Retail Losses Hit $41.6 Billion Last Year From Theft and Fraud

The preliminary results of the latest National Retail Security Survey found that retail shrinkage averaged 1.61 percent of retail sales last year, nearly unchanged from 1.60 percent in 2005.

Even though shrinkage as a percentage of sales stayed virtually the same, total retail losses increased last year to $41.6 billion due to higher retail sales in 2006 compared to 2005. The survey, now in its fifteenth year, is a collaborative effort between NRF and the University of Florida.

According to the survey, the majority of retail shrinkage last year hit was due to employee theft, at $19.5 billion, which represented almost half of losses (47%). Shoplifting accounted for $13.3 billion, or about one-third (32%) of losses. Other losses included administrative error ($5.8 billion and 14% of shrinkage) and vendor fraud ($1.7 billion and 4% of shrinkage).

Retailers don’t realize that most of their losses are from their loyal and trusted employee rather than customers. I used to call these employees my silent partners and I had a lot of them. Much of the saving from using POS software is that employees are forced to use the system correctly and that creates accountability. Every function in the POS software should make a sequential entry with a full audit trail. You should have an exception report that gives you exact entries at the checkout terminals. An employee that shows up on the exception report numerous times during the day is either poorly trained or stealing. Make employees accountable for their actions and you will have honest employees.