SURVEY SHOWS SHOPLIFTING AND EMPLOYEE THEFT CONTINUE TO COST BILLIONS

Nov. 20, 1998
Sources: Richard Hollinger, (352) 392-2497
Lee Pernice, (561) 989-7361

GAINESVILLE --- Employee theft, shoplifting, administrative error and vendor fraud continue to rob the nation's retailers of billions of dollars, this loss translates into higher consumer prices and cost the nation's retailers nearly $26 billion annually, according to the just-released 1998 National Retail Security Survey.

The survey of retail security executives was conducted by researchers at the University of Florida and sponsored by Sensormatic Electronics Corp. (SRM:NYSE).

The losses, otherwise known as inventory shrinkage, were 1.72 percent of total 1997 retail sales, down slightly from the year before, according to the survey. Employee theft made up 42.7 percent of the total losses, shoplifting 34.4 percent, administrative error 17.6 percent and vendor fraud 6.3 percent. The overall shrinkage percentages over the past eight years studied have remained relatively stable, ranging from a high of 1.95 percent in 1993 to a this year's low of 1.72 percent. However, the increase in overall retail sales makes the dollar impact of this problem more pronounced along with its effects on the consumer.

"Employee theft was at the highest levels that we have seen in the eight years we have conducted this survey," said Richard C. Hollinger, director of the University of Florida's Security Research Project, which conducts the survey. "While the average shoplifting incident costs the retailer $212.68, an employee theft averages $1,058.20 per incident. A tight labor market and increased consumer spending will compound this escalating problem."

With more than three-quarters of the losses coming from employee theft and shoplifting, survey respondents said high-tech electronic systems to monitor both employees and merchandise on the sales floor were more likely to see increased use in the coming year.

The survey found that closed-circuit television was reported, by far, as the most popular loss prevention system to be added during the coming year. It also verified the growing use of vendor source tagging and integrated closed-circuit TV systems at the point of sale.

Furthermore, the next generation of radio frequency identification technology combined with electronic article surveillance, or EAS, systems will offer the retailer even better security against traditional shoplifting but also provide added protection against refund fraud, counterfeit products and deliver better merchandising opportunities for the consumer.

"As retailers and manufacturers realize the benefits of source tagging, they are both looking to take their security systems to the next level," said Joe Ryan, vice president of Global Source Tagging for Sensormatic Electronics Corp., the world's leading manufacturer of electronic security systems. "The next logical step is to add intelligent chips to the EAS technology to deliver more value to all our customers." More than half of the 27 loss-prevention systems examined, including live closed-circuit TV, cables, locks and chains, shoplifting deterrence signage and acousto-magnetic EAS systems, were being used regularly by at least one-third of the responding retail chains, the survey reported.

The number of empty packages found in a retail store was down this year to 976 for every $100 million in sales from a record high of more than 1,270 for the same volume last year. For example, a large discounter with $34 billion in annual sales could have as many as 331,840 empty packages found in its stores in a year's time. Empty packaging is an indirect indicator of shoplifting, as many thieves remove the merchandise from its packaging to avoid the anti-theft devices that traditionally are placed on the outside of the packaging.

Sensormatic's Ryan said the decrease in empty packaging might be the result of more sophisticated source tagging programs where the security label is actually imbedded in the product itself, removing the motivation to discard the packaging while stealing the merchandise.

Other survey highlights include:

• Some of the highest losses were reported for books, cards, gifts, toys and hobbies while some of the lowest were reported for supermarkets and sellers of liquor, beer and wine, consumer electronics, furniture and optical items.

• Above-average losses also were reported in recorded music and video, drugs, jewelry, women's and children's apparel and other specialty apparel segments. Below-average losses were reported in men's apparel shops, household furnishing stores, full-line department stores and discount stores.

• Retailers reported apprehending an average of 265 shoplifters per $100 million in sales, but only 40.9 employee theft apprehensions per $100 million in sales.

• Retailers lost an average of $212.68 per shoplifting incident compared with $1,058.20 per employee theft incident, both figures up from last year's report.

The survey was based on 200 anonymous responses to a questionnaire returned by a cross section of retailers representing 18 different marketing categories. The retail firms participating in the survey include virtually the entire retailing industry -- with the intentional exclusion of restaurants, bars, motor vehicle dealers, auto service stations and direct catalog sale outlets.

Retail market segments reporting shrinkage percentages above the average of 1.72 percent were books and magazines (4.12 percent); cards, gifts and novelties (2.69 percent); toys and hobbies (2.44 percent); jewelry (2.27 percent); recorded music and video (2.19 percent); women's apparel (1.96 percent); and drugs (1.91 percent).

Market segments reporting below-average shrinkage were men's apparel (1.7 percent); household furnishings (1.69 percent); full-line department stores (1.6 percent); discount stores (1.58 percent); sporting goods (1.55 percent); convenience stores (1.52 percent); supermarket and grocery (1.47 percent); and liquor, wine and beer (1.28 percent).

The University of Florida's Security Research Project mission is to provide a reliable and unbiased source on research, statistics and information topics related to private security and retail loss prevention.

Sensormatic provided principal financial support for the survey project in the form of an unrestricted research grant.

Copies of the full study may be obtained for a nominal charge by contacting Professor Richard Hollinger, Security Research Project, Department of Sociology, University of Florida, 3219 Turlington Hall, Gainesville, Florida, 32611-7330. Orders also can be made through the UF Web site: http://web.clas.ufl.edu/sociology/srp.htm.

For a free executive summary of this survey, call Sensormatic Electronics Corporation at 1-800-368-7262.

Sensormatic Electronics Corp. is the world's leading supplier of electronic security systems to the retail, commercial and industrial marketplaces. Sensormatic also is a leader in integrated source tagging -- a process where consumer goods manufacturers apply anti-theft tags at the point of packaging or manufacturing.

For more information on Sensormatic, visit its home page in the World Wide Web at http://www.sensormatic.com.

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