SHRINKAGE RATES ARE INCREASING
Total retail shrinkage in the 32 countries covered by the Global Retail Theft Barometer
amounted to $98,630 million in the period July 2006-June 2007 (Table 1.2).
‘Shrinkage’ (comprising inventory losses from crime and waste) in 2007 cost retailers
1.36% of their annual sales turnover. The average shrinkage rate varied from 1.52% of
sales in North America to 1.24% in the Asia-Pacific region. While these shrinkage
figures – to an outsider – may seem comparatively small, the overall cost of shrinkage
has to be met by consumers, stockholders and employees through a mixture of higher
prices, lower profits and lower bonuses and wage levels. This year, shrinkage has cost
every single individual in the countries surveyed (excluding India) an average of $98.14
per person.
Table I.2
Global Retail Shrinkage 2007
Total Shrinkage
US$ millions
Shrinkage as
percentage of
sales turnover
North America
$43,485
1.52%
Europe
$39,881
1.26%
Asia-Pacific
$15,264
1.24%
Global
$98,630
1.36%
Retail shrinkage is measured against retail selling prices
Figure 1.1 shows the main contributors by country of the $98,630 million global
shrinkage total. The five largest national ‘contributors’ to global shrinkage were the U.S.,
Japan, the UK, Germany and France.
Figure I. 1
Global Shrinkage by Country/Region
The Netherlands
Spain United Kingdom
Other Western Europe
Poland
Italy
Germany
Other Central Europe
Canada
France
Other Asia-Pacific
Japan
India
United States of
America
Australia
There were great differences in the average rates of shrinkage between countries, as
shown by Figure I.2 and Table I.3. The highest shrinkage rates were seen in India
(2.90%), Thailand (1.65%) and the United States (1.52%). The lowest rates of shrinkage
were found in Austria (0.94%), Switzerland (0.96%) and Iceland (1.00%).
Figure I.2
Average Shrinkage By Country 2007
India
Thailand
United States of America
Canada
Baltic States
Czech Republic
Australia
Greece
Central Europe
Slovakia
Hungary
Average All Countries
Poland
France
United Kingdom
Ireland
Belgium/ Luxembourg
Sweden
Finland
Portugal
Spain
Norway
Average Eureop
Average Western Europ
Singapore
Average Asia-Pacific
The Netherlands
Italy
Denmark
Germany
Japan
Iceland
Switzerland
Austria
0.00%
1.00%
0.50%
2.00%
1.50%
3.00%
2.50%
Shrinkage as Percent of Sales
Global shrinkage in this period rose from 1.34% to 1.36% of sales between 2006 and
2007, an increase of 1.5%.
Sixteen countries from the 32 (i.e. 50% of the countries surveyed) showed an increase in
their average shrinkage rates compared to 2006 (see Table 1.3). Both in North America
and in Europe, shrinkage rates rose in 2007 (by +2.7% and +1.6% respectively), although
they fell by an average of -4.6% in Asia-Pacific. This came after a period when most
experts agree that shrinkage in Europe and the U.S. (although high) had been declining.
Now it is getting worse. The current retail climate in most countries is unforgiving, with
retailers of all types facing significant cost pressures, weak consumer demand and an
uncertain economic outlook. It is unfortunate, but it is no surprise, that in these
circumstances at least one-half of the countries surveyed by the Global Retail Theft
Barometer are facing problems caused by increased shrinkage.
Table I.3
Global Retail Shrink in 2007
Total Shrinkage
2007
All values are in U.S. $
NORTH AMERICA
Canada
United States
Average North America
Percentage
change
2007
2006
2006-2007
3,630
39,855
43,485
1.49%
1.52%
1.52%
1.43%
1.49%
1.48%
4.2%
2.0%
2.7%
ASIA-PACIFIC
Australia
India
Japan
Singapore
Thailand
Average Asia-Pacific
2,008
2,379
9,643
179
1,055
15,264
1.39%
2.90%
1.04%
1.25%
1.65%
1.24%
1.36%
3.20%
1.09%
1.19%
1.76%
1.30%
2.2%
-9.4%
-4.6%
5.0%
-6.3%
-4.6%
EUROPE
Austria
Belgium/Luxembourg
Denmark
Finland
France
Germany
Greece
588
1,106
500
567
6,326
6,681
712
0.94%
1.33%
1.2%
1.32%
1.34%
1.1%
1.36%
0.96%
1.28%
1.24%
1.34%
1.29%
1.07%
1.33%
-2.1%
3.9%
-3.2%
-1.5%
3.9%
2.8%
2.3%
Iceland
Ireland
Italy
The Netherlands
37
596
4,201
1,607
1.00%
1.33%
1.23%
1.24%
1.06%
1.25%
1.24%
1.2%
-5.7%
6.4%
-0.8%
3.3%
587
1.26%
1.29%
-2.3%
Norway
Portugal
U.S. $ million
Shrinkage
(as % of sales)
489
1.31%
1.34%
-2.2%
3,602
1.28%
1.29%
-0.8%
Sweden
861
1.32%
1.32%
0.0%
Switzerland
799
0.96%
0.92%
4.3%
7,621
1.34%
1.33%
0.8%
36,880
1.25%
1.23%
1.3%
Czech Republic
490
1.41%
1.42%
-0.7%
Hungary
458
1.36%
1.38%
-1.4%
1,596
1.34%
1.32%
1.5%
Slovakia
176
1.36%
1.4%
-2.9%
Baltic States
281
1.42%
1.32%
7.6%
Spain
United Kingdom
Average Western Europe
Poland
Average Central Europe
3,001
1.36%
1.35%
1.0%
Average Europe
39,881
1.26%
1.24%
1.6%
Average Global
98,630
1.36%
1.34%
1.5%
SHRINKAGE BY BUSINESS TYPE
In order to analyse how shrinkage rates vary between different kinds of business (or vertical
markets), we classified retailers using 16 categories (derived from the Hoover’s, Inc.
categorization of the global retail marketplace). Care should be taken, when making comparisons,
as many businesses could classify themselves in a number of ways.
The highest average rates of shrinkage (Figure 1.3) were found in vehicle (auto)
parts/hardware/building materials retail (1.77%); cosmetics/perfume/beauty supply/pharmacy
(1.70%); and apparel/clothing and fashion/accessories (1.66%). The lowest rates were in liquor,
wine, beer/off-licence (0.73%); footwear/shoes/sports goods and sporting goods (0.82%); and
electrical goods/computer centre/electronics store (0.89%). Although specialist liquor/wine/beer
outlets have the lowest shrinkage rate, alcohol (mainly spirits) is the fourth most-stolen product.
Figure I.3
Shrinkage by Global Vertical Markets, 2007
vehicle parts/hardware/DIY/building materials retail
cosmetics/ perfume/ health & beauty/pharmacy
apparel/clothing and fashion/ accessories
department store or large general store
convenience stores/ natural & speciality foods
Overall average
video/ music/ games software
supermarket/ hypermarkets/ large grocery
books/newspapers/stationery
furniture/ textiles/ floor & window coverings/
office products
jewellery/ watches
discount/ variety retail/ warehouse clubs
toys and games/ hobby and craft
electrical goods/ computer centre/ electronics store
footwear/ shoes/ sports goods & sporting goods
liquor, wine beer/off-licence
0.00%
0.50%
1.00%
1.50%
2.00%
Shrinkage as percentage of retail sales
SOURCES OF RETAIL SHRINKAGE
There is considerable debate about the main causes or sources of retail shrinkage, in particular
whether employee theft is a greater problem for retailers than customer theft or shoplifting.
Figure 1.4 shows that retailers reported that $41,504 million was lost to customer thieves (42.0%
of total shrinkage) and $34,671 million to employee theft (35.2%). Internal error (including
pricing mistakes, accounting errors, and process failures) cost retailers $16,248 million (16.5%)
and crime losses caused by suppliers or vendors (and supply-chain fraud) amounted to $6,207
million (6.3%). Globally, therefore, losses from customer theft were thought to be almost 20%
higher than losses from internal crime, including fraudulent employees placed in retail
organizations by organized crime. The main methods used to commit internal fraud are discussed
later in the Report.
Figure I.4
Global Sources of Retail Shrinkage 2007
Suppliersvendors,
$6,207 million
6.3%
Internal error,
$16,248 million
16.5%
Employees,
$34,671 million
35.2%
Customer
thieves,
$41,504 million
42.0%
However, opinions or perceptions about what were thought to be the causes of retail shrinkage
varied considerably between areas (Figure 1.5). North American retailers reported that employee
theft accounted for 45.8% of shrinkage compared to 32.5% of losses apparently caused by
customer thieves. The position in Europe and Asia-Pacific (except for Australia) was the
opposite: customer theft was thought to comprise 48.5% of European shrinkage and employee
theft was 28.6%. In Asia-Pacific, the proportions were 52.6% (customer theft) and 21.9% for
employee theft.
Closer examination of the data by country shows there are not two main views about the scale of
employee crime, but three. First, there are countries like the U.S. (where employee theft is 46.0%
of shrinkage), Canada (43.5%), Australia (40.2%) and Iceland (39.0%) that see employee theft as
the largest cause of shrink or equal in size to shoplifting. Second, there are countries, including
Poland (35.1%), Hungary (35.0%) and the United Kingdom (34.0%) where employee theft is
seen as a major problem, but not (yet) as large in total as customer theft. Third, there are countries
such as Greece (17.0%), Japan (18.3%), India (19.3%) and Austria (22.4%), where retailers report
that employee theft is very small.
Figure I.5
Sources of Global Retail Shrinkage 2007
North America
employees
customer thieves
Asia-Pacific
vendors
internal error
Europe
0
5000
10000
15000
20000
25000
U.S. $ million
These estimates result from the perceptions of Loss Prevention specialists, based on their current
understanding of the major problems they face. Most shrinkage is unseen at the time it occurs, so
the issues about its sources are not as unambiguous as, for example, data about sales revenues and
need to be treated with a degree of caution.
APPREHENDED CUSTOMER THIEVES AND DISHONEST EMPLOYEES
Table 1.4 shows that almost 6 million customer and employee thieves were apprehended by
retailers in 2006-2007. The great majority of these (87.5%) were customer thieves: the number
apprehended was 5,225,857. The average amount stolen or admitted per customer theft incident
was $270.
Table I.4
Number of Thieves Apprehended by Retailers 2007
Customer thieves
Number
Europe
Percentages
customers/employees
North America
Percentages
customers/employees
Asia-Pacific
Percentages
customers/employees
Global totals
Percentages
customers/employees
3,481,490
Average Amount
Stolen ($) per
Incident
$112
98.1%
1,635,687
$622
87.5%
69,015
$5,145
663,555
$54
10,929
$1,666
743,499
12.5%
2,299,242
100.0%
$206
9.1%
$270
3,550,505
100.0%
28.6%
90.9%
5,225,897
Number
Totals
Average
Amount Stolen
($) per Incident
1.9%
71.4%
108,720
Employee thieves
119,649
100.0%
$1,967
5,969,396
100.0%
Almost three-quarters of a million employee thieves were apprehended (743,499), the average
amount stolen or admitted per incident being $1,967. Globally, therefore, the employee fraudster
stole on average more than seven times the value stolen by the average shoplifter, explaining the
increasing importance that retailers in most countries place upon detecting and apprehending theft
by dishonest employees.
There are clear differences perceived between the main regions. Employee thieves represented
28.6% of persons apprehended by retailers in North America, 9.1% in Asia-Pacific, and only
1.9% in Europe. North American retailers apprehended the great majority of dishonest employees
(663,555 persons), while European retailers apprehended a total of only 69,015 employee thieves.
In contrast, European retailers apprehended almost 3.5 million customer thieves compared to the
North American total of more than 1.6 million. While there can be a number of reasons for these
differences, they may explain why North American retailers report employee theft as being
considerably greater than customer theft.
The average amount detected or admitted per incident for customer theft was $54 in Asia-Pacific,
$112 in Europe, and as high as $622 in North America (influenced particularly by organised retail
theft). The average employee theft incident was $5,145 in Europe, $1,666 in the U.S., and $206 in
Asia-Pacific. European retailers believe they have a considerable problem with large financial
frauds, which may partly explain their high average amount stolen. There may also be legal or
cultural differences, which affect the value of theft admitted. The types of thieves apprehended
will, of course, reflect LP policy as well as the number of offenders stealing from the business
THE LOCATION AND METHODS USED FOR INTERNAL FRAUD
Theft and fraud by employees (or internal fraud) cost retailers in the 32 countries $34,671
million. Where, and how, did this theft occur?
Table 1.5 shows globally where retailers believed that their main internal losses took place. The
checkout or cash desk was thought to be responsible for 30.9% of losses (costing $10,713
million), the back office, stockroom, or delivery bay for 36.5% ($12,655 million) and 32.6%
($11,303 million) of losses were thought to occur on the sales floor itself. Again, these figures are
perceptions. These figures varied somewhat between different regions with North American
retailers relating 41.5% of their internal losses to the sales floor, while European retailers, on
average, thought that 41.7% of their internal losses occurred in the back office, stockroom, or
delivery bay and Asia-Pacific reported that each location had an approximate equal share in
internal fraud.
Table I.5
Location of internal retail losses
Estimated Cost
$million
Percentages
Checkout
$10,713
30.9%
Back office, stockroom, delivery bay
$12,655
36.5%
Sales floor
$11,303
32.6%
Total
$34,671
100.0%
What methods were used by dishonest employees to steal merchandise, property or financial
assets from retailers? Figure 1.6 shows that retailers reported that 41.1% of internal fraud (or
$14,239 million) was stolen directly as merchandise. More than one-quarter (26.5%) was stolen
as cash, coupons, vouchers or gift cards ($9,181 million). Refund frauds and false markdowns
comprised 15.3% of internal fraud ($5,321 million) and collusion was 10.2% or $3,551 million.
Large financial frauds accounted for 6.9% of internal fraud ($2,378 million).
Major differences between regions included large financial frauds which European retailers
thought constituted 12.0% of internal fraud, collusion (which was considered to be only 6.7% in
Asia-Pacific, but 12.6% in Europe), and cash, coupons and voucher fraud (considered to be
16.5% in Asia-pacific and 32.6% of internal fraud suffered in Europe). Note that Figure 6 refers
to key methods of internal theft. Cash will also normally be the method used for large financial
frauds and refund frauds/false markdowns, whilst collusion is most likely to involve the theft of
goods.
Figure I.6
Main Methods of Internal Retail Fraud,
32 Countries
large financial
frauds, $2,378
million
6.9%
refund fraud,
false
markdowns,
$5,321 million
15.3%
collusion, $3,551
million
10.2%
cash, coupons,
vouchers,
$9,181 million
26.5%
merchandise,
$14,239 million
41.1%
RETAIL LOSS PREVENTION AND SECURITY SPENDING
Historically the retail industry has always had to protect its assets from crime and fraud, but
changes in policing methods have meant that stores increasingly have to police themselves.
Spending by retail businesses on loss prevention and security was $25,590 million in the 12
months ending in June 2007, equivalent to an average of 0.35% of retail sales (Table 1.6). AsiaPacific retailers spent a smaller proportion of their sales on loss prevention - $2,169 million or
0.18% of sales. The European figure of $10,648 million was near to the 32-country average of
0.34% of sales turnover.
Table I.6
Global Loss Prevention and Security Costs 2007
(Financial totals in U.S. $ million)
Loss Prevention and
Security Costs
Revenue Totals
Capital
Totals
LP Costs as
Percentage of
Sales
North America
$12,773
$8,834
$3,939
0.45%
Europe
$10,648
$7,177
$3,471
0.34%
$2,169
$1,292
$877
0.18%
$25,590
$17,303
$8,287
0.35%
Asia-Pacific
Global Totals
Global revenue spending of $17,303 million was 67.6% of total loss prevention spending, with
capital spending (including depreciation) of $8,287 million.
The breakdown of retail global loss prevention and security spending can be seen in Figure 1.7.
Figure I.7
Global Security Spending 2007
equipment,
$8,290 m.
32.4%
other, $1,438
m.
5.6%
armoured car
cash collection,
$1,885 m.
7.4%
direct
employees,
$5,817 m.
22.7%
contract
employees,
$8,159 m.
31.9%
Security employees accounted for more than one-half of loss prevention spending ($13,976
million or 54.6% of spending), with contract (third-party) employees costing $8,159 million and
direct employees $5,817 million.
Security equipment including electronic surveillance, software and hardware was $8,290 million
(32.4% of total security spending). Retailers also spent $1,885 million on armoured car cash
collection (7.4%) and ‘other’ spending of $1,438 million was equivalent to 5.6% of the loss
prevention budget.
THE COSTS OF RETAIL CRIME
Shrinkage is not a complete measure of retail crime, because it includes an allowance for
administrative error (such as pricing mistakes, accounting errors, and process failures). The Costs
of Retail Crime in Table 1.7 exclude administrative error and focus on crime-based losses. To
capture all the costs of crime, the totals of loss prevention spending by retailers are included in
crime costs.
