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Retail Losses Hit $41.6 Billion Last Year, According to National Retail Security Survey

For Immediate Release
Kathy Grannis (202) 783-7971
grannisk@nrf.com  

Retail Losses Hit $41.6 Billion Last Year, According to National Retail Security Survey
--Companies Lost 1.61% of Sales to Theft, Fraud-- 

San Diego, June 11, 2007 – As retailers continue to invest in new programs and technology to combat crime in their stores, dollar losses from theft and fraud have reached an all-time high. The preliminary results of the latest National Retail Security Survey were released today at the National Retail Federation’s Loss Prevention Conference and EXPO. Dr. Richard Hollinger, a professor at the University of Florida, will release the full survey in a session tomorrow at the conference. The survey found that retail shrinkage* averaged 1.61 percent of retail sales last year, nearly unchanged from 1.60 percent in 2005. 

Even though shrinkage as a percentage of sales stayed virtually the same, total retail losses increased last year to $41.6 billion due to higher retail sales in 2006 compared to 2005. The survey, now in its fifteenth year, is a collaborative effort between NRF and the University of Florida. 

“Though total retail losses continue to rise in correlation with industry sales, it is encouraging that shrinkage as a percentage of sales has stayed flat,” said Dr. Richard Hollinger, lead author of the report and a criminology professor at the University of Florida. “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.” 

According to the survey, the majority of retail shrinkage last year hit was due to employee theft, at $19.5 billion, which represented almost half of losses (47%). Shoplifting accounted for $13.3 billion, or about one-third (32%) of losses. Other losses included administrative error ($5.8 billion and 14% of shrinkage) and vendor fraud ($1.7 billion and 4% of shrinkage). 

The survey suggests that the phenomenon of organized retail crime is gaining more awareness within the industry. As retailers’ understanding regarding the impact of these crimes continues to grow, roughly half of companies say they are now tracking organized retail crime activity.  To combat criminals’ brazen actions, retailers have been investing in new technologies to deter, detect and convict criminals. According to the survey, most retailers’ loss prevention systems include burglar alarms (95.7%), visible closed circuit televisions (87.1%) and digital video (84.9%). Retailers also conduct check screening (60.4%), use armored cars (69.8%), and operate point of sale data mining software (69.1%), and hidden closed circuit televisions (57.6%). 

“Retail theft does not only affect the bottom line,” said Joe LaRocca, NRF’s Vice President of Loss Prevention. “When criminals steal from retailers, consumers pay higher prices, the safety of innocent employees can be compromised, and shoppers looking for popular merchandise often cannot find it. Retailers will continue to invest in new technologies to prevent and prosecute crimes.” 

Product categories that experienced the highest degrees of shrinkage include cards, gifts and novelties; specialty accessories; crafts and hobbies; and supermarket and grocery items. 

The National Retail Security Survey is an annual survey of loss prevention executives that benchmarks retail shrinkage and operational information about how retailers are combating losses. The study, which surveyed 139 retailers in the first half of 2007 and uses data from 2006, is a partnership between the University of Florida and the National Retail Federation. The survey was underwritten by the ASIS Foundation, ADT and Stored Valued Systems. 

The National Retail Federation is the world's largest retail trade association, with membership that comprises all retail formats and channels of distribution including department, specialty, discount, catalog, Internet, independent stores, chain restaurants, drug stores and grocery stores as well as the industry's key trading partners of retail goods and services. NRF represents an industry with more than 1.6 million U.S. retail establishments, more than 24 million employees - about one in five American workers - and 2006 sales of $4.7 trillion. As the industry umbrella group, NRF also represents more than 100 state, national and international retail associations. www.nrf.com 

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*Retail Shrinkage is defined as inventory losses occurring from employee theft, shoplifting, organized retail crime, administrative error and vendor fraud.