Local retailers hesitant to talk about theft

The survey, presented in June at the National Retail Federation’s Loss Prevention Conference and Expo in San Diego, found that theft and fraud cost U.S. retailers $41.6 billion in 2006, accounting for 1.61 percent of sales.

Deterring thieves

Though many retailers, including Wal-Mart, Borders and Bass Pro, declined to comment for this story – as did officials with retail megasite Battlefield Mall – Barry Sabor, vice president of loss prevention for Springfield-based O’Reilly Auto Parts, said theft is most prevalent at the auto-parts chain’s metropolitan locations. He declined to discuss specifics about O’Reilly’s losses, but he said that regardless of where the theft occurs, prosecution is a cornerstone of prevention.

“You want to deter them from stealing in the first place,” Sabor said. “If they do (steal), you want to let other people know that it won’t be tolerated. We think filing police reports with local law enforcement agencies is an effective way to do that.”

According to the survey, employee theft caused the most losses in 2006, at $19.5 billion, followed by shoplifting, at $13.3 billion. Other causes of shrinkage included administrative error – $5.8 billion – and vendor fraud – $1.7 billion.

The end result is that different businesses are concerned about varying types of losses.

“Some businesses are more concerned with internal shrinkage, such as employee theft as opposed to your general run-of-the-mill shoplifter,” said Nat Sprague, owner of BioMetAccess Co. LLC in Springfield, which offers access control, closed-circuit TV surveillance and intrusion detection systems. “Other people are more concerned with, say in a factory, someone pulling up in a semi-truck and carrying the goods out. It just depends upon the business.”

Where to watch

Loss prevention becomes a balancing act between cost and loss, according to O’Reilly’s Sabor.

“If your risk is that you are going to lose a $50 piece, you don’t want to spend $100 to protect it,” he said. “Part of the risk assessment of which products and which methods involves weighing that cost versus how much (the item) is worth and how desirable it is to someone who might want to take it.”

Making those decisions is common for big-box retailers, Sprague said.

“Sewing (accessories) and bolts of cloth (are) not a high-risk area, so why spend a lot of time and money watching that area?” Sprague said. “Automotive is a high theft area. The mean age group for theft like that is between the age of 16 and 25.”

An often-overlooked source of shrinkage is with returns, Sprague said.

“(Returns are) not handled with the same level of security and prevention that general merchandise is,” Sprague said, noting that they should be, because returned items have the same value as other inventory. “It is assumed that (the item) is going to go back to the manufacturer or the warehouse. It gets set on a shelf in the back and that stuff is gone.”

While the National Retail Security Survey says awareness of organized retail theft is rising among retailers, Sprague notes that it is often cyclical and connected to a specific product.

“Two or three years ago, with the incredible increase in methamphetamine use, you saw a lot of group theft going on,” Sprague said. “They hit the retail stores for the cold remedies and those sorts of things. The retailers got a better handle on it and got them behind the counter, then the theft slowed down.”

Sprague said systems attached to the goods, such as radio frequency identification chips, are very effective at deterring theft, while video surveillance systems are more reactive, offering help after theft has occurred.

Stores need to have multiple layers of protection; there is no single solution, Sprague said, and according to the survey, retailers are choosing multiple options to combat theft (see box).

While the total amount of theft uncovered by the survey is daunting, retail losses overall are fairly stable, according to University of Florida criminology professor Richard Hollinger, lead author of the survey and report. Although total losses are rising in correlation to industry sales, shrinkage as a percentage of sales has stayed flat – moving from 1.6 percent in 2005 to 1.61 percent in 2006.

“Retailers seem to be putting a dent in the amount of criminal activity in their stores, though they acknowledge they have a lot of work left to do,” Hollinger said in a news release.

The National Retail Security Survey comprised responses from 139 retailers regarding the first half of 2007 and data from 2006.

Combating Retail Theft

Retailers are taking action to fight inventory losses from theft and fraud. Of those surveyed:

• 95.7 percent are using burglar alarms;

• 87.1 percent are using visible closed-circuit TVs;

• 84.9 percent are using digital video devices;

• 60.4 percent conduct check screening;

• 69.8 percent are using armored cars;

• 69.1 percent operate point-of-sale data-mining software; and

• 57.6 percent are using hidden closed-circuit TVs

Source: National Retail Security Survey