Table I.7
Global Cost of retail Crime
All values in U.S. $ millions
Cost of customer theft (million)
Cost of employee theft (million)
Vendor/supplier fraud (million)
Cost of loss prevention (million)
Totals
Costs per household
North
America
Europe Asia-Pacific
$14,151
$19,322
$8,031
$19,912
$11,424
$3,335
$2,323
$2,750
$1,134
$2,169
$12,773
$10,648
Totals
$41,504
$34,671
$6,207
$25,590
$49,159
$44,144
$14,669
$108,093
$394.04
$229.48
$195.05
$283.61
The total global costs of crime (Table 1.7) for the 32 countries were $108,093 million, comprising
the costs of customer theft+employee theft+supplier/vendor theft+the costs of loss prevention.
This represented a tax imposed on honest people by retail criminals of $283.61 for every single
household in the 32 countries. The highest cost of crime was found in North America (an average
of $394.04 per household), $229.48 per household in Europe, and in Asia-Pacific it was
equivalent to $195.05 per household.
THE MOST STOLEN ITEMS
Globally, the five most-stolen items of retail merchandise amongst the 32 countries were:
cosmetics and skincare, alcohol, womenswear/ladies’ apparel, perfume and fine fragrances, and
designerwear (Table 1.8). Other highly stolen lines included razor blades, DVDs/CDs, video
games and video consoles, small electric items, and fashion accessories.
What products stocked by retailers are most vulnerable to theft? Research into this
question shows that (with some exceptions) the most stolen items tend to be expensive
designer or heavily-branded products mainly used for entertainment/ leisure, personal
care or clothing, as well as alcohol and electronics. Particularly where organized retail
crime is involved, the products stolen are those that can readily be sold to others. Many
items are comparatively small such as razor blades, memory cards or cosmetics, and can
be hidden relatively easily by the thief. As a result, the same basic range of merchandise
items appears in the most-stolen list of the great majority of countries.
Table I.8
Most-Stolen Merchandise, Global Retailers 2007
Rank
Order
1
2
3
4
5
6
7
8
9
10
11
12
Cosmetics and skincare
Alcohol
Womenswear/ladies’ apparel
17
Perfumes and fine fragrances
Designerwear
Razor blades
DVDs/CDs
Video games and consoles
Small electronic items
Accessories
Childrenswear/children’s apparel
High cost and speciality food (e.g. meat,
cheese, seafood)
Computer laptops
Batteries
Mobile phones
Nescafe and instant coffee
Other health and over-the-counter products
18
Watches
13
14
15
16
Rank
Order
19
20
21
Shoes & trainers
Hand tools
Office supplies & printer cartridges
22
23
24
25
26
27
28
29
30
Menswear/men’s apparel
Chocolates and confectionery
Power tools
Sporting goods & sports goods
Jewellery
TV/audio
Interior furnishings
Infant formula
Cigarettes and cigarette paper
31
32
33
34
35
Hair care, other beauty products
Leather belts, designer bags etc.
Home security products
Toys
Small plumbing items and bolts,
nuts and washers.
STORE AUDIT PROGRAMS AND LP COMPLIANCE
To ensure that agreed corporate policy for loss prevention and security is carried out in practice,
globally 70.1% of retailers had a store audit programme in place. This programme usually
involved an audit of store policy and procedures one or more times every year. The results were
finely balanced, with 35.1% of retailers conducting store audits three or more times per year and
35.0% carrying audits out once or twice every year.
The highest proportion of retail businesses using audits was found in North America (81.2%),
where 59.0% of retail corporations carried out store audits three or more times per year.
PROTECTING THE MOST-STOLEN MERCHANDISE
For ten of the most vulnerable product groups, retailers were asked to state what proportion of
lines were specially safeguarded or protected and to indicate what percentage of each group were
protected in specific ways. The product groups included the most vulnerable items such as DVDs,
video games, spirits, perfume, clothing and small electronic goods. The results are shown in
Table I.9.
The retailers of all 32 countries protected 61% of their ten highly vulnerable product lines and
39% of products went unprotected. In Table 1.9, the products are arranged in descending order of
the extent to which they were protected. Video games were the most protected product: the ‘% of
product not protected’ shows that only 10.8% were unprotected – or 89.2% were protected. In
contrast, 71.4% of shoes were not protected, according to the data provided by retailers.
Table I.9
Methods of Protection Used on Most-stolen Lines, 2007 all 32 countries:
Proportion of lines protected by main anti-theft systems
EAS Tags
% Of Product
Locked
Empty
cartons
Chains,
cables
Safers
Hard
Soft
not Protected
Cabinets
&shelves
& ticket
systems
Loop
alarms
Locked
boxes
Tags
Tags
Video Games
10.8%
9.4%
8.7%
0.0%
30.4%
1.4%
23.1%
16.2%
40.7%
100.0%
DVDs
13.4%
8.2%
10.6%
0.0%
29.6%
1.7%
24.3%
12.4%
38.4%
100.0%
Razors
16.7%
10.3%
15.5%
1.6%
21.7%
9.1%
24.5%
0.6%
34.2%
100.0%
Spirits
31.8%
3.3%
6.5%
0.7%
11.5%
28.7%
10.5%
6.9%
46.1%
100.0%
Trousers
Smaller electronic
goods
38.4%
1.4%
0.7%
5.8%
3.4%
34.8%
5.8%
9.8%
50.4%
100.0%
40.2%
5.7%
4.6%
15.9%
8.9%
7.8%
10.3%
6.6%
24.7%
Perfumes
41.0%
8.7%
8.6%
0.0%
5.9%
2.4%
26.2%
7.0%
35.6%
100.0%
Cosmetics
48.7%
5.1%
7.8%
0.0%
7.9%
6.0%
16.7%
7.9%
30.6%
100.0%
Shirts
62.8%
0.1%
0.1%
3.9%
3.9%
11.3%
7.3%
10.7%
29.3%
100.0%
Shoes
71.4%
0.1%
1.3%
2.2%
0.0%
10.3%
7.7%
6.9%
24.9%
100.0%
Averages
39.0%
5.0%
6.2%
3.2%
11.3%
11.9%
15.2%
8.3%
35.4%
Source
EAS
Tagged Sub-Total
100.0%
The main methods used were electronic article surveillance (used for 35.4% of these products, of
which source tagging was 8.3%), safers and locked boxes (11.3%), empty cartons and ticket
systems (6.2%), locked cabinets and shelves (5.0%) and chains, cables and security loops (3.2%).
Note that these figures relate to the specific methods used to combat theft for these ten products,
which are among the most frequently-stolen articles, rather than about the general use of these
anti-theft systems in retail.
EAS was most likely to be used on trousers (50.4%), spirits (46.1%), video games (40.7%), and
DVDs (38.4%). Safers/locked boxes on video games (30.4%), DVDs (29.6%), and razors
(21.7%); chains, cables and loop alarms on smaller electronic goods (15.9%); empty cartons and
ticket systems for razors (15.5%), DVDs (10.6%) and video games (8.7%); and locked cabinets
and shelves for razors (10.3%), video games (9.4%), and DVDs (8.2%).
ELECTRONIC SOURCE TAGGING OF MERCHANDISE
Electronic tagging of merchandise, generally known as EAS (electronic article surveillance), uses
small devices that alarm if the tagged merchandise is removed from the store without being
deactivated. Retailers were asked about their progress with source tagging, which involves
including these devices in or on the item or its packaging at source before the goods arrive in the
shops.
100.0%
The percentage of retailers in the survey claiming to use source tagging was 39.8%, including
45.2% in North America, 39.7% in Europe and 27.4% in Asia-Pacific. A further 25.5% expected
to use source tagging within the next two years. Thus by the end of the decade, 65.3% of major
retailers would be using source tagging including. In Europe and North America, less than onethird of retailers had no current plans for source tagging, including those for whom it was a
longer-term prospect and those who made no use of EAS.
Table I.10
Use of EAS source tagging
We already use Source tagging
We will use it within 2 years
We have no plans to use Source
Tagging
Total
Number (average)
What percentage of sales is this?
North
America
45.2%
23.5%
Europe
Asia-Pacific
TOTALS
39.7%
29.6%
27.4%
19.9%
39.8%
25.5%
31.3%
30.7%
52.7%
34.7%
100.0%
100.0%
100.0%
100.0%
396
219
97
268
21.3%
15.9%
6.1%
16.4%
The average number of product lines that were source tagged was 268 (16.4% of retail sales). In
North America, source tagging had much greater levels of penetration, responsible for 21.3% of
sales, while currently in Asia-Pacific only 6.1% of products were source tagged.
[PART TWO: NORTH AMERICA]
THE GLOBAL RETAIL THEFT BAROMETER
SURVEY INFORMATION
One hundred and ninety-six large U.S. retailers took part in the survey and they operated 69,639
retail stores with combined sales of U.S. $341.457 billion. In Canada, 32 retail corporations with
total sales of Can$37.3 billion (U.S.$35 billion) participated in the study. The retail businesses
taking part accounted for 13% of North American retail sales.
The Global Retail Theft Barometer is based on a 24-question confidential survey sent to the Loss
Prevention Vice President or Chief Security Officer of 3,600 large retail corporations drawn from
different kinds of business worldwide. It covers all retail sectors and vertical markets in the
United States and Canada and uses the same methods to examine retail shrink and crime in 30
other countries. The shrink figures used here are based on retail selling prices and data from
retailers that use cost prices or a combination of cost and retail selling prices have been converted
to retail selling prices. The calculations of average shrink rates within each country and for each
geographical area use ‘weighted’ averages rather than simple averages, with proportionally
greater significance being given to larger companies and larger countries.
For convenience, all values in this part of the Report are converted into U.S. dollars at the rate of
exchange applying on July 1, 2007.
SHRINK RATES IN NORTH AMERICA
Based on the sample of 228 North American retail corporations with combined retail sales of
$376 billion, average shrink (stockloss from crime or waste expressed as a percentage of retail
sales) in the 12 months to June 2007 was 1.52% of U.S. retail sales and 1.49% of Canadian retail
sales. The overall cost of retail shrink in 2007 for U.S. retailers was almost $40 billion and in
Canada $3.6 billion, a combined total of $43.5 billion
Table 1
Retail Shrink North America
Total Shrink
2007
U.S. $ million
Canada
United States
Total
3,630
39,854
43,484
Shrink
(as % of sales)
Percentage
change
2007
2006
2006-7
1.49%
1.52%
1.52%
1.43%
1.49%
1.48%
4.2%
2.0%
2.7%
Retail shrink is measured against retail selling prices
To an outsider, these shrink figures may seem comparatively small, but the shrink figure of $43.5
billion has to be met ultimately by consumers, stockholders and employees through a mixture of
higher prices, lower profits and lower bonuses and wage levels. This year, shrink has cost each
man, woman and child in the U.S. $139.06 and U.S. $112.59 in Canada.
Table 2.1 shows that average shrink rates were increasing in both countries in common with onehalf of other countries surveyed (globally, shrink rose by 1.5% to 1.36%). U.S. shrink rose by
2.0% (from 1.49% to 1.52%) and in Canada the average shrink rate rose 4.2% (from 1.43% to
1.49%). The current retail climate in most countries is unforgiving, with retailers of all types
facing significant cost pressures, weak consumer demand and an uncertain economic outlook. It
is unfortunate, but it is no surprise, that in these circumstances at least one-half of the countries
surveyed by the Global Retail Theft Barometer are facing similar problems of increased shrink
that are seen in the U.S. and Canada.
Figure 1
Shrink a s Percenta ge of Sales
Ca nada
20 07
20 06
U SA
1.00%
1.10%
1.20%
1.30%
1.40%
1.50%
1.60%
Percentage of Sales
The U.S. and Canada have relatively high rates of shrink compared with most of the countries
surveyed. They are positioned third and fourth with the highest shrink rates after India (2.90%)
and Thailand (1.65%). A full list can be found in Part I.
These figures and all shrink data in this Report are calculated as a proportion of retail selling
prices with the shrink rates of those retailers using cost prices or a combination recalculated to
retail selling prices. ‘Shrink’ is an accountancy term, reflecting the difference between the
financial revenue the business should have received (based upon inventory and purchases) and
the amount actually received. Shrink losses are caused mainly by people stealing goods or money
from the company and also by a range of small or large process errors, accounting lapses and
pricing mistakes that produce apparent inventory losses. In addition to the actual loss of
inventory, declared ‘shrink’ rates will also be affected by company policy, accounting rules and
tax regulations that will influence practice and account for some differences in results.
SHRINK BY BUSINESS TYPE
Different kinds of businesses normally have different shrink problems and may even account for
shrink differently. We classified retailers using 16 categories (derived from the Hoover’s, Inc.
categorization of the global retail marketplace). Care should be taken, when making comparisons,
as many businesses could classify themselves in more than one way. Figure 2.2 shows how the
average shrink rate varied between different kinds of retail business in North America.
The highest average rates of shrink (Figure 2.2 and Table 2.2) were seen in cosmetics/
perfume/beauty supply/pharmacy (1.89%), auto parts/hardware/building materials retail (1.83%)
and supermarkets/large grocery (1.63%). The lowest rates were liquor/wine/beer (0.61%),
books/newspapers/stationery (0.85%) and toys and games/hobby and craft (0.92%). Although
specialist liquor/wine/beer outlets have the lowest shrink rate, alcohol (mainly spirits) is the
fourth most-stolen product.
Figure 2
Shrink by Vertical Market in North America
cosmetics/ perfume/ beauty/pharmacy
auto parts/hardware
supermarket/ large grocery
apparel/clothing&fashion/accessories
department & large general stores
furniture/ textiles/ floor & window coverings
average
convenience stores/natural & specialty foods
jewelry/ watches
video/ music/ games software
discount/ variety retail/ warehouse clubs
footwear/ shoes/ sports & sporting goods
office products
electricals/ computers/electronics stores
toys and games/ hobby and craft
books/newspapers/stationery
liquor, wine beer
0.00%
0.50%
1.00%
1.50%
S hrink % of S a le s
Significant increases in average shrink (Table 2.2) were seen in electrical goods/computer
center/electronics (+4.5%), cosmetics/perfume/beauty supply/pharmacy (+4.4%) and
supermarkets/large grocery (+3.8%). Reductions in shrink were fewer but included
books/newspapers/stationery (-5.6%), footwear/ shoes/sports and sporting goods (-4.5%) and
liquor/wine/beer (-3.2%).
The ranking from high shrink to low shrink types of retail business is, with some exceptions,
similar in North America to other parts of the world. However, supermarkets/large grocery tend
to have a lower shrink elsewhere while convenience stores and books/newspapers/stationery in
other parts of the world suffer much higher rates of shrink than in North America.
2.00%
Table 2
Shrink as Percentage of Sales by Sector, North America
2007 2006
Change
cosmetics/perfume/beauty supply/pharmacy
1.89% 1.81%
4.4%
auto parts/hardware/building materials retail
supermarkets/large grocery
1.83% 1.79%
1.63% 1.57%
2.2%
3.8%
apparel/clothing and fashion/accessories
1.61% 1.56%
3.2%
department store or large general store
furniture/textiles/ floor & window coverings
1.58% 1.55%
1.53% 1.57%
1.9%
-2.5%
convenience stores/natural & specialty foods
1.44% 1.40%
2.9%
jewelry/watches
1.25% 1.28%
-2.3%
video/ music/games software
1.24% 1.21%
2.5%
discount/variety retail/warehouse clubs
1.21% 1.17%
3.4%
footwear/shoes/sports goods & sporting goods
1.05% 1.10%
-4.5%
office products
1.15% 1.15%
0.0%
electrical goods/computer center/electronics store
0.93% 0.89%
4.5%
toys and games/hobby and craft
0.92% 0.94%
-2.1%
books/newspapers/stationery
0.85% 0.90%
-5.6%
liquor/ wine/beer
0.61% 0.63%
-3.2%
Overall Averages
1.52% 1.48%
2.7%
SOURCES OF RETAIL SHRINK IN NORTH AMERICA
What were the main sources of retail losses according to the retailers who took part in the survey?
Retailers found the largest source of loss was attributed to a number of dishonest employees,
responsible for 45.8% of retail shrink (Figure 2.3). This proportion also includes fraudulent
employees placed in retail organizations by organized crime. The total costs of crime by
dishonest employees were $19.912 billion, consisting of $18.333 billion suffered by U.S. retailers
and $1.579 billion in Canada (Table 2.5). The main methods used to commit internal fraud are
considered in a later section.
