From The Editor | March 19, 2013

Retail Theft Study: Only 1 In 46 Gets Caught

Matt Pillar, editor in chief

By Matt Pillar, editor in chief

The Centre For Retailing Research released a comprehensive report on retail crime this week, complete with analysis of the major trends in global retail crime and LP since 2001. The report reminds us that the POS is the front line in the battle against retail loss. 

Changing Retail, Changing Loss Prevention, available for download here, is full of stats that underscore the massive challenges retail LP pros struggle with in the multifaceted battle against shrink and loss. For instance, the average number of arrests made annually for retail theft has hovered around six million. Slightly less than 1/6 of those being arrested each year are employees.

These figures reveal not just how hard it is to catch and prosecute a thief, but how misguided our collective LP effort might be. By extrapolating average loss per incident from total losses, report author Professor Joshua Bamfield figures that the roughly 5 million external thieves apprehended annually account for only about 2% of shoplifting incidents. The give-or-take 1 million retail employee thieves who are caught represent about 3.6% of internal theft incidents.

In other words we’re only catching 6 million of the more than 275 million who commit retail theft (globally). That’s about 1 in 46. And, bear in mind that we’re only talking about apprehensions here. The research doesn’t dive into prosecution statistics, but only a handful of cases make it that far. It’s a bad success rate, and Bamfield is understated when he suggests the rate of apprehension is “probably too low to provide effective deterrence through fear of arrest.”

In the face of statistics like this, retail LP becomes a question of where to focus the effort to curb our losses. Some retailers choose to start with the merchandise; they lock down the electronics and the perfume and the designer apparel that all do so well on the black market. They train more cameras on the fresh meat that remains such a popular theft target for grocers.

But, in a losing and resource-constrained battle like this, I think a little more analysis is necessary to stem the more serious bleeding, which is coming from within.

No matter what report you consult, you’ll see that employees steal five to six times more per incident than external shoplifters. The average incidence of shoplifting costs a few hundred dollars. The cost of the average incidence of employee fraud is climbing toward a couple thousand dollars. There’s clearly more mitigation of damage from loss to be had if the focus shifts from external sources of theft to internal sources of theft.

Research shows that the POS is the pinnacle of associate theft, and transaction/returns fraud is the vehicle chosen most often. Application of exception reporting tools and POS transaction authority control are the best measures of protection from the largest profit siphons in your stores. Short of overpaying your cashiers, the motivation of theft is nearly impossible to influence. But, if the target is unsuitable (i.e. POS transaction controls) and a guardian is present, (i.e. monitoring software/video surveillance), you’ll minimize the associate’s opportunity to steal at the cash wrap.

While merchandise theft is also a leading cause of associate dishonesty, shifting the merchandise protection focus from what external shoplifters are stealing to what associates are stealing can prove difficult and probably isn’t an effective use of limited resources.  Associate theft of merchandise is typically more opportunistic than external theft, making it hard to focus on the merchandise that has the highest potential for pilferage, and that which—when stolen—results in the greatest loss of profit.

Bamfield’s research reminds us that to stop external shoplifters, we need to understand and focus on the merchandise they target. To stop associate theft, we need to understand and focus on the people at the POS.