the global retail theft barometer 2014–2015

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THE GLOBAL RETAIL THEFT BAROMETER 2014–2015

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About the Study

The GRTB (Global Retail Theft Barometer) is a study of the losses incurred due to merchandise shrinkage in global retail industry

The study focuses on shrinkage trends globally and across regions, in addition to select individual countries

The study was conducted by The Smart Cube and Ernie Deyle and commissioned by Checkpoint Systems

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About The Smart Cube

The Smart Cube is a global company which has delivered more than 22,000 studies to clients across every function and region, within a wide range of industries including retail, consumer packaged goods, pharmaceuticals, technology, etc.

With a global network in 8 countries, the Smart Cube redefines the traditional research model by raising the quality of the analytics and the research

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About Ernie Deyle

Ernie is one of the leading experts globally in the field of retail loss prevention, business risk assessment, and risk mitigation services, most notably in the area of performance improvement programs designed to impact the P&L Statement/Earnings Report

During his 30+ years retail career, Ernie has worked with over 150 retailers worldwide across multiple sectors and formats

Ernie has served in a variety of roles from Chief Operation Officer, Global Leader for Profit Recovery, and Vice President of Loss Prevention for firms such as Capgemini and Arthur Andersen in the consulting space, and Kroger and CVS/Caremark in the retail industry and today at Sears Holding

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To understand shrinkage rates in four key regions, covering 24 countries as well as the reasons for shrinkage and steps taken to prevent losses

To provide qualitative insights of best methods of loss prevention, the most stolen items, and the impact of shrinkage on retailers.

Key researched data:

• Average shrinkage rate for retailing as a whole

• Reasons for shrinkage: % share of shoplifting, employee theft, supplier fraud, and administrative/non-crime losses in total shrinkage

• Most effective loss-prevention solutions

Study Objectives

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Asia/Pacific

Australia China Hong Kong Japan

Europe

Austria Belgium Finland France Germany Italy Netherlands Norway Poland Portugal Russia Spain Sweden Switzerland Turkey United Kingdom

North America

United States

Latin America

Argentina Brazil Mexico

Countries Researched

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An online survey of retailers across 24 countries was conducted

In-depth phone interviews with loss prevention managers of leading retailers and retail industry experts were conducted to gain qualitative insights

The Smart Cube analyzed and evaluated the quantitative and qualitative information obtained from this research to understand the trends in shrinkage and loss prevention during 2014–2015

A total of 203 retailers (more than 113,000 stores) in 24 countries participated in the study

These companies generated US$996.2 billion sales during 2014–2015

Methodology

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Shrinkage across the 24 countries under review was estimated at US$123.4 billion • This represents 1.23% of retail sales on an average across the 24 researched

countries

Shrinkage has been observed to increase in most of the reviewed countries and by

0.48 pps1 globally

• In the 16 countries where like-for-like analysis2 was possible, shrinkage increased in 10 and decreased in 6

• Out of the 11 verticals (where like-for-like analysis2 was possible) loss prevention spend increased across 5 but decreased across 6

Key Findings

Note: 1) pps refers to percentage points—the unit for the arithmetic difference between two percentages 2) “Like-for-like analysis” implies comparison of data from common respondents who participated in surveys of both the years—2013–2014 and 2014–2015

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Dishonest employee theft and shoplifting—accounting for more than 75%—

were the key reasons for shrinkage;

dishonest employee theft increased by 11 pps this year

According to retailers, most incidents of employee theft occur at point of sale (POS)

and the remaining are cases of stolen inventory at locations such as warehouses

• Retailers are using many procedures, such as pre-employment background checks of potential employees and POS exception-based reporting, to combat dishonest

employee theft

Key Findings

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Shrinkage rates across the 24 researched countries ranged between 0.75% to 1.68%

Across the countries under review, Mexico recorded the highest rate, with shrinkage amounting to 1.68% followed by the Netherlands at 1.48%

Norway, Switzerland, and France recorded the lowest shrinkage rates

Country Shrinkage Rates

0.75%

0.76%

0.81%

0.88%

0.89%

0.90%

1.00%

1.01%

1.02%

1.03%

1.05%

1.08%

1.10%

1.17%

1.18%

1.19%

1.20%

1.27%

1.33%

1.35%

1.35%

1.38%

1.48%

1.68%

1.23%

Norway

Switzerland

France

Poland

United Kingdom

Portugal

Argentina

Italy

Australia

Austria

Honk Kong

Germany

Brazil

Turkey

Russia

Belgium

Sweden

United States

Spain

Japan

China

Finland

Netherlands

Mexico

Global

Global Retail Shrinkage – by Country (2014–2015)

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Shrinkage in the 24 countries under consideration stood at US$123.4 billion; shrinkage rate increase from 0.94% to 1.42% globally

Region Country Shrinkage value

(US$ billion)

Shrinkage as Percentage of

Sales (%)

Change in Shrinkage as Compared with Last

Year (common respondents)

Percentage Change in Shrinkage as Compared with

Last Year (pps, common respondents)

Asia-Pacific Australia 2.44 1.02 ↘ -0.04

China 26.06 1.35 ↗ 0.48

Hong Kong 0.66 1.05 NA NA

Japan 14.90 1.35 ↗ 0.50

Europe Austria 0.77 1.03 NA NA

Belgium 1.23 1.19 ↗ 0.22

Finland 0.69 1.38 ↘ -0.30

France 4.61 0.81 NA NA

Germany 6.62 1.08 NA NA

Italy 3.91 1.01 ↘ -0.31

Netherlands 1.88 1.48 ↗ 0.26

Norway 0.50 0.75 ↗ 0.25

Global Shrinkage

Increased Decreased

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Global Shrinkage

Increased Decreased

Region Country Shrinkage value

(US$ billion)