Figure 3
Sources of Shrink 2007, North America
shoplifte rs
32.5%
administrativ e e rror
16.3%
v e ndors
5.3%
e mploye e s
45.8%
The second most significant source of retail shrink loss in North America was reported to be
shoplifters, responsible for 32.5% of shrink ($14,151 million). Retailers are focusing vigorously
on the issues caused by organized retail crime (ORC), which is a major contributing factor to
shoplifting. U.S. losses from shoplifting were $12.873 billion and Canada’s losses were $1.278
billion, a combined total of $14.151 billion.
Table 3
Sources of Shrink
U.S.$ million
Shoplifters
Employees
Vendors
Administrative Error
Totals
U.S.
$million
Percent
12,873 32.3%
18,333 46.0%
2,152
5.4%
6,497 16.3%
39,855 100.0%
Canada
Total
$million
Percent
$million
Percent
1,278
35.2%
14,151 32.5%
1,579
43.5%
19,912 45.8%
171
4.7%
2,323
5.4%
602
16.6%
7,099 16.3%
3,630
100.0%
43,485 100.0%
Vendor crime (including losses in the distribution chain and theft by delivery employees) was
responsible for 5.4% of shrink, $2.152 billion in the U.S. and $0.171 billion in Canada.
Lastly, administrative error, which includes accounting mistakes, pricing errors and process
failures, cost retailers $7.099 billion (16% of shrink losses). This was made up of $6.497 billion
in the U.S. and $0.602 billion in Canada.
Table 4
Global Sources of Retail Shrink 2007
Shoplifters
North America
Canada
United States
Average North America
Europe
France
Germany
Italy
The Netherlands
Spain
United Kingdom
Western Europe (18 countries)
Central European (7 countries)
Average all European
countries
Asia-Pacific
Australia
India
Japan
Singapore
Thailand
Average Asia-Pacific
Employees
Vendors Administrative
error
35.2%
32.3%
32.5%
43.5%
46.0%
45.8%
4.7%
5.4%
5.4%
16.6%
16.3%
16.3%
43.5%
55.9%
50.8%
47.5%
53.0%
42.6%
48.9%
42.2%
29.3%
24.6%
28.4%
26.7%
24.6%
34.0%
28.2%
34.1%
8.9%
6.8%
7.0%
8.6%
8.8%
5.6%
6.9%
6.1%
18.3%
12.7%
13.8%
17.2%
13.6%
17.8%
16.0%
17.6%
48.5%
28.6%
6.9%
16.0%
36.6%
50.2%
57.1%
52.7%
47.5%
52.6%
40.2%
19.3%
18.3%
24.3%
24.7%
21.9%
6.8%
8.5%
7.1%
7.6%
9.2%
7.4%
16.4%
22.0%
17.5%
15.4%
18.6%
18.1%
In a majority of other countries, however, most retailers reported that shoplifters represented a
larger proportion of their losses than employees (Table 2.4).
These estimates of the contribution to shrink loss made by employees, shoplifters, vendors and
administrative error are of course based on the perceptions of Loss Prevention specialists, based
on their current understanding of the major problems they face.
APPREHENDED SHOPLIFTERS AND DISHONEST EMPLOYEES
Table 2.5 shows the numbers of shoplifters and employee thieves apprehended in 2006-2007 and
the average amount stolen per incident or admitted.
U.S. retailers apprehended 2,270,176 thieves and Canadian retail corporations apprehended
29,066 persons, a combined total of 2.299 million. These were made up of 663,555 employee
thieves (28.9% of the total) and 1,635,687 shoplifters (71.4% of total apprehensions). Slightly
more than one-third of thieves (33.8% or 9,826 persons) apprehended in Canada were dishonest
employees and U.S. retailers apprehended 653,729 employee thieves (28.8% of total thieves
apprehended). The number of employee thieves was 663,555, or 28.6% of the total.
The high proportion of employee thieves apprehended justifies retailers’ perceptions that
dishonest employees in North America are likely to be responsible for a larger proportion of their
losses than shoplifters.
Table 5
Number of Thieves Apprehended by North American Retailers 2007
Shoplifters
Employee thieves
Totals
Average
Average
Amount Stolen
Amount Stolen
Number
($) per Incident Number
($) per Incident Number
Canada
Percentages
19,240
66.2%
$241
9,826
33.8%
$693
29,066
100.0%
U.S.
Percentages
1,616,447
71.2%
$658
653,729
28.8%
$1,755
2,270,176
100.0%
North America
Percentages
1,635,687
71.1%
$622
663,555
28.9%
$1,666
2,299,242
100.0%
Shoplifters stole or admitted to stealing an average of $622 per incident, and employee thieves to
$1,666 per incident. Average values were lower in Canada (an average of $241 per shoplifting
incident and $693 per employee theft case) than in the U.S. (an average of $658 per shoplifting
incident and $1,755 per employee theft incident). There may be legal or cultural differences,
which affect the values of theft admitted. The types of thieves apprehended will, of course, reflect
LP policy as well as the number of offenders stealing from the business.
Figure 4
Numbers of Thieves Apprehended
Asia-Pacific
# Employee thieves
# Customer thieves
North America
Europe
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
m illions of offenders
As Figure 2.4 shows, North American retailers apprehended a larger total and proportion of
employee thieves than retailers elsewhere. Asia-Pacific retailers apprehended 110,000 thieves
(9.1% of which were dishonest employees) and European retailers 3.55 million thieves (only
1.9% of which were dishonest employees.
The average amount admitted or proven for shoplifters in Europe and Asia-Pacific was much
smaller than in North America, $112 and $54 respectively. However the average employee theft
incident in Europe was $5,145 (reflecting large financial frauds) compared with $206 for
employee thieves apprehended by Asia-Pacific retailers.
THE LOCATION AND METHODS USED FOR INTERNAL FRAUD
In the period of this survey, theft and fraud by employees (internal fraud) cost U.S. retailers
$18.33 billion and Canadian retailers $1.6 billion (a total of $19.9 billion). This section looks at
where and how employee theft occurs.
In Table 2.6, responses from U.S. retail corporations indicated that 24.6% of internal theft was
believed to take place at the checkout or cash desk, 43.2% on the sales floor and 32.2% in the
back office, delivery bay or stockroom.
In Canada the checkout was estimated to account for 44.5% of internal losses, 23.7% of losses
occurred on the sales floor and 31.8% in the back office, stockroom or delivery bay.
The location of losses is very important because it will determine what means are used to prevent
or detect internal fraud. European retailers reported that losses from the stockroom or delivery
bay were 41.7%.
Table 6
Location of Retail Losses
Checkout
Back office,
stockroom,
delivery bay
Canada
United States
Average North America
44.5%
24.6%
26.3%
31.8%
32.2%
32.2%
23.7%
43.2%
41.5%
Total Europe
34.2%
41.7%
24.1%
Total Asia-Pacific
33.1%
33.4%
33.6%
Sales floor
NORTH AMERICA
What methods were used by dishonest employees to steal merchandise, property or financial
assets from retailers in North America? Figure 2.5 shows that retailers estimated that almost onehalf, 49.1% or $9.772 billion, was stolen directly as merchandise. Almost one-quarter (24.6%)
was stolen as cash, coupons, vouchers or gift cards ($4.908 billion). Refund frauds and false
markdowns comprised 13.1% of internal fraud ($2.611 billion) and collusion cost 9.5% or $1.889
billion. Large financial frauds accounted for 3.7% of internal fraud ($0.731 billion).
Figure 5
Methods of Internal Theft, North America
large financial frauds.
$731 million
3.7%
collusion, $1,889
million
9.5%
refund fraud, false
markdowns. $2,611
million
13.1%
cash, coupons,
vouchers, $4,908
million
24.6%
merchandise theft.
$9,772 million
49.1%
The proportions for Canada and the U.S. are given in Table 2.7. For the U.S., the figures indicate
that merchandise theft was $9.2 billion, cash theft $4.4 billion, refund fraud and markdowns $2.3
billion, collusion $1.7 billion and large financial frauds $0.623 billion. In Canada, merchandise
theft was $584 million, cash theft $466 million, refund fraud and markdowns $260 million,
collusion $164 million and large financial frauds $104 million.
Table 7
The Main Methods of Internal Retail Theft
Refund
fraud, false Large financial
markdowns
frauds
Collusion
Cash, coupons,
vouchers
Merchandise
Canada
United States
Average North America
29.5%
24.2%
24.7%
37.0%
50.2%
49.1%
16.5%
12.8%
13.1%
6.6%
3.4%
3.7%
10.4%
9.4%
9.5%
Average Europe
32.6%
24.5%
18.3%
12.0%
12.6%
Average Asia-Pacific
16.5%
50.0%
18.6%
8.3%
6.7%
In Europe, theft of cash, vouchers, coupons and gift cards was, at 32.6%, estimated to be the
largest method of internal fraud, and theft of merchandise was 24.5%. Retailers in Europe and
Asia-Pacific considered that they suffered high losses as a result of refund fraud and bogus price
markdowns, which were 18.3% in Europe and 18.6% in Asia-Pacific, compared with 13.1% in
North America.
RETAIL LOSS PREVENTION AND SECURITY SPENDING
Spending by retail corporations in North America on loss prevention and security was $12.773
billion in the 12 months ending in June 2007, equivalent to an average of 0.45% of retail sales
(Table 2.8).
Loss prevention spending in the U.S. was $11.799 billion (0.45% of retail sales), made up of
revenue spending of $8.128 billion and capital spending on security equipment, IT and other
long-term assets of $3.671 billion. As a percentage of sales, revenue spending was 0.31% of sales
and capital 0.14%.
Loss prevention spending in Canada was $974 million (0.40% of retail sales), made up of revenue
spending of $706 million and capital spending of $268 million. This was equivalent to 0.29% of
sales for revenue spending and capital spending was 0.11% of sales.
Table 2.8 shows that combined U.S. and Canadian spending on loss prevention of 0.45% of retail
sales was higher than other countries. For all 32 countries, the average spending on loss
prevention was 0.35% of retail sales.
The North American loss prevention spending of 0.45% of sales is a very robust response to the
issues of crime and fraud that face retailers. It is equivalent to 29.3% of their shrink losses, clear
evidence of a strong commitment to preventing and deterring crime.
Table 8
Loss Prevention Costs
Values in million U.S. $
LP costs
Revenue
NORTH AMERICA
Canada
United States
North America
$
974
$ 11,799
$ 12,773
Europe
Asia-Pacific
Global Totals
$
$
$
10,648
2,169
25,590
LP costs
Capital
$ 706
$ 8,128
$ 8,834
$ 268
$ 3,671
$ 3,939
as percentage
of sales
0.40%
0.45%
0.45%
$ 7,177
$ 1,292
$ 17,303
$ 3,471
$ 877
$ 8,287
0.34%
0.18%
0.35%
The main focus areas for retail loss prevention spending in North America are shown in Figure
2.6. The most significant LP budget heading was LP employees, which, at $7.084 billion,
represented 55.4% of total LP spending. Direct employees cost $3.114 billion (24.4% of LP
spending) and spending on contract employees was $3.97 billion (31.0% of LP spending).
Retailers allocated $3.9 billion (30.8%) to security equipment including electronic surveillance,
CCTV, IT and depreciation. The remaining budget heads were armored vehicle cash collection
($0.88 billion or 6.9% of LP spending) and ‘Other’ spending of $0.88 billion (6.9% of the loss
prevention budget).
As Table 2.8 shows, other regions spent less on loss prevention and proportionately less on the
capital budget. Generally however the percentage allocation of loss prevention budgets in other
countries was not radically different from North America. This is not surprising: the tasks faced
by loss prevention departments are similar across the world.
Figure 6
Analysis of Loss Prevention Spending, North America
security equipment
30.8%
direct employees
24.4%
other
6.9%
contract employees
31.0%
armored car cash
collection
6.9%
THE COSTS OF RETAIL CRIME
‘Shrink’ is not a complete measure of retail crime because shrink includes an allowance for
administrative error. The Costs of Retail Crime provided in Table 2.9 exclude administrative error
and focus on crime-based losses. Because ‘loss prevention spending by retailers is obviously
crime related, the costs of loss prevention are included here in the costs of crime.
Table 9
Costs of crime
ALL VALUES IN U.S. $
U.S.
Canada
Total
Cost of shoplifting (million)
Cost of employee theft (million)
Vendor fraud (million)
Cost of loss prevention (million)
Totals
$12,873
$18,333
$2,152
$11,799
$45,157
$1,278
$1,579
$171
$974
$4,002
$14,151
$19,912
$2,323
$12,773
$49,159
Costs per household
$394.04
$322.69
$387.08
Table 2.9 shows that the total cost of crime in the U.S. was $45.157 billion, which represented a
tax imposed on honest people by criminals of $394.04 for every single household in the U.S. This
was made up of $12.87 billion in shoplifting, $18.33 billion in employee theft, $2.15 billion in
vendor fraud and $11.80 billion for loss prevention costs.
The Canadian figures indicate that the total cost of crime in Canada was slightly more than $4
billion and in 2007 this cost every Canadian household $322.69. It comprised $1,278 million for
shoplifting, $1,579 million for employee theft, $171 million in vendor fraud and $974 million for
loss prevention costs (Table 2.9).
For North America as a whole, the cost per household of retail crime was $387.08 for a combined
North American retail crime figure of $49,158 million. The cost per household was $394.04 in
the U.S. and $322.69 in Canada.
Table 2.10 gives a global comparison of the costs of retail crime (crime-related shrink plus
security costs). The global costs of crime were $108,093 million ($283.61 per household). Costs
per household were lower in other countries than North America, although countries like the
U.K., Ireland and Denmark have costs per household that are almost as high as North America.
On average in Europe, costs per household were $229.48 and in Asia-Pacific $195.05.
Table10
Global Costs of Crime, 2007
Crime-related
Shrink
$ million
NORTH AMERICA
Canada
United States
North America
LP
Costs
$ million
Costs of
Crime
$ million
Cost per
Household
$ per year
3,028
33,358
36,386
974
11,799
12,773
4,002
45,157
49,159
$322.69
$394.04
$387.08
5,168
5,833
3,622
1,833
1,701
1,195
7,001
7,534
4,817
$278.71
$191.27
$214.70
1,331
3,112
492
1,126
1,823
4,238
$256.40
$279.92
6,264
1,533
7,797
$298.85
31,024
10,056
41,080
$246.25
2,592
595
3,187
$122.20
33,617
10,651
44146
$229.48
ASIA-PACIFIC
Australia
India
Japan
Singapore
Thailand
Asia-Pacific
1,679
1,855
7,956
151
859
12,500
506
148
1,391
34
90
2,169
2,185
2,003
9,347
185
949
14,669
$280.52
NA
$190.05
$177.08
$55.16
$195.05
Global Costs of Crime
82,503
25,590
108,093
$283.61
EUROPE
France
Germany
Italy
The Netherlands
Spain
United Kingdom
Western Europe (18
countries)
Central Europe (7
countries)
Europe
THE MOST STOLEN ITEMS
What products stocked by retailers are most vulnerable to theft? Research into this question
shows that (with some exceptions) the most stolen items tend to be expensive designer or heavilybranded products mainly used for entertainment/leisure, personal care or clothing, as well as
alcohol and electronics. Particularly where organized retail crime is involved, the products stolen
are those that can readily be sold to others. Many items are comparatively small such as razor
blades, memory cards or cosmetics, and can be hidden relatively easily by the thief.
Table 2.11 shows the merchandise items that North American retailers reported as being mostfrequently stolen. They are listed in rank order, based on data provided by the retail corporations
that responded to the survey.
In 2007, the most heavily stolen products from retail stores in North America were cosmetics and
skin care.
Table 11
The Most-Stolen Merchandise From Retailers
Rank
Order
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Rank
Order
Cosmetics and skincare
19
Leather belts, designer bags etc
Ladies’ apparel
20
Office supplies
Perfumes and fine fragrances
21
Hand tools
Alcohol
22
Men’s apparel
Designer apparel
23
Chocolate
Razor blades
24
Power tools
Video games and consoles
25
Mobile phones
Small electronic items
26
Children’s clothing
DVDs/CDs
27
Shoes and trainers
Batteries
28
Baby products, diapers, etc
High cost and specialty food (e.g. fresh
meat, cheese, pâté)
Instant coffee
29
30
Sports equipment and sports
accessories
TV/audio
Infant formula
31
Interior furnishings, lamps etc
Computer laptops
32
Jewelry
OTC medications
33
Hair care, other beauty products
Health products, vitamins, etc
34
Home security products
17
Watches
35
Toys
18
Accessories (apparel)
The second most stolen was ladies’ apparel, followed by perfume and fragrances, alcohol
(particularly spirits such as whiskey and vodka) and designer apparel. Razor blades were the sixth
most likely to be stolen, followed by video games and consoles, small electronic items (including
the ubiquitous memory stick), DVDs/CDs and batteries.
Other items of note include infant formula, medicines, vitamin tablets, watches, instant coffee,
and hand tools. Home security products, such as door and window locks and CCTVs are also
stolen.
