Shrink has shrunk

A new study from the Food Marketing Institute reports that "shrink" is down at supermarkets but organized crime activity and gift card fraud cases are up. I had no idea the extent that organized crime exists for the big box and supermarket retailers.

From the FMI news release:

Shrink in supermarkets declined for the third straight year, to a median of 1.52 percent of sales in 2006, as food retailers devoted more technology, training and employee vigilance to combat theft and other losses, according to the Food Marketing Institute (FMI) Supermarket Security and Loss Prevention 2007 report, which was released here today. The 2006 shrink figure is down from 1.69 percent of sales in 2005 and 2.00 percent in 2004.
At the same time, supermarkets continue to report increases in organized retail crime — thefts committed by sophisticated gangs that sweep baby formula, medicines and other expensive items off shelves and fence them through flea markets, pawn shops and Internet auction sites. Nearly six in 10 of the food retailers surveyed (59.6 percent) reported an increase in these crimes in 2006, about the same number in last year’s report (62.5 percent). The FBI estimates that these gangs steal up to $30 billion in products a year from all retailers.

Food retailers are taking action to thwart organized retail crime, according to the report. In fact, 93.6 of the loss prevention executives surveyed are allocating more resources to deter and detect it and to help law enforcement capture and prosecute the perpetrators. The measures include:
Provide more loss prevention training, cited by 52.3 percent.
Install more closed-circuit television (CCTV) cameras, 52.3 percent.
Track these crimes regionally or nationally, 50.0 percent.
Help develop legislation to address the problem, 47.8 percent.
Add security personnel, 36.4 percent, and systems, 31.8 percent.
Use product-marking technology to identify stolen products, 34.1 percent.
Retailers Seek a Federal Law to Fight Organized Retail Crime

Two FMI members, Safeway Inc. and Target Corp., presented the industry’s case to Congress for legislation to make organized retail crime a federal felony at an October 25 hearing of the House Judiciary Crime, Terrorism and Homeland Security Subcommittee.
Retailers spend an estimated $12 billion a year to fight retail theft, testified Target Vice President of Assets Protection Brad Brekke. For example, the company built forensic laboratories with latent fingerprint and other technologies to support investigations. Safeway created a whole division to fight these crimes throughout the U.S. and Canada.

“Other Top-Line Results
Shoplifting
Retailers apprehended 507 shoplifters per company in 2006, averaging 16 per store and $34 per incident.
The most frequently stolen items were meat, health and beauty care products, over-the-counter medicines, liquor and razor blades.
Robberies and Bad Checks
Two-thirds of companies reported at least one robbery, costing retailers an average of $8,891 per incident.
Retailers accepted more than $28 million in worthless checks, resulting in a median loss of $284,124 per company in 2006.

Employee Theft
Nearly 40 percent of all shrink was attributed to stealing by store employees in 2006, averaging 3.1 cases per store. Losses averaged $362 per store and $193 per incident. The checkstands and service departments continue to be the most vulnerable, accounting for a combined 75 percent of employee theft.

Gift Card Fraud on the Rise
The growth in gift cards is spawning new forms of fraud. Examples include tampering with bar codes to increase the value on stolen cards and buying gift cards with worthless checks or stolen credit cards, effectively laundering them.
Nearly all stores offer gift cards, and 76.7 percent of companies reported some type of fraud, theft or tampering in 2006 — up from 65.7 in 2005.

Methodology

The report was based on surveys from 47 companies operating 8,893 stores. It was made possible by the generous support of Checkpoint Systems, Inc. To purchase Supermarket Security and Loss Prevention 2007 (retailer/wholesaler FMI members $95, associate members $145, nonmembers $195), visit the FMI Store at www.fmi.org/store/.