4 minute read
INDUSTRY NEWS
Global Shrinkage Rises 6.6%
by Robert L. DiLonardo
DiLonardo is a well-known authority on the electronic article surveillance business, the cost justification of security products and services, and retail accounting. He is the principal of Retail Consulting Partners, LLC (www.retailconsultingllc.com), a firm that provides strategic and tactical guidance in retail security equipment procurement. DiLonardo can be reached at 727-709-6961 or by email at rdilonar@tampabay.rr.com.
The Centre for Retail Research recently published its 5th annual Global Retail Theft Barometer (GRTB) for the twelve-month period ending June 2011. Total global shrinkage cost respondent retailers $119.1 billion, an average of 1.45 percent of retail sales. The results are 6.6 percent higher than last year’s 1.36 percent, adjusted for the inclusion of first-time participant South Korea and currency exchange rate changes. Shrinkage rose in all geographic regions. A fifth geographic data subset, Middle East/Africa, has been added this year.
Global Shrinkage for 2011
Europe and North America remain the largest components. A three-year look at global totals indicates that the sharp increase in shrinkage in 2009 to 1.44 percent, no doubt caused by the recession, may not have been an anomaly after all. This year’s 6.6 percent increase in shrinkage to 1.45 percent places the global estimate at a level slightly higher than 2009. This is the fourth consecutive year that Latin America has recorded the highest shrinkage as a percentage of sales.
GLOBAL SHRINKAGE FOR 2011
Region Total Shrinkage
($US in billions) Shrinkage as Percentage of Sales
Change in Shrinkage Rate 2010 – 2011
Europe $48.615 1.39% +7.8% North America $45.321 1.58% +6.0% Asia-Pacific $18.288 1.22% +0.8% Latin America $6.053 1.67% +4.4% Middle East/ Africa $0.815 1.22% +0.8%
Global Total $119.092 1.45% +6.6%
The countries with the highest rates of shrinkage as a percentage of sales were India (2.38%), Russia (1.74%), and Morocco (1.72%). The lowest rates of shrinkage were found in Taiwan (0.91%), Hong Kong SAR (0.95%), and Switzerland (1.04%). Twenty countries posted shrinkage rates that exceeded the global total, down from twenty-two in 2010. Twenty-three countries posted lower rates, up from twenty in 2010. Shrinkage was estimated at 1.30 percent in first-time participant South Korea, below the global total.
Sources of Shrinkage
Globally, customer theft, including shoplifting and organized retail crime (ORC), was thought to cause the greatest shrinkage in most countries—43.2 percent of total shrinkage—compared with 42.4 in 2010 and 42.5 in 2009. Employee dishonesty was estimated to be responsible for 35.0 percent of total shrinkage, compared with 35.3 in 2010 and 35.5 in 2009. Internal error and administrative failure, such as pricing, process, or accounting mistakes, accounted for 16.2 percent of total shrinkage, compared with 16.9 in 2010 and 16.4 in 2009. Suppliers/vendor fraud accounted for 5.6 percent of total shrinkage, compared with 5.4 in 2010 and 5.6 in 2009.
As in the previous years, there is an interesting divergence of opinion among respondent groups over the sources of shrinkage. North American and Latin American retailers regard dishonest employees as the biggest problem (44.1 and 42.6% respectively). Shoplifters and ORC account for 35.8 and 33.2 percent respectively. North American retailers have focused vigorously on ORC issues over the past few years.
European and Asian retailers, on the other hand, identify customer theft as the largest shrinkage component (47.7 and 53.3% respectively). Dishonest employees account for an estimated 30.2 and 22.7 percent respectively.
SOURCES OF GLOBAL SHRINKAGE FOR 2011
Region Shoplifters/
ORC Employees Suppliers/ Vendors Internal Error
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