How does the North American ‘most-stolen’ list compare to those of other countries? There are
many regional differences, but similar types of items are stolen all over the world. It’s a global
marketplace for crime as well as for honest consumers. The order of every product on the list is
slightly different in other countries, but lists from Europe and Asia-Pacific, similar to North
America, are also dominated by alcohol, cosmetics, perfumes, ladies’ apparel, accessories and
designer apparel, razor blades and high-cost and specialty foods such as fresh meat, ham, seafood
and cheese.
STORE AUDIT PROGRAMS AND LP COMPLIANCE
To ensure that agreed corporate policy for loss prevention and security is carried out in practice,
81.4% of U.S. retailers had a store audit program in place, as did 78.5% of Canadian retailers
(Table 2.12). This usually involved an audit of store policy and procedures three or more times
every year. Almost three-fifths (59.4%) of U.S. retailers conducted store audits three or more
times every year and 54.2% of Canadian retailers. A little more than one-fifth (22.0%) of U.S.
retailers and 24.3% of Canadian retailers carried out store LP audits one or two times per year.
The pattern elsewhere was that less than two-thirds of retailers normally had a store LP audit
program – 63.8% in Europe and an average of 60.3% in Asia-Pacific overall. As well as being
less likely to have an audit program, the frequency of audit was also lower. In Europe 52.3% of
retailers carried out audits only once or twice a year, although the average was higher in AsiaPacific with 39.9% of retailers conducting store LP audits three or more times every year.
Table 12
LP Compliance and Store Audit Programs
Audit program in
place
Frequency of Audits per annum
1-2 times
3 or more
Canada
United States
North America
78.5%
81.4%
81.2%
24.3%
22.0%
22.2%
54.2%
59.4%
59.0%
Europe
63.8%
52.3%
11.5%
Asia-Pacific
60.3%
20.4%
39.9%
PROTECTING THE MOST-STOLEN MERCHANDISE
For ten of the most vulnerable product groups, retailers were asked to state what proportion of
lines were specially safeguarded or protected and how this was done. The results are shown in
Table 2.13.
The product groups chosen included the most vulnerable items such as DVDs, video games,
spirits, perfume, clothing and small electronic goods. What means are used by the major retailers
to protect their most vulnerable merchandise from theft?
The products are arranged in descending order of the extent to which they were protected. DVDs
were the most protected product: the second column (‘% of product not protected’) shows that
only 10.3% are unprotected – or 89.7% are protected. In contrast, 60.3% of shirts are not
protected, according to the data provided by retailers.
Table 2.13 shows that almost two-thirds of merchandise items are protected – 62.5% of the ten
most vulnerable lines are protected. However, this means that 37.5% of vulnerable items are not
protected.
Table 13
Methods of Protection Used on Most-stolen Lines in North America, 2007;
Proportion of lines protected by main anti-theft systems
EAS Tags
Product type
DVDs
Razors
Video Games
Trousers
Spirits
Perfumes
Smaller
electronic goods
Cosmetics
Shoes
Shirts
Averages
% of
Product
Not
Protected
Locked
Cabinets
&shelves
Empty
cartons
& ticket
systems
Chains,
cables
Loop
alarms
Safers
locked
boxes
Hard
Tags
Soft
Tags
Source
Tagged
EAS
SubTotal
Totals
10.3%
16.7%
18.0%
34.8%
31.6%
33.7%
9.6%
10.2%
9.6%
3.6%
4.7%
10.9%
12.5%
17.2%
12.3%
0.0%
5.0%
5.6%
0.0%
0.0%
0.0%
5.6%
0.7%
0.0%
26.9% 1.3% 25.0%
17.5% 12.0% 24.9%
22.4% 1.4% 17.0%
5.7% 34.2% 5.6%
7.8% 35.8% 8.6%
3.4% 3.3% 33.8%
14.4%
1.5%
19.3%
10.5%
5.8%
9.3%
40.7%
38.4%
37.7%
50.3%
50.2%
46.4%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
30.0%
39.1%
73.6%
60.3%
37.5%
5.6%
4.4%
0.0%
0.0%
5.4%
7.6%
7.2%
0.6%
0.0%
6.2%
18.9%
0.0%
1.6%
3.6%
3.4%
11.4% 9.6% 10.4%
12.6% 11.2% 17.8%
0.0% 9.8% 8.6%
4.4% 11.1% 7.6%
9.5% 14.3% 14.9%
6.5%
7.7%
5.8%
13.0%
8.8%
26.5%
36.7%
24.2%
31.7%
38.0%
100.0%
100.0%
100.0%
100.0%
100.0%
The main methods used are electronic article surveillance (used for 38.0% of these products, of
which source tagging was 13.0%), safers and locked boxes (9.5%), empty cartons and ticket
systems (6.2%), locked cabinets and shelves (5.4%) and chains, cables and security loops (3.4%).
Note that these figures relate to the specific methods used to combat theft for these 10 products,
which are among the most frequently-stolen articles, rather than the general use of these anti-theft
systems in the entire retail industry.
For DVDs, the most-protected item, electronic article surveillance (EAS) provided 40.7% (of
which source tagging was 14.4%), safers and locked boxes protected 26.9% of items, empty
cartons and ticket systems were used for 12.5% and locked cabinets and shelves 9.6%.
EAS was most likely to be used on trousers (50.3%), spirits (50.2%), perfumes (46.4%) and
DVDs (40.7%); safers/locked boxes on DVDs (26.9%), video games (22.4%) and razors (17.5%);
chains, cables and loop alarms on smaller electronic goods (18.9%); empty cartons and ticket
systems for razors (17.2%), DVDs (12.5%) and video games (12.3%); and locked cabinets and
shelves for perfumes (10.9%), razors (10.2%) and DVDs (9.6%).
ELECTRONIC SOURCE TAGGING OF MERCHANDISE
Electronic tagging of merchandise, or EAS, uses small devices that alarm if the tagged
merchandise is removed from the store without being deactivated. Retailers were asked about
their use of source tagging, which involves including these devices in or on the item or its
packaging at source before the goods arrive in the shops. Source tagging has been discussed by
the industry for a number of years and the technology has been developed to meet most
eventualities. The responses are shown in Table 2.14.
North American retailers led in the use of source tagging with 45.2% currently using source
tagging and a further 23.5% expected to introduce it in the next two years. By the end of the
decade, therefore, 68.7% of large retailers in North America expect to be using source tagging of
merchandise.
North American retailers that already used source tagging were receiving an average of 396
product lines into their stores already EAS tagged at source. This was almost double the average
number in use in Europe (219). The percentage of sales from product lines that were sourcetagged when being placed in the store was 21.3% in North America.
Table 14
Use of EAS source tagging
We already use Source tagging
We will use it within 2 years
We have no plans to use Source tagging
Total
Number (average)
What percentage of sales is this?
North
America
45.2%
23.5%
31.3%
Europe
Asia-Pacific
TOTALS
39.7%
29.6%
30.7%
27.4%
19.9%
52.7%
100.0%
100.0%
100.0%
39.8%
25.5%
34.7%
100.0%
396
21.3%
219
15.9%
97
6.1%
268
16.4%
The proportion of European retailers using source tagging was 39.7% and in Asia-Pacific it was
27.4%. The percentage of retailers expecting to introduce the use of source tagging over the next
two years was 29.6% in Europe and 19.9% in Asia-Pacific, implying that 69.3% of large
European retailers would soon be using source tagging and 47.3% of Asian-Pacific retailers. An
average of 219 product lines amongst large European retailers was source tagged (15.9% of sales)
and 97 in Asia-Pacific (accounting for 6.1% of sales, although the proportion in Australia was
19.3%). Considerable developments in the use of source tagging are expected in North America
and the rest of the world.
[PART THREE: EUROPE]
THE GLOBAL RETAIL THEFT BAROMETER
SURVEY INFORMATION
Since 2001, European retailers have been sharing information about the impact of retail crime
through the European Retail Theft Barometer. This research has grown in importance, as shown
by the increase every year in the number of retailers who take part in the study. By 2006 the
European Retail Theft Barometer covered 25 countries in Western and Central Europe. Using the
same methodology, as the Global Retail Theft Barometer it now includes Australia, Canada,
India, Japan, Singapore, Thailand, Canada and the United States.
The number of European retailers that took part in this year’s study was 489. These companies
had a combined turnover €371 billion and 43,276 stores. They represented 16% of European
retail turnover and the sample response rate was 22.8%.
Based on the period of twelve months to June 2007, the Global Retail Theft Barometer covers
trends in security spending, the extent of theft by customers and by employees, current
information on what products are most stolen, estimates of the means of internal theft and fraud,
and how retailers protected their most vulnerable merchandise. All shrinkage figures used here
are based on retail selling prices. Data from retailers that use cost prices or a combination of cost
and retail selling prices have been converted to retail selling prices. For convenience, all values in
Part Three of the Report were converted into euros (€) at the rate of exchange applying on July 1,
2007 and the US$:€ rate used was $1:€0.734305.
The term ‘Europe’ is used in this Report to include 25 countries of Western Europe and Central
Europe that are covered by this survey. It does not mean the European Union (EU), although a
majority of these countries are members. The results of certain countries have been combined in
order to ensure confidentiality.
INCREASING CRIME AND SHRINKAGE RATES
This year, as predicted in the last Report, shrinkage (stock loss from crime or wastage expressed
as a percentage of retail sales turnover) has started to rise. For Europe the average shrinkage rate
was 1.26% compared to the previous year’s rate of 1.24% (an increase of 1.6%). Shrinkage cost
European retailers a total of €29 285 million. The increase in shrinkage cost €454 million more
than last year.
For consumers, the shrinkage rate represented a cost equivalent to €61.95 per head.
Figure 1
Shrinkage Figures W. Europe
2000-2007
2000
2001
2002
2003
2004
2005
2006
2007
1.00
1.10
1.20
1.30
1.40
1.50
Percentage of turnover
Western Europe is the only area for which we have a series of data since 2000. In 2007, the
average shrinkage rate in Western Europe was 1.25%, a rise of 1.6% above last year’s 1.23% (see
Figure 3.1). In Western Europe shrinkage had fallen continually since 2002, until 2007, when this
four-year trend was reversed. Although the increase from 1.23% to 1.25% was comparatively
small it came after four years of shrinkage and crime reductions. The current retail climate is
unforgiving, with retailers of all types facing significant cost pressures, weak consumer demand,
and an uncertain economic outlook. It will be a matter of great concern if increasing shrinkage
exacerbates those cost pressures further.
All shrinkage figures in the Report use retail selling prices and retail data based on cost prices or
a combination have been converted to retail selling prices.
Table 1
Retail Shrinkage 2007
Total Shrinkage
2007
(€ millions)
EUROPE
Austria
Belgium/Luxembourg
Denmark
Finland
France
Germany
Greece
Iceland
Ireland
Italy
The Netherlands
Norway
Portugal
Spain
Sweden
Switzerland
United Kingdom
432
812
367
416
4 645
4 906
523
27
438
3 085
1 180
431
359
2 645
632
587
5 596
Shrinkage 2007
(as % of
turnover)
0.94
1.33
1.20
1.32
1.34
1.10
1.36
1.00
1.33
1.23
1.24
1.26
1.31
1.28
1.32
0.96
1.34
Shrinkage 2006
(as % of
turnover)
0.96
1.28
1.24
1.34
1.29
1.07
1.33
1.06
1.25
1.24
1.20
1.29
1.34
1.29
1.32
0.92
1.33
Percentage
change
2006-07
-2.1%
3.9%
-3.2%
-1.5%
3.9%
2.8%
2.3%
-5.7%
6.4%
-0.8%
3.3%
-2.3%
-2.2%
-0.8%
0.0%
4.3%
0.8%
Western Europe
27 081
1.25
1.23
1.6%
360
336
1 172
129
1.41
1.36
1.34
1.36
1.42
1.38
1.32
1.40
-0.7%
-1.4%
1.5%
-2.9%
207
2 204
1.42
1.36
1.32
1.35
7.6%
1.0%
Western and Central
Europe
29 285
1.26
1.24
1.6%
Average North America
31 931
1.52
1.48
2.7%
Average Asia-Pacific
11 209
1.24
1.30
-4.6%
Global
72 424
1.36
1.34
1.5%
Czech Republic
Hungary
Poland
Slovakia
Baltic States *
Latvia, Estonia, Lithuania
Central Europe
Shrinkage information for every European country can be seen in Table 3.1. The lowest shrinkage
rates occurred in Austria (0.94%), Switzerland (0.96%) and Iceland (1.00%). The highest
identified shrinkage rates were found in the Baltic States (1.42%), the Czech Republic (1.41%),
and Greece, Slovakia and Hungary (all 1.36%). The reduction in variance around the average
shrinkage rate seen in previous years has continued. The variance in shrinkage rates has fallen
since 2002 as retailers increasingly use common anti-theft approaches throughout Europe and this
has tended to iron out some of the substantial differences in average shrinkage rates.
Shrinkage rates in Central Europe rose rapidly after 2004, although this seems to have changed in
2007 with shrinkage reductions in Slovakia, Hungary and the Czech Republic. However a small
rise in Polish shrinkage and a significant increase in shrinkage of the Baltic States
counterbalanced this, recording a small 1.0% rise in central European shrinkage from 1.35% to
the new figure of 1.36%.
Eleven European countries saw reductions in their average rate of shrinkage, thirteen saw
increases, and there was no change in one country (Sweden). Significant reductions in average
shrinkage rates were seen in Iceland (-5.7%), Denmark (-3.2%), and Slovakia (-2.9%). In
contrast, there were increases in average shrinkage rates in the Baltic States of Latvia, Lithuania,
and Estonia (+7.6%), Ireland (+6.4%), and Switzerland (4.3%). However in a number of these
countries the increases come after several years of shrinkage reductions and too much
significance should not be given to moderate fluctuations around an average.
In every European country there are retailers that have reduced shrinkage as well as those where
shrinkage rates have increased, suggesting that shrinkage levels can be the result of policy and
strategy as well as the national environment. Countries that have successfully reduced shrinkage
tend to be those with more of the first type than the second. Therefore adopting proven lossreduction strategies including those discussed in this Report may help the retailer to reduce
shrinkage or to prevent it rising and hence improve the proportion of successful low-shrinkage
retailers in every country.
The 2007 increase in average retail shrinkage was predictable from last year’s data (which
showed increasing shrinkage in many countries). The major question is whether the modest rise
in shrinkage seen this year will be followed in future years by significant increases in shrinkage
or whether the downward trend seen in 2002-6 will be resumed.
SHRINKAGE BY KINDS OF BUSINESS
Different kinds of business often have different shrinkage problems and may even account for
shrinkage differently. In Table 3.2 we show how the average shrinkage rate varies between
different kinds of retail business. Retailers classified themselves into one of 16 categories or
vertical markets, which provided a much fuller analysis than was used before. Care should be
taken, when making comparisons, as many businesses could classify themselves in more
than one way.
The lowest average rates of shrinkage in Europe were found in discount stores/variety chains
(0.76%),
electrical
goods/computer
centres/electronic
stores
(0.82%),
and
furniture/textiles/carpets and curtains (0.83%). The highest average rates were found in vehicle
parts/DIY/hardware/building materials (1.71%), books/ newsagents/stationery (1.69%), and
cosmetics/perfume/health and beauty/ pharmacy (1.53%).
There were considerable variations within and well as between each category. Individual retailers
may have shrinkage rates, which are significantly higher or lower than the industry average as
shown in Table 3.2.
Table 2
Shrinkage as Percentage of Turnover by Kinds of Business
EUROPE
2007 2006
Change
apparel/clothing and fashion/ accessories
1.69% 1.66%
1.8%
books/newspapers/stationery
1.69% 1.71%
-1.2%
convenience stores/ natural & speciality foods
1.64% 1.60%
2.5%
cosmetics/ perfume/ health & beauty/pharmacy
1.53% 1.59%
-3.8%
department store or large general store
discount/ variety retail/ warehouse clubs
1.43% 1.38%
0.76% 0.71%
3.6%
7.0%
electrical goods/ computer centre/ electronics store
0.82% 0.84%
-2.4%
footwear/ shoes/ sports goods & sporting goods
0.67% 0.62%
7.7%
furniture/ textiles/ floor & window coverings/
0.83% 0.83%
0.0%
jewellery/ watches
0.96% 1.05%
-8.6%
liquor, wine beer/off-licence
0.80% 0.72%
11.1%
supermarket/ hypermarkets/ large grocery
1.21% 1.17%
3.4%
office products
1.08% 0.96%
12.5%
toys and games/ hobby and craft
0.75% 0.83%
-9.6%
vehicle parts/hardware/DIY/building materials retail
1.71% 1.85%
-7.6%
video/ music/ games software
1.36% 1.34%
1.5%
Totals
1.26% 1.24%
1.6%
SOURCES OF RETAIL SHRINKAGE
Previous editions of the European Retail Theft Barometer have shown that European retailers
perceived customer thieves and organised gangs to be the largest single cause of retail shrinkage.