Shrinkage as Percentage of

Sales (%)

Change in Shrinkage as Compared with Last

Year (common respondents)

Percentage Change in Shrinkage as Compared with

Last Year (pps, common respondents)

Poland 0.97 0.88 ↘ -0.02

Europe Portugal 0.49 0.90 ↗ 0.10

Russia 6.17 1.18 NA NA

Spain 3.31 1.33 ↗ 0.25

Sweden 1.07 1.20 ↗ 0.53

Switzerland 0.86 0.76 NA NA

Turkey 2.14 1.17 ↘ -0.35

UK 5.15 0.89 ↘ -0.20

Latin America

Argentina 1.14 1.00 NA NA

Brazil 3.89 1.10 ↗ 0.34

Mexico 3.86 1.68 NA NA

North America

US 36.79 1.27 ↗ 0.69

Loss prevention spend decreased or remained the same in 10 of the 14 countries where like-for-like analysis was possible; this led to an increase in global shrinkage

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Dishonest Employee

Theft

39%

Shoplifting

38%

Supplier Fraud

7%

Admin/non-crime Loss

16%

Global Sources of Shrinkage – by Source (2014–2015)

Dishonest employee theft and shoplifting were the major causes of shrinkage globally

• In 18 out of the 24 countries, shoplifting was the major cause

The primary causes varied across the retail landscape, depending on retailer type, size, and location

• For example, shoplifting was lower in the North America region and Argentina, which were more prone to dishonest employee theft

In countries such as the UK and Brazil, administrative and non-crime loss was the major cause

Sources of Shrinkage

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Turkey, Brazil, China, and Poland registered the lowest costs of retail crime per household

Per household, cost of retail crime across 24 countries ranged between $74.24 to $868.40

Even though countries such as Norway, Switzerland, and France witnessed low shrinkage rates, their costs of retail crime per household were high

Cost of Retail Crime per Household

Country Cost of Retail Crime

(US$ billion) Number of Households

(‘000) Cost of Retail Crime per

Household ($)

Argentina 2.39 11,930 200.42

Australia 3.40 8,875 382.96

Austria 1.64 3,704 442.20

Belgium 1.64 4,645 353.14

Brazil 5.05 59,690 84.65

China 43.63 418,440 104.26

Finland 2.23 2,571 868.40

France 11.03 27,923 395.15

Germany 12.01 40,343 297.70

Hong Kong 1.69 2,433 694.97

Italy 7.13 25,746 276.80

Japan 21.30 53,000 401.97

Mexico 6.43 31,559 203.89

Netherlands 2.93 7,550 387.79

Norway 1.30 2,259 573.91

Poland 1.53 13,660 112.19

Portugal 0.89 4,005 223.05

Russia 9.04 54,610 165.51

Spain 5.50 17,419 316.00

Sweden 0.79 4,632 171.33

Switzerland 1.40 3,362 416.0

Turkey 1.54 20,705 74.24

UK 7.24 27,232 265.76

US 75.32 122,459 615.07

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Small and easy to conceal items

such as spirits, mobile accessories,

batteries, fashion accessories, and

razor blades, as well as high-value

items with high resale value, such

as tablets, were most vulnerable

Most Vulnerable Merchandise

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Most Stolen Merchandise

Apparel and Fashion Accessories

Food and Beverages

DIY/ Home Improvement

Health and Beauty

1. Footwear 2. Fashion Accessories 3. Sports-related

Clothing

1. Wines and Spirits 2. Tobacco 3. Fresh Meat

1. Batteries 2. Power Tools 3. Door Locks

1. Mobile Device Accessories

2. iPads/Tablets 3. Video Games

1. Razor Blades 2. Makeup Products 3. Perfumes and

Fragrances

Most Vulnerable Merchandise

Electronics

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11%

15%

27%

27%

44%

73%

EAS Pedestal AnalyticData Tools

RFID- based EAS

Shelving Solutionsand Delayed Fixtures

Advanced InventoryControl Tactics

(secure cable devices,etc.)

Spider Wraps andSecurity Keepers

EAS (Electronic Article Surveillance –

Labels and Hard Tags/EAS Antennas)

Global Loss Prevention Solutions – at Product-level (2014–2015)

• Electronic Article Surveillance

(EAS) antennas, labels, and tags

were the most popular solutions

for loss prevention, used by 73%

of retailers

• Spider wraps and security

pods/containers, and advanced

inventory control tactics (such as

secure cable devices) were also

widely used

Loss Prevention Solutions

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Increasing the use of source-tagging as it helps in reduction of in-store labor and ensures consistent tagging compliance

Leveraging internal data more effectively to better understand shrink performance metrics at the SKU, category, and store levels

Using a mix of loss prevention solutions; EAS, fixtures, CCTV, manual screening, etc. should work hand-in-hand

Investing in employee training to prevent theft from stores

Establishing awareness programs to make people aware both internally (training) and externally (signage) of techniques and solutions used by retailers to prevent theft

Increasing vigilance during holiday and sales periods when there is high footfall in stores and an increased difficulty in deploying loss-prevention solutions

Conducting pre-employment background screenings of potential employees to decrease dishonest employee theft

A detailed understanding of the source of shrinkage helps implement the right solution; as per the surveyed retailers, effective prevention solutions helps them reduce shrinkage

Loss Prevention Best Practices

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Participate in the Global Retail Theft Barometer in 2016

Register on:

www.GlobalRetailTheftBarometer.com

the global retail theft barometer 2014–2015

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