Despite $33.5 billion lost, shoplifting and retail theft decline, report says

shoppers in a retail storeRetailers lost a whopping $33.5 billion to fraud last year, but that's still the lowest level in 19 years, a new industry report says.

Retail "shrinkage" -- the combined result of people stealing from stores, employee theft, administrative errors and vendor fraud -- decreased to 1.44% of overall sales, compared to 1.51% in 2008, according to the National Retail Federation. That amounts to losses of $91.8 million per day or $3.8 million per hour in 2009.

Despite the scale of the problem -- retailers lost $36.5 billion the previous year -- the slight decrease shows the industry's increased efforts to protect inventories and stay a step ahead of criminals is paying off.

"Retail crime, like any other type of crime, is a crime of opportunity," said Ann Lindstrom, a spokeswoman for ADT Security Services, which co-funded the study. "When retailers remove that opportunity or make it harder for people to steal, the trend is that it decreases."

Consistent with previous trends, the bulk of retail crime last year was due to employee theft, which accounted for $14.4 billion, or 43%, of losses. Shoplifting, which affects consumers by taking goods off shelves and increasing prices, deprived retailers of $11.7 billion.

One of the most common ways employees steal is by "sweethearting," ringing up an item at a lower price. Then the employee either keeps it or gives it to someone who's in on the scheme, Lindstrom said.

In the case of external crime rings, she said, perpetrators typically target items "consumers really want -- the hottest brand names, the things that retailers want to keep on the shelves. That could be the most popular kind of jeans or it could be a particular kind of baby formula."

Operational errors further cost retailers $4.9 billion. Vendor fraud took $1.3 billion, according to the report.

Retailers have been fraud targets for years. Most recently, return fraud -- the act of returning items that were used or never bought in the first place -- has compounded the problem. As a result, the industry has stepped up loss prevention efforts, through a combination of new anti-theft technology tools and better coordination with police.

"Retailers lose billions to shoplifting, internal theft and other types of criminal activity every year, so it's encouraging to see these small successes when it comes to shrink rates," said Joe LaRocca, NRF senior asset protection advisor. "Just as the industry battles organized crime rings on a daily basis, retailers are also faced with the daunting task of protecting their merchandise from everyday criminals because they are greedy and self-serving."

The National Retail Security Survey is taken every year among loss prevention executives to identify trends in retail theft and best practices for preventing losses.
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