The current Report replicates this finding, with customer thieves thought to be responsible for
48.5% of shrinkage losses (see Figure 3.2). The next most important was dishonest employees,
estimated to cause 28.6% of retail losses. The great majority of staff were honest, but employee
theft results from a very small number of disloyal staff including fraudulent employees placed
there by organised crime. Supplier fraud and delivery theft were estimated to contribute 6.9% to
losses. Lastly, administrative mistakes, pricing errors, and process failures were believed to cause
16.0% of shrinkage losses.
Table 3
Sources of Shrinkage 2007, Europe
percentages
48.5%
28.6%
6.9%
16.0%
100.0%
Customers
Employees
Suppliers
Internal error
Total
€ millions
14 188
8 389
2 019
4 689
29 285
Customer theft was responsible for €14 188 million (Table 3), employees €8 389 million,
suppliers €2 019 million, and administrative error €4 689 million. Compared to the previous
Report, retailers believed that administrative error and supplier fraud probably played a slightly
greater part in shrinkage, with error up from 14.3% to 16.0% and supplier fraud from 6.0% to
6.9%.
The percentages of the sources or causes of shrinkage are perceptions or estimates made by retail
security managers based on their current understanding of the major problems they face. But most
shrinkage is unseen at the time it occurs and it may be months before it is discovered, by which
time it may be too late to know the cause. Care should be taken, therefore, in considering these
estimates.
Figure 2
Sources of Retail Shrinkage, Europe
suppliers,
€2 019 million
6.9%
internal error,
€4 689 million
16.0%
employees,
€8 389 million
28.6%
customers,
€14 188 million
48.5%
How do the sources of retail shrinkage differ between European countries? Table 3.4 shows the
perceived sources of shrinkage by country. All European countries believed that their losses from
customer theft were greater than from employees. Countries where retailers believed that
customer theft was the greatest proportion included Greece (58.0%), Austria (57.2%), and
Germany (55.9%). The lowest customer–theft percentages were seen in Iceland (39.7%), Poland
(40.5%), and the Baltic States (42.2%). Countries where employee theft was believed to have a
relatively large part of shrinkage included Iceland (39.0%), Poland (35.1%), and Hungary
(35.0%). It is important to point out that Iceland has a relatively low shrinkage rate of 1.00%. The
lowest employee proportions of shrinkage were seen in Greece (17.0%), Austria (22.4%), Spain
(24.6%) and Portugal (24.7%).
Although individual retailers that participated in the study had different views about the sources
of their shrinkage, the averages for every country generally show a similar ranking: customer
theft was seen as most important, followed by employee theft, administrative error and last,
supplier fraud. However, inspection of the European data shows that countries can generally be
classified in one of two main groups. In some countries such as Greece, Austria and Germany,
‘Customers’ (including outside criminals) are seen as the dominant threat to retailers: for these
countries, theft by employees is believed to be less than one-half that caused by ‘customers’. This
should not be taken as meaning that customers and tourists in those countries are especially prone
to commit fraud, simply that retailers believe a larger proportion of their shrinkage losses comes
from customers.
Table 4
Sources of Retail Shrinkage, Europe
Customers
Staff
Suppliers
Internal
Error
Austria
Belgium/Luxembourg
Denmark
Finland
France
Germany
Greece
Iceland
Ireland
Italy
The Netherlands
Norway
Portugal
Spain
Sweden
Switzerland
United Kingdom
Western Europe averages
average 2006
57.2%
52.8%
47.0%
50.7%
43.5%
55.9%
58.0%
39.7%
41.9%
50.8%
47.5%
50.4%
53.5%
53.0%
48.8%
52.8%
42.6%
48.9%
49.3%
22.4%
25.4%
29.4%
28.7%
29.3%
24.6%
17.0%
39.0%
33.0%
28.4%
26.7%
27.1%
24.7%
24.6%
28.7%
27.6%
34.0%
28.2%
30.4%
5.6%
2.6%
6.2%
7.6%
8.9%
6.8%
7.0%
5.2%
8.9%
7.0%
8.6%
4.6%
3.2%
8.8%
5.2%
5.7%
5.6%
6.9%
6.1%
14.8%
19.2%
17.4%
13.0%
18.3%
12.7%
18.0%
16.1%
16.2%
13.8%
17.2%
17.9%
18.6%
13.6%
17.3%
13.9%
17.8%
16.0%
14.2%
Czech Republic
Hungary
Poland
Slovakia
46.0%
42.6%
40.5%
43.9%
31.9%
35.0%
35.1%
31.3%
5.8%
6.2%
5.7%
9.5%
16.3%
16.2%
18.7%
15.3%
Baltic States
Central Europe average
average 206
42.2%
42.2%
42.6%
33.4%
34.1%
34.6%
6.5%
6.1%
6.9%
17.9%
17.6%
16.0%
Europe Averages
average 2006
48.5%
28.6%
6.9%
16.0%
48.8%
30.7%
6.2%
14.3%
In the other group, countries such as Iceland, Hungary, and the UK, retailers feel that staff theft is
a considerable problem on similar scale to theft by customers (although not necessarily as great).
These countries do not believe that their staff are more disloyal than those of other countries, but
have adopted a different view about the causes of retail crime.
North American retailers saw employee theft as the biggest problem they faced, responsible for
45.8% of shrinkage, and significantly larger than customer theft (32.5%). There are some
commentators who believe that the variation in beliefs/opinions (as shown here) about the sources
– or causes – of retail shrinkage and crime may reflect not national differences but error. This
may be true, but, if so, it rather undermines the point of making inter-country comparisons. There
seems no reason why the experience of shrinkage and crime in every country should be the same.
APPREHENDED RETAIL THIEVES
Table 3.5 shows that in 2006-07 European retailers apprehended 3.55 million retail
thieves. This figure was made up of 3 481 490 customer thieves and 69 015 employee
thieves. The great majority of retail thieves (96.4%) were apprehended in West Europe,
Central European retailers apprehended 197 140 thieves. Only 1.9% of apprehended
thieves were employees. This can be compared to the 663 555 employee thieves
apprehended in North America (28.6% of the North American total).
There was a significant difference between the amount stolen or admitted by employee
thieves and customer thieves. In Western Europe, the average value stolen or admitted by
apprehended employee thieves was €4013 and €87 by customer thieves per incident (i.e.
46 times greater). In Central Europe the average value stolen or admitted by employees
was €434 and by customer thieves €18. There may be legal or cultural differences, which
affect the values of theft admitted. The types of thieves apprehended will, of course, reflect LP
policy as well as the number of offenders stealing from the business.
Table 5
Number of Thieves Apprehended by Retailers 2007
Customer thieves
Average
Amount Stolen
Number
(€) per Incident
West Europe
Central Europe
Europe
Percentages
North America
Percentages
Asia-Pacific
Percentages
Global totals
Percentages
Employee thieves
Average
Amount Stolen
Number
(€) per Incident
Totals
3 290 628
€87
62 737
€4013
190 862
€18
6 278
€434
197 140
3 481 490
88.1%
€82
69 015
1.9%
€3778
3 550 505
100.0%
1 635 687
71.4%
€457
663 555
28.6%
€1223
2 299 242
100.0%
108 720
90.9%
€40
10 929
9.1%
€151
119 649
100.0%
5 225 897
87.5%
€198
743 499
12.5%
€1443
5 969 396
100.0%
3 353 365
In North America, the average value admitted or stolen by dishonest employees was much lower
(€1223) and the average value of customer theft incidents was considerably higher than Europe at
€457. The high average value of customer theft in North America probably reflects the results of
organised retail theft and the high European value of employee theft may result from a higher
perceived rate of large financial frauds. The differences in the volume and value of apprehensions
may explain part of the perceived differences in attitude to the scale of employee fraud between
Europe and North America.
RETAIL SECURITY AND LOSS PREVENTION
Spending by retail businesses on security was €7 821 million in the twelve months ending in June
2007, equivalent to an average of 0.34% of retail turnover. This was a small reduction of 0.3% in
Western Europe compared to 2006 (see Figure 3.5), but capital spending increased to represent
32.6% of total security spending.
Figure 3
Trends in Retail Security Spending
Western Europe 2000-2007
2000
2001
2002
2003
2004
2005
2006
2007
3000
5000
7000
millions of E uros
In Western and Central Europe, security costs in 2007 were:


Revenue security spending €5270 million (0.23% of retail turnover)
(consisting of payroll, armoured car cash collection etc)
Capital security spending €2551 million (0.11% of retail turnover)
(consisting of security equipment including EAS, CCTV and information systems).
Direct security employees accounted for 19.1% of total security spending (€1491 million)
amongst European retailers (Figure 4). They spent 180% more on contract or third-party security
than on direct security employees. Cash collection by armoured car accounted for 7.7% of
security spending (€606 million), a reduction from 8.8% last year.
Capital spending by security departments was not directly comparable to last year, because this is
the first time in this survey that retailers have been asked to provide information for this
separately. Capital spending (including depreciation) on information systems, EAS, CCTV, and
other merchandise protection was now 32.6% of total security spending (€2551 million), which
could be compared to approximately 23.4% of security spending in 2001.
European retailers’ average security spending was equivalent to 0.34% of retail turnover. This
can be compared to US retailers, who spent 0.45% of their retail sales on security and loss
prevention (0.31% of sales on revenue spending and 0.14% on capital). Table 3.6 provides only a
summary of European data: the security costs for every country surveyed are given in Table 3.8.
European retailers committed a sum equivalent to more than one-quarter of their total retail
shrinkage to security spending. Security spending of €7821 million represented 26.7% of their
shrinkage losses and thus provided a particularly robust response to the problem of retail crime
and shrinkage.
Figure 4
European Retail Security & Loss Prevention Expenditure 2007
security equipment,
€2551 million
32.6%
direct employees,
€1491 million
19.1%
other, €369 million
4.7%
contract employees,
€2804 million
35.9%
cash collection, €606
million
7.7%
Table 6
Security Costs
Values in millions €
Security costs
France
Germany
Italy
The Netherlands
Revenue
Capital
Security costs as
Percentage of
turnover
1 346
1 249
877
932
847
652
414
402
225
0.39%
0.28%
0.35%
361
827
257
599
104
228
0.38%
0.40%
1 126
751
375
0.27%
Western Europe (18 countries)
7 384
4 978
2 406
0.34%
Central European (7 countries)
Europe
437
293
144
0.28%
7 821
5 271
2 550
0.34%
North America
9 379
6 487
2 892
0.45%
Asia-Pacific
1 592
948
644
0.18%
18 792
12 706
6 086
0.35%
Spain
United Kingdom
Global
THE COSTS OF RETAIL CRIME IN EUROPE
‘Shrinkage’ is not the same as retail crime because shrinkage includes an allowance for
administrative error. The Costs of Retail Crime provided in Table 3.8 exclude administrative error
and focus on crime-based losses. Because ‘security spending’ is crime related, the costs of
security are included here in the costs of crime.
In the period of this survey, the costs of retail crime in Western and Central Europe were €32 417
million. The figure consists of customer crime of €14188 million, crime by employees, €8389
million, thefts by suppliers and losses in the distribution chain of €2019 million, and security and
loss prevention costs of €7821 million.
The costs of crime are equivalent to a tax imposed by criminals of €168.51 each year on every
household in Europe.
Table 7
The Total Costs of Retail Crime 2007, Europe
€14 188 million
€8 389 million
€2 019 million
€7 821 million
Costs of crime by customers
+ Costs of crime by employees
+ Costs of crime by suppliers
+ Costs of retail security
TOTAL COST OF CRIME
Cost per household, Europe
=
=
€32 417 million
€168.51
The methods used to calculate the costs of retail crime have altered since last year, so direct
comparisons are not appropriate. However re-calculating last year’s cost of crime, shows that
crime costs have risen by €421.5 million since last year, a further addition to the cost increases
facing European retailers.
Table 3.8 shows the combined costs of crime for each country surveyed. ‘Crime-related
shrinkage’ is the sum of losses from customers, staff and the supply chain. The figure for security
costs refers to retail spending on security. The total ‘Costs of Crime’ are crime-related shrinkage
plus security costs.
The countries with the highest cost per head of retail crime were Ireland (€339.31), Iceland
(€269.79), and Denmark (€255.92). The lowest figures were Slovakia (€60.81), the Baltic States
(€78.51), and Hungary (€97.20). The costs per household are not necessarily a measure of
criminality or efficiency, but depend on the size of households, the amount spent on security and
the size of each country’s retail industry. A wealthy country even with a low shrinkage rate is
likely to have higher costs of crime per household than one that is currently less well off. In North
America, the costs of retail crime represented €278.03 per household and in Asia-Pacific
(excluding India) the figure was €143.23.
Table 8
Costs Of Retail Crime 2007
Austria
Belgium/Luxembourg
Denmark
Finland
France
Germany
Greece
Iceland
Ireland
Italy
The Netherlands
Norway
Portugal
Spain
Sweden
Switzerland
United Kingdom
Western Europe
Czech Republic
Hungary
Poland
Slovakia
Baltic States
Central Europe
Crime-related
Security
Shrinkage
Costs
€ millions € millions
368
145
656
200
303
327
362
114
3 771
1 346
4 263
1 249
429
88
23
12
367
103
2 659
877
977
361
354
123
292
96
2 285
827
523
154
505
236
4 555
1 126
22 692
7 384
360
61
281
82
982
235
105
26
175
34
1 904
437
Europe
24 596
7 821
Costs of
Crime
€ millions
513
856
630
476
5 117
5 512
517
35
470
3 536
1 338
478
388
3 112
677
741
5 681
30 076
421
363
1 217
131
209
2 341
32 417
Cost per
Household
€ per year
145.17
197.11
255.92
200.29
204.66
140.45
135.88
269.79
339.31
157.65
188.27
238.19
99.90
205.54
157.87
222.19
219.44
180.82
111.58
97.20
88.40
60.81
78.51
89.73
168.51
THE MOST STOLEN ITEMS
Previous editions of this study showed that (with some exceptions) the most stolen items were
expensive designer or heavily-branded products mainly used for entertainment/leisure, personal
care or clothing, as well as alcohol and electronics. They could therefore be easily sold to others.
Many of them were also comparatively small such as razor blades, memory cards, or cosmetics
and could be secreted relatively easily by the thief.
The ten most-stolen items revealed by this survey are shown in Table 3.9. They are: alcohol,
(including whisky, vodka, and champagne); cosmetics and skincare, womenswear/ladies apparel;
perfumes and fine fragrances; razor blades; DVDs/CDs; childrenswear; accessories;
designerwear; and high-cost and speciality food such as fresh meat, ham, seafood, and cheese.
It is important to note that every type of specialist store has its own list of most stolen items.
Medicines, vitamin tablets, watches, instant coffee, batteries, power tools, and newspapers are
also heavily stolen. In hardware/DIY, even home security products such as door and window
locks and CCTV are stolen – probably without the thieves understanding the irony of what they
are doing.
Table 9
The Most-Stolen Merchandise From Europe’s Retailers
Rank
Order
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Rank
Order
Alcohol
Cosmetics and skincare
Womenswear
Perfumes and fine fragrances
Razor blades
DVDs/CDs
Childrenswear
Accessories
Designerwear
High cost and speciality food (e.g. meat,
cheese, seafood)
Video games and consoles
Shoes
Mobile phones
Computer laptops
Small electronic items
Cigarettes and cigarette paper
Other health and over-the-counter
products
Watches
19
20
21
22
23
24
25
26
27
28
TV/audio
Batteries
Menswear
Chocolates and confectionery
Power tools
Hand tools
Office supplies
Nescafe and instant coffee
Newspapers
Sporting goods
29
30
31
32
33
34
35
Interior furnishings
Jewellery
Hair care
Electrical beauty products
Toys
Home security products
Small plumbing items and bolts,
nuts and washers.
THE LOCATION AND METHODS USED FOR INTERNAL FRAUD
Theft and fraud by employees (or internal fraud) cost Europe’s retailers €8 389 million in the
period of this report. This section looks at where and how it occurs.
In Table 3.10, responses from European retailers show that slightly more than one-third of
internal theft (34.1% or €2869 million) occurred at the checkout or cash desk. Losses from direct
theft on the sales floor were estimated to be 24.1% and from the stockroom or delivery bay were
41.7%.
Table 10
Where Internal Retail Losses Took Place
checkout
Western Europe
Central Europe
Total Europe
Estimated Values
€ millions
back office,
stockroom,
delivery bay
sales floor
34.1%
36.3%
34.2%
41.5%
44.6%
41.7%
24.4%
19.1%
24.1%
€2869
€3498
€2021
Figure 3.5 deals with the main forms or methods of internal theft. Amongst European retailers
these were thought to be: cash thefts (32.6% of the total) costing €2735 million, thefts of
merchandise (24.5%) costing €2055 million, refund fraud/markdowns (18.3%) costing €1535
million, and collusion (12.6%) costing €1057 million. Twelve per cent of internal theft was
thought to result from large financial frauds. Note that Figure 3.5 relates to the methods used to
commit internal fraud: large financial frauds and refund fraud often involve cash as well as direct
theft of cash, coupons and vouchers.
Figure 5
Methods of Internal Theft, Europe 2007
collusion, €1057
million
12.6%
cash, coupons,
vouchers, €2735
million
32.6%
large financial frauds,
€1007 million
12.0%
refund fraud, false
markdowns,
€1535 million
18.3%
merchandise theft,
€2055 million
24.5%
STORE AUDIT PROGRAMMES AND LP COMPLIANCE
To ensure that agreed corporate policy for loss prevention and security is carried out in practice,
63.8% of large European retail businesses had a store audit programme (Table 3.11). This
normally involved an audit of store policy and procedures one or two times every year, with
11.5% of respondents claiming to carry out audits three or more times per year. Proportions were
higher in North America, where 81.2% of retailers had a store audit programme in place,
involving 59.0% of retailers in carrying out audits three or more times every year.
Table 11
LP Compliance and Store Audit Programmes
Audit
programme in
place
Frequency of Audits per
annum
1-2 times
3 or more
52.3%
11.5%
Europe
63.8%
North America
81.2%
22.2%
59.0%
Asia-Pacific
60.3%
20.4%
39.9%
PROTECTING THE MOST-STOLEN MERCHANDISE
For ten of the most vulnerable product groups (Table 3.12), retailers were asked to state what
proportion of lines were specially safeguarded or protected and how this was done.
The product groups included the most vulnerable items such as DVDs, video games, spirits,
perfume, clothing, and small electronic goods. So what means are used by the major European
retailers to protect their most vulnerable merchandise from theft?
Table 12
Methods of Protection Used on Most-stolen Lines in Europe, 2007:
Proportion of lines protected by main anti-theft systems
EAS Tags
Product type
% Of
Locked
Empty Chains, Safers Hard
Product Cabinets cartons cables locked Tags
not
&shelves & ticket Loop boxes
Protected
systems alarms
Video Games
DVDs
Razors
Spirits
Trousers
Smaller
electronic goods
Perfumes
Cosmetics
Shoes
Shirts
Averages
6.9%
18.3%
19.4%
29.4%
34.8%
8.9%
7.2%
8.1%
2.4%
0.0%
6.4%
9.3%
15.0%
8.5%
1.1%
40.2%
48.2%
53.3%
64.5%
60.7%
38.5%
6.7%
7.1%
5.2%
0.2%
0.2%
4.6%
Averages 2006
40.6%
5.1%
0.0%
0.0%
2.2%
1.0%
5.9%
Soft
Tags
Source
Tagged
EAS
SubTotal
35.2% 1.4%
29.5% 2.0%
24.4% 7.4%
18.2% 21.7%
1.9% 38.7%
27.1%
23.2%
23.5%
10.2%
5.8%
14.1%
10.5%
0.0%
8.6%
11.8%
42.6%
35.7%
30.9%
40.5%
56.3%
2.1%
10.6%
8.6%
2.4%
0.3%
6.4%
15.7% 8.6% 7.2%
0.0% 7.0% 1.3%
0.0% 4.3% 2.1%
3.0% 0.0% 11.6%
4.7% 4.4% 11.4%
3.3% 12.5% 10.5%
11.1%
20.0%
16.5%
8.4%
6.7%
15.3%
8.4%
5.8%
10.0%
9.9%
11.6%
9.1%
26.7%
27.1%
28.6%
29.9%
29.7%
34.8%
6.7%
2.8% 10.7% 13.4%
14.5%
6.2%
34.1%
Totals
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
In Table 3.12, the products are arranged in descending order of the extent to which they were
protected. Video games were the most protected product: the second column (headed ‘% of
Products Not Protected’) shows that only 6.9% is unprotected – or 93.1% is protected. In
contrast, 60.7% of shirts are not protected according to the data provided by retailers.
Table 3.12 shows that more goods are protected now than last year – 61.5% of the ten most
vulnerable lines are protected compared to 59.4% last year (i.e. the not-protected proportion has
fallen from 40.6% to 38.5%). However that still means that 38.5% of vulnerable items are not
protected.
The main methods used are electronic article surveillance (used for 34.8% of these products an
increase from 34.1% last year), safers and locked boxes (10.5%), empty cartons and ticket
systems (6.4%), locked cabinets and shelves (4.6%, a reduction from last year), and chains, cables
and security loops (3.3%). Note that these figures relate to the specific methods used to combat
theft for these ten products, which previous surveys have shown to be amongst the most
frequently-stolen articles, rather than about the general use of these anti-theft systems in retailing.
The products most likely to receive specific protection in retail stores were video games (only
6.9% were unprotected), DVDs (18.3% unprotected), razors (19.4% unprotected), and spirits
(29.4% unprotected). From trousers onwards (34.8% unprotected), a larger proportion of
vulnerable items remain unprotected. The level of protection has particularly increased since last
year for spirits (the proportion not protected has fallen by 5%), reflecting the high losses that can
occur with this type of merchandise.
ELECTRONIC SOURCE TAGGING OF MERCHANDISE
Electronic tagging of merchandise, generally known as EAS (electronic article surveillance), uses
small devices that alarm if the tagged merchandise is removed from the store without being
deactivated. Retailers were asked about their progress with source tagging, which involves
including these devices in or on the item or its packaging at source before the goods arrive in the
shops. Source tagging has been discussed by the industry for a number of years and the
technology has been developed to meet most eventualities. The responses are shown in Table
3.13.
The percentage of large European retailers in the survey using source tagging was 39.7% and
within the next two years a further 29.6% of large retailers expected to introduce source tagging.
Thus by the end of the decade, 69.3% of large retailers in Europe will have taken advantage of
source tagging. The average number of product lines that were source tagged in Europe was
estimated to be 219, accounting for 15.9% of those companies’ retail sales.
As might be expected, North American retailers led in the use of source tagging with 45.2%
currently using source tagging and a further 23.5% expected to introduce it in the next two years
(a projected 68.7% of large retailers). Source tagging users in North America were receiving an
average of 396 product lines into their stores already EAS tagged at source, responsible for 21.3%
of retail sales.
Table 13
Use of EAS source tagging
We already use Source tagging
We will use it within 2 years
We have no plans to use Source tagging
Total
Number (average)
What percentage of sales is this?
North
America
45.2%
23.5%
31.3%
Europe
Asia-Pacific
TOTALS
39.7%
29.6%
30.7%
27.4%
19.9%
52.7%
100.0%
100.0%
100.0%
39.8%
25.5%
34.7%
100.0%
396
21.3%
219
15.9%
97
6.1%
268
16.4%
[PART IV: ASIA-PACIFIC]
THE GLOBAL RETAIL THEFT BAROMETER
SURVEY INFORMATION
This part of the Report deals with all retail sectors and vertical markets in Australia, India, Japan,
Singapore, and Thailand as part of an extensive global survey that also includes countries in
North America and Europe.
The Asia-Pacific data for Australia, India, Japan, Singapore, and Thailand was provided by
survey information from 103 large retail businesses. They operated 16,230 retail stores with
combined retail sales of $65,418 million, equivalent to 6% of retail sales in these five countries.
All shrinkage figures used here are based on retail selling prices. Data from retailers that use cost
prices or a combination of cost and retail selling prices have been converted to retail selling
prices. The calculations of average shrinkage rates within each country and for each geographical
area use ‘weighted’ averages rather than simple averages, with proportionally greater significance
being given to larger companies and larger countries.
For convenience, all values in this part of the Report are converted into U.S. dollars at the rate of
exchange applying on July 1, 2007.
CRIME AND SHRINKAGE IN ASIA-PACIFIC
The average shrinkage (stockloss from crime or wastage expressed as a percentage of retail sales)
rate in Asia-Pacific in the twelve months to June 2007 was 1.24% for all five countries, a
reduction of 4.6% compared to 2006 when average shrinkage was 1.30% (Figure 4.1). AsiaPacific was the only region surveyed, where shrinkage rates were falling: in Europe shrinkage
rates rose by an average of 1.5% and in North America by 2.7%. The Asia-Pacific data has been
calculated from survey information provided by a sample of 103 Asia-Pacific retail businesses
with combined retail sales of $65,418 million.
Figure 1
Shrink age 20 07, Asia-Pac ific
Australia
India
Japan
20 07
20 06
Singapore
Thailand
Av erage
0
0. 5
1
1. 5
2
2. 5
3
Shrinkage as Perce ntage of Sales
3. 5
To an outsider, a shrinkage figure of 1.30% may seem comparatively small, but the cost of this
shrinkage for the five countries surveyed was a total of $15,264 million. In Australia, India,
Japan, Singapore, and Thailand this shrinkage figure of $15,264 million has to be met ultimately
by consumers, stockholders and employees through a mixture of higher prices, lower profits and
lower bonuses and wage levels. This year, shrinkage has cost each person in the Asia-Pacific
region $58.44 (excluding India).
Shrinkage cost Japanese retailers $9,643 million even though Japan had the lowest shrinkage rate
in the region, $2,379 million in India (which has a high, though declining rate), $2,008 million in
Australia, $1,055 million in Thailand and $179 million in Singapore.
Table 1
Retail Shrinkage in the Asia-Pacific Region
Australia
India
Japan
Singapore
Thailand
Asia-Pacific
Total
Shrinkage
2007
US$ millions
2,008
2,379
9,643
179
1,055
15,264
Shrinkage
(as % of sales)
2007
2006
1.39%
1.36%
2.90%
3.20%
1.04%
1.09%
1.25%
1.19%
1.65%
1.76%
1.24%
1.30%
Percentage
change
2006-7
2.2%
-9.4%
-4.6%
5.0%
-6.3%
-4.6%
Retail shrinkage is measured against retail selling prices
Figure 4.1 and Table 4.1 show that shrinkage rates varied between the five countries surveyed, as
did the change in shrinkage compared to 2006. The highest shrinkage rate was found in India,
2.90%, a reduction of 9.4% over last year’s 3.20%. Japan had the lowest rate of 1.04%, which had
fallen by 4.6% from the 2006 rate of 1.09%. Australian shrinkage was 1.39%, an increase of 2.2%
over the previous rate, 1.36%. Thailand’s rate of 1.65% was a reduction of 6.3%, whilst
Singapore’s 1.25% showed an increase of 5.0% since 2006.
Although the trends in shrinkage amongst 32 countries surveyed are varied, the general pattern is
that shrinkage rates are starting to rise after some years of decline (in Europe there have been four
years of reductions). Asia-Pacific stands out from that pattern, with three of the five countries
(India, Japan and Thailand) recording reductions whilst Australia and Singapore experiencing
increased shrinkage. The average shrinkage rate for all 32 countries was 1.36%. India (2.90%)
and Thailand (1.65%) had the highest shrinkage rates amongst the 32 countries surveyed,
followed by the U.S. (1.52%) and Canada (1.49%). Japan (1.04%) had the fourth lowest
shrinkage rate. The average shrinkage rate in Asia-Pacific (1.24%) is similar to Europe’s 1.26%
and considerably lower than North America (1.52%). Further details can be found in ‘Global’
section of this Report (Part I).
As the ‘organised’ retail sector in India is comparatively small and recent, in this Report Indian
retail shrinkage data relates only to shrinkage in the organised retail sector. These figures and all
shrinkage data in this Report are calculated as a proportion of retail selling prices with the
shrinkage rates of those retailers using cost prices or a combination recalculated to retail selling
prices. The calculations of average shrinkage rates for every country including Asia-Pacific
nations are based on ‘weighted’ averages rather than simple averages, with proportionally greater
significance being given to larger companies and larger countries. ‘Shrinkage’ is an accountancy
term, reflecting the difference between the financial revenue the business should have received
(based upon inventory and purchases) and the amount actually received. Shrinkage losses are
caused mainly by people stealing goods or money from the company and also by a range of small
or large process errors, accounting lapses and pricing mistakes that produce apparent inventory
losses. In addition to the actual loss of inventory, declared ‘shrinkage’ rates will also be affected
by company policy, accounting rules and tax regulations that will influence practice and account
for some differences in results.
SHRINKAGE BY KINDS OF BUSINESS
Different kinds of business normally have different shrinkage problems and may even account for
shrinkage differently. Figure 4.2 shows average shrinkage rates for different kinds of retail
business.
Sixteen categories of business type or vertical markets were used. Retailers were asked to classify
themselves into one of the 16 categories. There are a number of businesses that could classify
themselves in more than one way so care should be taken, when making comparisons.
The highest average rates of shrinkage were seen (Table 4.2) in vehicle parts/hardware/building
materials retail (1.80%), cosmetics/perfume/beauty supply/ pharmacy (1.70%), and
apparel/clothing and fashion/ accessories (1.69%). The lowest rates were footwear/ shoes/ sports
goods & sporting goods (0.68%), liquor, wine, beer (0.84%), and jewellery/watches (0.88%).
Figure 2
Shrinkage by Vertical Market, 2007, Asia-Pacific
vehicle parts/ hardware/ DIY/ building materi
cosmetics/ perfume/ health & beauty/ pharm
apparel/ clothing and fashion/ accessories
video/ music/ games software
department store or large general store
books/ newspapers/ stationery
toys and games/ hobby and craft
convenience stores/ natural & speciality foo
office products
electrical goods/ computer centre/ electroni
furniture/ textiles/ floor & window coverings/
supermarket/ hypermarkets/ large grocery
discount/ variety retail/ warehouse clubs
jewellery/ watches
liquor, wine beer/ off-licence
footwear/ shoes/ sports goods & sporting g
0.00%
0.50%
1.00%
1.50%
Shrinkage as percentage of retail sales
2.00%
There were considerable variations within and well as between each category. Individual retailers
may have shrinkage rates, which are significantly higher or lower than the industry average as
shown in Table 4.2.
Table 2
Shrinkage as Percentage of Sales by Kinds of Business
Asia-Pacific
2007 2006 Change
apparel/clothing and fashion/ accessories
1.69% 1.74%
-2.9%
books/newspapers/stationery
convenience stores/ natural & speciality foods
1.45% 1.54%
1.03% 1.11%
-5.8%
-7.2%
cosmetics/ perfume/ health & beauty/pharmacy
1.70% 1.75%
-2.9%
department store or large general store
discount/ variety retail/ warehouse clubs
1.52% 1.48%
0.89% 0.86%
2.7%
3.5%
electrical goods/ computer centre/ electronics store
0.96% 1.05%
-8.6%
footwear/ shoes/ sports goods & sporting goods
0.68% 0.72%
-5.6%
furniture/ textiles/ floor & window coverings/
0.96% 0.96%
0.0%
jewellery/ watches
0.88% 0.93%
-5.4%
liquor, wine beer/off-licence
0.84% 0.90%
-6.7%
supermarket/ hypermarkets/ large grocery
0.94% 1.03%
-8.7%
office products
0.98% 1.06%
-7.5%
toys and games/ hobby and craft
1.21% 1.28%
-5.5%
vehicle/auto parts/hardware/DIY/building materials retail
1.80% 1.76%
2.3%
video/ music/ games software
1.61% 1.66%
-3.0%
Totals
1.24% 1.30%
-4.6
Significant reductions in average shrinkage (Table 4.2) occurred in supermarket/
hypermarkets/large grocery (-8.7%), electrical goods/computer centre/electronics (-8.6%) and
office products (-7.5%). Increases in shrinkage were fewer but included discount/variety
retail/warehouse clubs (+3.5%) and department stores or large general stores (+2.7%).
The ranking from high shrinkage to low shrinkage types of retail business is, with some
exceptions, similar in Asia-Pacific to other parts of the world, although convenience stores have
higher shrinkage rates in Europe and shrinkage is higher in North America supermarkets.
SOURCES OF RETAIL SHRINKAGE IN ASIA-PACIFIC
The main sources of retail crime and waste loss in Asia-Pacific are shown in Figure 4.3.
Taking an average across all five countries, retailers found the largest source of loss was
attributed to customer thieves, responsible for 52.6% of shrinkage (Table 4.3). The total amount
stolen by customer thieves or shoplifters was $8,031 million.
The next most important source of loss was employees, a small but significant proportion of
which were collectively responsible for 21.9% of retail shrinkage or $3,335 million. This
proportion also includes fraudulent employees placed there by organised crime. The main
methods used to commit internal fraud will be considered later in the Report.
Figure 3
Sources of Shrinkage, 2007, Asia-Pacific
internal error
18.1%
suppliers
7.4%
customers
52.6%
employees
21.9%
Supplier or vendor crime including losses in the distribution chain and theft by delivery
employees was responsible for 7.4% of shrinkage or $1,134 million.
Lastly, retailers reported that internal error or administrative error, which included accounting
mistakes, pricing errors, and process failures caused 18.1% of shrinkage losses. This involved a
total of $2,764 million.
Table 3
Sources of Shrinkage 2007, Asia-Pacific
percentages
Customers
52.6%
Employees
21.9%
Suppliers
7.4%
Internal error
18.1%
Total
100.0%
$millions
8,031
3,335
1,134
2,764
15,264
The perceived sources or causes of retail shrinkage for the Asia-Pacific countries and several
other states can be observed in Table 4.4. The dollar values of the different crimes committed
against retailers in each Asia-Pacific country can be found in Table 4.9, dealing with the Costs of
Retail Crime.
There were some significant differences of emphasis reported between the five countries of AsiaPacific in this survey (Table 4.4). Employee theft in Australia, for example, was regarded as
being responsible for 40.2% of shrinkage losses, rather greater than customer theft, seen as
comprising 36.6% of shrinkage. In contrast, Japanese retailers reported that 57.1% of their
shrinkage was perceived to have been caused by customers and only 18.3% by their employees.
In India, 22.0% of shrinkage was regarded as being caused by administrative error, whilst in
Australia and Singapore the proportion was thought to be 16.4% and 15.4% respectively. In
Thailand, 9.2% of shrinkage was considered to be the result of supplier and distribution fraud and
in Australia this was held to be responsible for only 6.8% of shrinkage.
Table 4.4 shows that, on average, Asia-Pacific retailers reported that 21.9% of their shrinkage
losses were caused by dishonest employees. This is a low figure (apart from Australia) compared
to other parts of the world. The highest proportions were seen in North America, where dishonest
employees were reported to account for 45.8% of shrinkage.
These estimates of the contribution to shrinkage loss made by employees, shoplifters, vendors
and administrative error are of course based on the perceptions of security and loss prevention
specialists, based on their current understanding of the major problems they face. Most shrinkage
is unseen at the time it occurs. Although these estimates have considerable credibility, therefore,
they cannot be regarded as facts comparable to sales revenue figures and need to be considered
with a degree of caution.
Table 4
Global Sources of Retail Shrinkage 2007
Customer
Thieves
North America
Canada
United States
Average North America
Europe
France
Germany
Italy
The Netherlands
Spain
United Kingdom
Western Europe (18 countries)
Central European (7 countries)
Average all European
countries
Asia-Pacific
Australia
India
Japan
Singapore
Thailand
Average Asia-Pacific
Employees Suppliers/ Administrative
vendors
error
35.2%
32.3%
32.5%
43.5%
46.0%
45.8%
4.7%
5.4%
5.4%
16.6%
16.3%
16.3%
43.5%
55.9%
50.8%
47.5%
53.0%
42.6%
48.9%
42.2%
29.3%
24.6%
28.4%
26.7%
24.6%
34.0%
28.2%
34.1%
8.9%
6.8%
7.0%
8.6%
8.8%
5.6%
6.9%
6.1%
18.3%
12.7%
13.8%
17.2%
13.6%
17.8%
16.0%
17.6%
48.5%
28.6%
6.9%
16.0%
36.6%
50.2%
57.1%
52.7%
47.5%
52.6%
40.2%
19.3%
18.3%
24.3%
24.7%
21.9%
6.8%
8.5%
7.1%
7.6%
9.2%
7.4%
16.4%
22.0%
17.5%
15.4%
18.6%
18.1%
APPREHENDED SHOPLIFTERS AND DISHONEST EMPLOYEES
Table 4.5 provides information about the number of thieves apprehended by retailers in different
countries. This information is provided by retailers and concerns the number of people
apprehended, irrespective of whether they were dealt with by the criminal justice system, and
may not correspond to data published by the police.
In the five countries of Asia-Pacific in this survey, a total of 108,720 customer thieves were
apprehended and 10,929 employee thieves, a combined total of 119,649 (Table 4.5). Employee
thieves were less than one-tenth (9.1%) of the total thieves apprehended. More than one-half of
the thieves apprehended (62.3%) were caught in India. Australia however was responsible for
18,840 store thieves, of which 4,890 (26%) were employee thieves.
Table 5
Number of Thieves Apprehended by Asia-Pacific Retailers 2007
Shoplifters
Employee thieves
Number
Australia
Percentages
13,950
India
Percentages
69,573
Japan
Percentages
7,200
Singapore
Percentages
2,300
Thailand
Percentages
15,697
Asia-Pacific
Percentages
108,720
Average
Amount Stolen
($) per Incident
$83
74.0%
93.3%
4,890
$349
4,967
$57
248
$144
96.0%
95
$191
95.6%
729
$863
10,929
9.1%
2,395
100.0%
$40
4.4%
$54
7,448
100.0%
4.0%
$12
74,540
100.0%
3.3%
$34
18,840
100.0%
6.7%
96.7%
90.9%
Number
26.0%
$12
Totals
Average
Amount Stolen
($) per Incident
16,426
100.0%
$206
119,649
100.0%
The number of retail thieves apprehended by North American retailers was 2.3 million and
European retailers apprehended 3.55 million thieves.
Other important differences between countries relate to the average amounts stolen or admitted.
In the five countries of Asia-Pacific, the amount stolen or admitted by employee thieves was an
average of $206, almost four times higher than the average amount stolen by customer thieves.
This difference was greatest in Singapore, where the employee theft average was $863 (the
highest amount in Asia-Pacific) and the customer theft average was $34. In Australia, the average
stolen by employees was $349 and by customer thieves, $83, the highest in the five countries.
There may be, of course, legal, cultural or economic factors which affect the value of theft that is
admitted.
The willingness or ability of dishonest employees to steal more than customer thieves is an
acknowledged feature of employee crime. In North America the average stolen or admitted by
employee thieves was $1,666 (2.6 times greater than the average customer incident of $622) and
the European average was $5,145 (46 times greater than the average customer incident of $112).
THE LOCATION AND METHODS USED FOR INTERNAL FRAUD
Theft and fraud by employees (or internal fraud) cost retailers $3,335 million in the Asia-Pacific
countries during the period of this survey. This section looks at where and how employee theft
occurs.
In Table 4.6, responses from retailers indicated that 33.1% of internal theft was believed to take
place at the checkout or cash desk, 33.6% on the sales floor and 33.4% in the back office,
delivery bay or stockroom. There was a fairly even split between the three options. It was rather
different in Australia, where 46.9% of employee theft and fraud was thought to occur at the
checkout or in Thailand where 51.2% of internal losses took place in the back office, stockroom
or delivery bay.
Table 6
Where Internal Retail Losses Took Place
Checkout/
cashdesk
Back office,
stockroom, or
delivery bay
Sales floor
EUROPE
Western Europe
Central Europe
Europe
34.1%
36.3%
34.2%
41.5%
44.6%
41.7%
24.4%
19.1%
24.1%
44.5%
24.6%
26.3%
31.8%
32.2%
32.2%
23.7%
43.2%
41.5%
Australia
India
Japan
Singapore
Thailand
46.9%
36.7%
30.7%
42.6%
29.4%
27.8%
31.3%
33.2%
32.7%
51.2%
25.3%
32.0%
36.1%
24.7%
19.4%
Asia-Pacific
33.1%
33.4%
33.6%
NORTH AMERICA
Canada
United States of America
North America
ASIA-PACIFIC
The location of losses is very important because it will determine what means are used to prevent
or detect internal fraud. In North America around one-quarter of internal losses were thought to
occur at the checkout: 41.5% of losses occurred on the sales floor. The position in Europe was
almost the reverse of this. Checkout losses at 34.2% were higher, sales floor losses were only
24.1% and back office, stockroom or delivery was thought to be responsible for 41.7% of losses.
Figure 4
Methods of Internal Theft, Asia-Pacific
collusion, $223 million
7%
large financial frauds,
$276 million
8%
cash, coupons,
vouchers, $549 million
16%
refund fraud, false
markdowns, $619
million
19%
merchandise theft,
$1,668 million
50%
What methods were used by dishonest employees to steal merchandise, property or financial
assets from Asia-Pacific retailers? Figure 4.4 shows that Asia-Pacific retailers estimated that
50.0% of their internal losses ($1,668 million) was stolen directly as merchandise. Refund frauds
and false markdowns comprised 18.6% of internal fraud ($619 million). Theft of cash, coupons,
vouchers or gift cards was responsible for 16.5% of internal losses ($549 million) and collusion
made up 6.7% (or $223 million). Large financial frauds accounted for 8.3% of internal fraud
($276 million).
Note that Figure 4.4 refers to key methods of internal theft. Cash will also normally be the
method used for large financial frauds and refund frauds/false markdowns, whilst collusion is
most likely to involve the theft of goods.
The proportions for every one of the five countries in this survey as well as North America and
Europe are given in Table 4.7. The highest proportion of internal theft by cash, coupons or
vouchers was in India (38.7%) and Thailand (32.7%) and the lowest was thought to be in Japan
(12.6%). The highest perceived proportional theft of merchandise by employees was in Japan
(55.4%) and Singapore (39.8%) and the lowest in India (25.0%) Collusion was seen as a major
source of loss in Australia (19.6%) and India (19.2%) but very low in Japan (2.9%). Refund fraud
and false markdowns were significant in Japan (19.6%) and Australia (18.2%) and
proportionately lowest in Thailand (12.0%). Large financial fraud was proportionately highest in
Japan (9.5%) and lowest in Thailand (4.0%), India (4.3%) and Australia (4.8%).
There were several differences between Asia-Pacific retailers and those of other countries. In
North America, retailers thought that merchandise theft represented one-half (49.1%) of internal
fraud, rather like Asia-Pacific retailers, but believed that cash theft (24.7%) was more important
than in the Asia-Pacific region, collusion, at 9.5%, was more important, but refund
fraud/markdowns were proportionately lower (13.1%) and large financial frauds were
significantly lower at 3.7%.
Table 7
The Main Methods of Internal Retail Theft
Refund
fraud, false Large financial
markdowns
frauds
Collusion
Cash, coupons,
vouchers
Merchandise
Western Europe
Central Europe
Europe
32.8%
30.0%
32.6%
24.2%
28.3%
24.5%
18.5%
15.2%
18.3%
12.4%
6.1%
12.0%
12.1%
20.4%
12.6%
Canada
United States
North America
29.5%
24.2%
24.7%
37.0%
50.2%
49.1%
16.5%
12.8%
13.1%
6.6%
3.4%
3.7%
10.4%
9.4%
9.5%
Australia
India
Japan
Singapore
Thailand
20.6%
38.7%
12.6%
26.1%
32.7%
36.8%
25.0%
55.4%
39.8%
36.0%
18.2%
12.8%
19.6%
16.5%
12.0%
4.8%
4.3%
9.5%
7.2%
4.0%
19.6%
19.2%
2.9%
10.4%
15.3%
Asia-Pacific
16.5%
50.0%
18.6%
8.3%
6.7%
European retailers saw cash, not merchandise, as their major source of loss at 32.6% of internal
fraud, whilst merchandise was only thought to be one-quarter of employee theft (24.5%). Refund
fraud/markdowns represented a similar proportion to Asia-Pacific retailers, large financial frauds
were higher (12.0%) and the proportion of collusion was thought to be almost double that of the
five countries.
RETAIL LOSS PREVENTION AND SECURITY SPENDING
Spending by retail companies on loss prevention to prevent crime and apprehend offenders in the
Asia-Pacific countries was $2,169 million in the twelve months ending in June 2007, equivalent
to an average of 0.18% of retail sales (Table 4.8). This was the equivalent of 14.2% of total retail
shrinkage.
Australian retailers spent proportionately most on security, 0.35% of their retail sales or $506
million. Japanese retailers spent $1,391 million on loss prevention, which was 0.15% of their
retail sales. Thai retailers committed the lowest proportion of retail sales to loss, prevention,
0.14% or $32 million.
Asia-Pacific retailers spent $1,291 million on revenue costs (payroll and services) and a
significant percentage of their security budget went on capital (security equipment, IT and other
long-term assets) of $877 million. As a percentage of sales, revenue spending was 0.11% of sales
and capital 0.07%.
Figure 4.5 shows how loss prevention spending was allocated between budget heads by retailers
in the five countries. Almost one-half of loss prevention spending (48.9%) went on security
employees, a total of $1,059 million. Thirty-one per cent of security spending or $672 million
went on direct employees and 17.9% ($387 million) on contract employees. Spending on security
equipment including depreciation was comparatively high at $877 million (40.4%), $180 million
(8.3%) on armoured vehicle cash collection, and other spending of $52 million made up 2.4% of
the security budget.
Table 8
Loss Prevention and Security Costs
Values in million U.S. $
LP costs
Revenue
Loss Prevention costs
Capital
as percentage
of sales
North America
Europe
$12,773
$10,648
$8,834
$7,177
$3,939
$3,471
0.45%
0.34%
$506
$148
$1,391
$34
$90
$2,169
$333
$140
$741
$20
$58
$1,292
$173
$8
$650
$14
$32
$877
0.35%
0.18%
0.15%
0.24%
0.14%
0.18%
$25,590
$17,303
$8,287
0.35%
Australia
India
Japan
Singapore
Thailand
Asia-Pacific Totals
Global Totals
North American retailers spent an average of 0.45% of retail sales on loss prevention and
European spending was an average of 0.34%. Revenue spending in Europe was 0.23% of retail
sales (capital spending was 0.11%) and North American revenue spending was 0.31% of sales
(capital spending 0.14%).
Figure 5
Analysis of Loss Prevention Spending, Asia-Pacific
security equipment,
$877 million
40.4%
other, $52 million
2.4%
direct employees,
$672 million
31.0%
Armoured car cash
collection, $180
million
8.3%
contract employees,
$387 million
17.9%
Although the proportion spent on capital in the five Asia-Pacific countries (40.4%) represented a
high percentage compared to many other countries (normally 28% to 34%), this related to
security budgets that were relatively low by international standards. In Europe, for example, there
has been a rapid increase in capital spending, which is now 32.6% of the total loss prevention
budget. In Europe, the proportion spent on capital was 0.11% of retail sales and in North America
capital spending was 0.14% of sales, compared with 0.07% in the five countries.
THE COSTS OF RETAIL CRIME IN THE ASIA-PACIFIC REGION
‘Shrinkage’ is not a complete measure of retail crime because shrinkage includes an allowance
for administrative error. The Costs of Retail Crime provided in Table 4.9 exclude administrative
error and focus on crime-based losses. Because ‘loss prevention spending by retailers is obviously
crime related, the costs of loss prevention are included here in the costs of crime.
Table 9
Costs of Retail Crime in Asia-Pacific, 2007
All Values in US$ millions
Australia
cost of customer theft
(millions)
cost of employee theft
(millions)
supplier fraud (millions)
cost of loss prevention
(millions)
totals
costs per household
India
Japan
Singapore Thailand
Total
735
1,194
5,506
94
501
8,031
807
137
459
202
1,765
685
43
14
261
97
3,335
1,134
506
2,184
148
2,003
1,391
9,347
34
185
90
949
2,169
14,669
$280.52
NA
$190.05
$177.08
$52.14
$195.05
The costs of crime in the five countries of Asia-Pacific reached $14,669 million in the period
2006 to 2007. This was equivalent to an annual tax imposed by criminals on honest shoppers of
$195.05 on every household in Asia-Pacific.
It is made up of $8,031 million of customer theft, $3,335 million of employee theft, $1,134
million of supplier theft and loss prevention and security costs of $2,169 million.
The costs of crime for every Asia-Pacific country in this survey are included in Table 4.9. No
‘costs per household’ figure has been calculated for India in view of the fact that the organised
sector is comparatively small and the country’s population is 1,086 million, so the figure, at this
stage, would not be comparable with the other countries.
This estimate is not the same as shrinkage, which includes internal error and does not include
retail security costs. The costs of retail crime measure the impact on the business of crime losses
as well as the burden of security costs. A comparison between Asia-Pacific and the other major
countries can be found in Table 4.10, which shows that the global costs of crime per household
are $387.08 in North America and $229.48 in Europe.
Table 10
Global Costs of Crime, 2007
CrimeSecurity
related
Costs
Shrinkage $ millions
$ millions
Costs of
Crime
$ millions
Cost per
Household
$ per year
NORTH AMERICA
Canada
United States of America
North America
EUROPE
France
Germany
Italy
The Netherlands
Spain
United Kingdom
Western Europe (18 countries)
Central European (7 countries)
3,028
33,358
36,386
974
11,799
12,773
4,002
45,157
49,159
$322.69
$394.04
$387.08
5,168
5,833
3,622
1,833
1,701
1,195
7,001
7,534
4,817
$278.71
$191.27
$214.70
1,331
3,112
492
1,126
1,823
4,238
$256.40
$279.92
6,264
31,024
1,533
10,056
7,797
41,080
$298.85
$246.25
2,592
595
3,187
$122.20
33,617
10,651
44,268
$229.48
ASIA-PACIFIC
Australia
India
Japan
Singapore
Thailand
Asia-Pacific
1,679
1,855
7,956
151
859
12,500
506
148
1,391
34
90
2,169
2,185
2,003
9,347
185
949
14,669
$280.52
NA
$190.05
$177.08
$55.16
$195.05
Global Costs of Crime
82,503
25,590
108,093
$283.61
European countries
THE MOST STOLEN MERCHANDISE
What products stocked by retailers are most vulnerable to theft? Research into this question
shows that (with some exceptions) the most stolen items were expensive designer or heavilybranded products mainly used for entertainment/leisure, personal care, clothing, and alcohol and
electronics. Particularly where organised retail crime is involved, the products stolen are those
which can readily be sold to others. Many items are comparatively small such as razor blades,
memory cards, or cosmetics and can be secreted relatively easily by the thief.
Table 4.11 shows the most heavily-stolen merchandise items that Asia-Pacific retailers reported.
In 2007, the most vulnerable product in Asia-Pacific retail stores was spirits.
The second most stolen was cosmetics and skincare (including suntan lotion). This was followed
by ladies fashion, perfume and fragrances, high-cost and speciality food including fresh meat,
video games and consoles including iPODs, DVDs/CDs, designerwear, razor blades and small
electronic items (including memory sticks).
Table 11
The Most-Stolen Merchandise From Asia-Pacific Retailers
Rank
Order
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Rank
Order
Spirits
16
Computer laptops
Cosmetics and skincare
17
Womenswear/ladies apparel
18
Health and over-the-counter
products
Nescafe and instant coffee
Perfumes and fine fragrances
19
Menswear
High cost and speciality food (e.g. meat,
cheese, seafood)
Video games and consoles, iPODs
20
21
Office supplies and printer
cartridges
Jewellery & watches
DVDs/CDs
22
TV/audio
Designerwear and accessories, leather
belts and bags
Razor blades
23
Childrenswear
24
Hair care products
Small electronic items
25
Confectionery
Cigarettes and cigarette paper
26
Shoes & trainers
27
Electrical health & beauty
products
Sporting goods
Magazines and Newspapers, stationery,
and books
Batteries
28
Toys
29
Interior furnishings
Mobile phones
30
Power tools
How does the Asia-Pacific ‘most-stolen’ list compare with those of other countries? Quite simply,
similar types of items are stolen all over the world: it’s a global marketplace for crime as well as
for honest consumers. The order of every product on the list is slightly different in other
countries, but lists from Europe and North America, similar to Asia-Pacific, are also dominated
by alcohol, cosmetics, perfumes, ladies apparel, accessories and designer apparel, razor blades,
and high-cost and specialty foods such as fresh meat, ham, seafood and cheese. There are many
regional differences of course but the products are essentially the same.
STORE AUDIT PROGRAMMES AND LP COMPLIANCE
To ensure that agreed corporate policy for loss prevention and security was carried out in
practice, 60.3% of retailers in the five countries surveyed had a store audit programme in place
(Table 4.12). Singapore had the highest percentage involvement in store audits (70.9%) and Thai
retailers were least likely to have a store audit programme (43.8%). The average Asia-Pacific
figure is similar to the European percentage of 63.8%. North American retailers were most likely
to make use of store audits: 81.2% of retailers had audits in place.
In Asia-Pacific, store audits normally involved an audit of store policy and procedures three or
more times every year, with 39.9% retailers conducting store audits three or more times and
20.4% carrying these out once or twice per year. High-frequency store audits were common in
Japan and Singapore, whilst in Australia the practice was more likely to involve audit only once
or twice per year. The content of a store audit programme may vary and it is not suggested that a
policy of ‘more audits’ is superior to a programme of one or two every year. High-frequency
store audit programmes were common in North America, where 59.0% of retailers carried out
audits three or more times per year. In Europe the standard was to have one or two audits every
year, with 52.3% of retailers doing so and only 11.5% having more frequent audits.
Table 12
LP Compliance and Store Audit Programmes
Audit programme in place
Frequency of Audits per annum
1-2 times
3 or more
52.3%
11.5%
EUROPE
63.8%
NORTH AMERICA
Canada
United States of America
Total North America
78.5%
81.4%
81.2%
24.3%
22.0%
22.2%
54.2%
59.4%
59.0%
ASIA-PACIFIC
Australia
India
Japan
Singapore
Thailand
62.1%
53.0%
61.6%
70.9%
43.8%
52.2%
23.8%
14.8%
24.8%
23.5%
9.9%
29.2%
46.8%
46.1%
20.3%
Total Asia-Pacific
60.3%
20.4%
39.9%
PROTECTING THE MOST-STOLEN MERCHANDISE
For ten of the most vulnerable product groups retailers were asked to state what proportion of
lines were specially safeguarded or protected and how this was done. The results are shown in
Table 4.13.
The product groups investigated included the most vulnerable items such as DVDs, video games,
spirits, perfume, clothing, and small electronic goods. So what means are used by the major
retailers to protect their most vulnerable merchandise from theft?
The products are arranged in descending order of the extent to which they were protected. DVDs
were the most protected product: the second column (headed ‘% of Product Not Protected’)
shows that only 4.2% is unprotected – or 95.8% is protected. In contrast, 73.8% of shirts are
unprotected.
Table 4.13 shows that almost two-thirds of merchandise items are protected – 56.3% of the ten
most vulnerable lines are protected. However that still means that 43.7% of vulnerable items are
not protected. This is a higher proportion of unprotected items than Europe or North America,
where 38.5% and 37.5% respectively are not protected.
Table 13
Methods of Protection Used on Most-stolen Lines in Asia-Pacific, 2007:
Proportion of lines protected by main anti-theft systems
EAS Tags
Product type
Video Games
DVDs
Razors
Spirits
Perfumes
Trousers
Cosmetics
Smaller electronic goods
Shirts
Shoes
Averages
Percentage Locked
Empty Chains, Safers Hard
Of Product Cabinets cartons cables locked Tags
not
&shelves & ticket Loop boxes
Protected
systems alarms
Soft
Tags
Source
Tagged
EAS
SubTotal
4.2%
8.0%
10.0%
38.6%
39.7%
55.7%
59.3%
10.2%
7.2%
16.0%
2.2%
7.8%
0.0%
6.2%
6.4%
9.3%
13.0%
5.0%
10.6%
1.1%
7.3%
0.0% 36.6% 1.4%
0.0% 36.0% 1.8%
4.0% 24.3% 6.7%
0.0% 3.0% 30.2%
0.0% 9.2% 3.2%
5.9% 1.9% 26.0%
0.0% 6.0% 4.0%
27.1%
25.2%
26.0%
15.4%
24.6%
6.1%
14.5%
14.1%
12.5%
0.0%
5.6%
4.9%
3.3%
2.7%
42.6%
39.5%
32.7%
51.2%
32.7%
35.4%
21.2%
64.0%
73.8%
84.1%
43.7%
3.1%
0.0%
0.0%
5.3%
4.2%
0.0%
0.0%
5.7%
10.0% 3.6% 4.9%
2.7% 1.3% 11.3%
1.6% 0.0% 8.2%
2.4% 12.2% 9.8%
7.9%
7.9%
4.0%
15.9%
2.3%
3.0%
2.1%
5.1%
15.1%
22.2%
14.3%
30.7%
Totals
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
The main methods used by Asia-Pacific retailers are electronic article surveillance (used for
30.7% of these products, of which source tagging was 5.1%), safers and locked boxes (12.2%),
empty cartons and ticket systems (5.7%), locked cabinets and shelves (5.3%), and chains, cables
and security loops (2.4%).
Note that these figures relate to the specific methods used to combat theft for these ten products,
which are amongst the most frequently-stolen articles, rather than about the general use of these
anti-theft systems in retailing.
For videogames, the most-protected item in Asia-Pacific, electronic article surveillance (EAS)
provided 42.6% (of which source tagging was 14.1%), safers and locked boxes protected 36.6%
of items, empty cartons and ticket systems were used for 6.4%, and locked cabinets and shelves
for 10.2%.
EAS was most likely to be used on spirits (51.2%), videogames (42.6%), and DVDs (39.5%);
safers/locked boxes on video games (36.6%), DVDs (36.0%), and razors (24.3%); chains, cables
and loop alarms on smaller electronic goods (10.0%); empty cartons and ticket systems on razors
(13.0%) and perfumes (10.6%); and locked cabinets and shelves were used particularly on razors
(16.0%) and videogames (10.2%).
ELECTRONIC SOURCE TAGGING OF MERCHANDISE
Electronic tagging of merchandise, generally known as EAS (electronic article surveillance), uses
small devices that alarm if the tagged merchandise is removed from the store without being
deactivated. Retailers were asked about their progress with source tagging, which involves
including these devices in or on the item or its packaging at source before the goods arrive in the
shops. Source tagging has been discussed by the industry for a number of years and the
technology has been developed to meet most eventualities. The responses are shown in Table
4.14.
The percentage of retailers in the survey claiming to use source tagging was 27.4% in AsiaPacific (including 40% in Australia), 45.2% in North America, and 39.7% in Europe.
Within the next two years, a further 19.9% of Asia-Pacific retailers reported that they would
introduce source tagging in their stores. By the end of the decade, therefore, 47.3% of large AsiaPacific retailers expected to be using source tagging of merchandise, compared with 68.7% in
North America and 69.3% in Europe.
Those Asia-Pacific retailers with source tagging were receiving into their stores an average of 97
product lines that were tagged at source. These lines accounted for an average of 6.1% of retail
sales, although in Australia source tagging represented 19.3% of retail sales. Currently, 52.7% of
retailers had no plans for source tagging.
Source tagging in Asia-Pacific was used less than by North American and European retailers,
where 45.2% and 39.7% respectively of retail companies use source tagging. The average number
of product lines that were source tagged in North America was 396 (accounting for 21.3% of
retail sales) and in Europe it was 219 (15.9% of retail sales).
Table 14
Use of EAS source tagging
We already use Source tagging
We will use it within 2 years
We have no plans to use Source tagging
Total
Number (average)
What percentage of sales is this?
North
America
45.2%
23.5%
31.3%
Europe
Asia-Pacific
TOTALS
39.7%
29.6%
30.7%
27.4%
19.9%
52.7%
100.0%
100.0%
100.0%
39.8%
25.5%
34.7%
100.0%
396
21.3%
219
15.9%
97
6.1%
268
16.4%
APPENDIX:
SURVEY METHODS
OBJECTIVES. The objective of the Global Retail Theft Barometer is to capture the extent of crimerelated losses and shrinkage suffered by retailers throughout 32 countries in Europe, North America,
Australia and Asia and to note trends both in the scale of losses and in the security policies adopted by
companies. This study has been funded by an independent grant from Checkpoint Systems, Inc. as a
contribution to discussion within the sector.
THE QUESTIONNAIRES. The loss prevention managers or finance directors of 3600 of the major
retailers in the countries being surveyed were sent a questionnaire for completion. The questionnaire
consisted of 24 questions. Anonymity was guaranteed. The questionnaire was in French, English, German,
Italian, Japanese and Spanish and was also available on-line.
CONTACT DETAILS. The names and addresses of the companies were drawn from a combination of
commercial lists and the Centre’s own list of retailers.
CROSS SECTION BY COUNTRY AND BY TYPE. The final composite list covered the major retailers
in the 32 countries, drawn from all kinds of retail business. The number of questionnaires sent out to
retailers in each country was proportional to the size of the retail industry in that country. However between
25-45 questionnaires were sent to smaller countries in order to encourage replies from a representative
sample of the sector as a whole in each country. The growth of cross-border and international retailing
meant that a number of respondents would naturally have been providing information about more than one
country. The results for Luxembourg were included with Belgium in order to protect commercial
confidentiality and the results for Latvia, Lithuania and Estonia were combined (as before) as ‘Baltic
states’. Iceland was included in the survey within Western Europe. No political implications should be
drawn from the process of grouping certain states or from the inclusion or non-inclusion of any country.
THE RESPONSE. 820 useable returns were provided including returns that were made on-line. By
continent, 228 responses were received from North American corporations (total sales $376 billion [€276
billion]), 489 from Europe ($505 billion [€371 billion]) – 5% more than last year - and 103 retailers from
Asia-Pacific ($65 billion [€48 billion]). The response rate was 22%, which is perfectly satisfactory for a
study of this kind. The number of returns made by retailers in each country and the collective scale of those
retailers that responded can be seen in the accompanying Table. The retailers who completed the
questionnaires were collectively responsible for a combined sales of $947,766 million (€695 949 million)
and operated 138,603 retail outlets.
COLLATING THE DATA. Retailers were allocated to one of 16 types of business. A distinction was
made between a ‘nil response’ (no reply was entered to a question) and ‘0’. The ‘0’ was counted but not the
nil response. The data provided was consistent (no responses needed to be abandoned because of material
error), but it should be noted that there were significant differences between retailers in the same country.
CALCULATING THE RESULTS. In a survey of this kind there is a danger that a small and
unrepresentative number of respondents can influence the average – either exaggerating a ‘trend’ or
minimizing a problem. To avoid this, we have not used simple arithmetic averages, but have weighted each
reply in accordance with the sales of the company involved. Thus the shrinkage result for Germany is not a
simple addition of the average shrinkages of the companies which reported, but each result has been
weighted so that the shrinkage of a $500 million retailer is calculated at five times more than a $100 million
corporation.
COUNTRY WEIGHTINGS. The results of retailers in each country have been weighted in proportion to
the total retail sales of that country to prevent differences in the response rates between countries affecting
the overall result.
The results for 17 Western European countries are published separately from the seven states in Central
Europe. ‘Western’ and ‘Central Europe’ are used here as geographical expressions: no political
implications are intended through the use of this terminology. No political conclusions should be drawn
from the groupings used, or from the inclusion or non-inclusion of any country in this study.
SHRINKAGE. ’Shrinkage’ is an accountancy figure, reflecting the difference between the financial
revenue the business should have received (based upon inventory and purchases) and the amount actually
received. Shrinkage losses are caused mainly by people stealing goods or money from the company but
also by a range of small or large process errors, accounting lapses, and pricing mistakes that produce
apparent inventory losses. In addition to the actual loss of inventory, declared ‘shrinkage’ rates will also be
affected by company policy, accounting rules, and tax regulations that will influence practice and account
for some differences in results.
Although ‘shrinkage’ is often used as a proxy for retail crime it is not identical to crime against shops
because it includes error and waste as well as crime. It is a convenient figure used almost universally by
retailers for management-control purposes. In a later section, this Report provides an estimate of the total
costs of crime against shops from which ‘wastage’ and ‘error’ have been subtracted.
The Centre for Retail Research
The Centre for Retail Research is an independent organization providing research
and consultancy for the retail sector. It has carried out a range of studies dealing
with the costs of crime and the application of electronic and computerized systems
to combat shop theft and fraud in many parts of the world.
The Global Retail Theft Barometer has been written by Professor Joshua Bamfield,
Director of the Centre. He has researched retail crime issues since the mid-1980s
and has written extensively on this topic.
Appendix
Companies in the Global Retail Theft Barometer Survey 2007
EUROPE
Austria
Belgium/Luxembourg
Denmark
Finland
France
Germany
Greece
Iceland
Ireland
Italy
The Netherlands
Norway
Portugal
Spain
Sweden
Switzerland
United Kingdom
Subtotal Western Europe
Czech Republic
Hungary
Poland
Slovakia
Baltic States *
(Latvia, Lithuania, Estonia)
Subtotal Central Europe
Total Western and Central Europe
Number
Number
of Retailers
of stores
Combined
Combined
Sales of
Turnover of
Respondents
Respondents
$ millions
€ millions
8,740
10,403
9,387
13,097
34,247
84,288
10,752
1,016
2,935
43,306
67,965
8,578
7,478
25,321
13,057
9,751
144,279
494,600
6418
7639
6893
9617
25148
61893
7895
746
2155
31800
49907
6299
5491
18593
9588
7160
105945
363187
15
19
19
18
48
46
16
4
23
29
23
20
21
29
22
19
48
419
630
1060
1960
1385
6491
3493
583
172
532
2436
2547
490
2185
3299
2761
1989
10058
42071
12
19
20
9
83
295
390
46
1,216
3,616
4,351
306
893
2655
3195
225
10
70
391
1205
1,768
11,257
1298
8266
489
43276
505,857
371453
$ millions
€ millions
NORTH AMERICA
32
9458
35,032
25724
United States of America
196
69639
341,457
250735
Total North America
228
79097
376,489
276459
$ millions
€ millions
Canada
ASIA-PACIFIC
Australia
29
2784
42,067
30890
India
21
1440
5,732
4209
Japan
16
7391
11,823
8682
Singapore
17
632
1,779
1306
Thailand
20
3983
4,016
2949
Total Asia-Pacific
103
16230
65,418
48037
Grand Totals Global
820
138603
947,766
695949