GLOBAL RETAIL

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Index
THE GLOBAL RETAIL THEFT BAROMETER
Contents
Foreword....................................................................6
Executive Summary...................................................9
Part I : Introduction and Global Report....................15
Part II : North America.............................................31
Part III : Europe........................................................49
Part IV: Asia-Paci.c................................................65
Appendix: Survey Methods......................................82
A Global Perspective On Shrink
In 2000, the Centre for Retail Research released the .rst European Retail Theft Barometer, dedicated
to measuring retail shrink in Europe. Now, seven years later, Professor Joshua Bam.eld and his team,
sponsored by Checkpoint Systems, Inc., have published the .rst Global Retail Theft Barometer: a
comparative study of retail crime in 32 different countries worldwide.
As a company dedicated to facilitating interaction between different participants in an inter-continental
supply chain, Checkpoint has been at the forefront of developing solutions that deliver bene.ts globally.
Over the last decade we have seen our business adapt to the new realities of global retail: technology
driven applications to protect and identify fast-moving consumer packaged goods can be applied in one
continent, tracked while shipped across another, and used to deliver bene.ts for consumers in stores in
yet another. The decision to make this annual study global is a re.ection of these new realities. We can no
longer think of our business within isolated markets: everything is connected.
Sponsoring a global survey is an indication of Checkpoint’s commitment to furthering the .ow of
information between the cardinal points of retail worldwide. The phenomenon of shrink must be taken
seriously in the context of a global economy. According to the results revealed in this study, shrink cost
the world’s retailers $98.6 billion, representing an annual ‘tax’ on honest consumers everywhere of
$287.70 per household. This is a substantial .gure with an immediate impact on the margins of the global
retail industry — an industry on which the world’s economy, particularly in many developing or recently
developed regions, depends for growth and stability.
What can we hope to learn from a comparative study of retail theft on a global level? How do cultural,
economic and social factors impact shrink through theft? How do retailers in each region react to the
phenomenon of shrink? Identifying global trends in such a complex, multi-faceted environment is
challenging, but this study provides some fascinating indications. The phenomenon of shrink and its
impact on percentage of turnover is remarkably similar worldwide. Of course, there are signi.cant
variations between speci.c countries, but overall the differences are less than many would expect given
the massive amount of global retail and countries as culturally diverse as, for example, Switzerland and
Thailand.
There are different reasons for this: among them is the fact that application of retail security solutions has
become endemic across different national and vertical markets. The results show that in all countries there
are retailers who have managed to reduce shrink, and others where shrink has risen regardless of regional
location, which suggests that lower rates are the outcome of strategy, policy and investment, not of factors
related to the national environment.
Mr. George. W Off
CEO and Chairman
of the Board
Checkpoint Systems inc.
This fact is also supported by the results regarding investments that global retailers are making in security
spending, which are very similar in spite of country, continent or region. The report proves that retailers
worldwide are coming to the same conclusion: investing in security technology is seen as a priority and
can provide a signi.cant return on investment. For example, the study shows that up to 46 percent of
retailers worldwide expect to increase open merchandising of products in the next two years. In order to
avoid a rise in shrink while using open merchandising to increase sales, retailers will be presented with
some interesting challenges to protect their products. One solution retailers are employing to control
shrink globally is the application of EAS tags at source. According to the study, more than 65 percent of
retailers expect to use this method of protection within the next two years.
Other data from this Barometer has been noted with interest. Internal theft continues to be an alarming
phenomenon and remains the area where least impact has been made over the last few years - particularly
in North America - and where more research is needed. Shrink through theft or error along the supply
chain is also increasing worldwide, and has now reached up to 7 percent of the total. This underlines
the need for additional security efforts along the entire retail distribution chain, which is becoming
increasingly important for successful business in a global market.
So, what can we expect to see in the future? With the right approach from manufacturers, retailers and
solutions providers, technology can keep pace with the new risks and opportunities that are arising in an
increasingly global retail environment.
I would like to thank Professor Bam.eld and all the retailers worldwide who participated in this unique
study. I hope you .nd the information contained in this .rst global shrink barometer as interesting and
enlightening as I have.
Mr. George. W Off
CEO and Chairman of the Board
Checkpoint Systems, Inc.

THE GLOBAL RETAIL THEFT BAROMETER
EXECUTIVE SUMMARY
Monitoring the Costs of Shrinkage
and Crime on the
Global Retail Industry
The First Worldwide Shrinkage Survey
10
Executive Summary
The Global Retail Theft Barometer reports on levels of retail
shrinkage and crime in 32 countries in North America, Europe
and Asia-Paci.c. Eight hundred and twenty retail companies,
operating 138,603 stores with sales of U.S. $948 billion,
provided the data used in this study. The survey covered a
period of 12 months to June 2007. The retailers taking part
represented 16% of total European retail sales turnover, 13%
of North American retail sales, and 5% of retail sales in Asia-
Paci.c. The sample response rate was 22.8%. The Global
Retail Theft Barometer is the largest survey of retail crime
and loss in the world.
The Report is prepared by the Centre for Retail Research,
Nottingham, England, and is funded by an independent grant
from Checkpoint Systems, Inc. as a contribution to discussion
within the sector.
Global Report
• Total global shrinkage (stockloss from crime or waste
expressed as a percentage of retail sales) cost retailers in the
32 countries $98,630 million, equivalent to 1.36% of retail
sales. The countries with the highest shrinkage rates were
India, Thailand, and the U.S., while Austria, Switzerland and
Iceland had the lowest rates.
• One-half of the 32 countries suffered increased rates of
shrinkage between 2006 and 2007, although Asia-Paci.c
retailers reduced shrinkage by 4.6%. Globally, the average
shrinkage rate increased by 1.5%, an increase from 1.34% to
1.36%.
• The largest source of shrinkage was customer theft
(shoplifting), responsible for 42.0% of shrinkage or $41,504
million. Disloyal employees cost 35.2% of shrinkage or
$34,671 million, internal error and administrative failure (e.g.
pricing or accounting mistakes) was 16.5% ($16,248 million),
and supplier or vendor theft and fraud was 6.3% of shrinkage
($6,207 million). Retailers in the U.S, Canada, Australia, and
Iceland reported that employee theft was higher than customer
theft.
• Retailers apprehended almost 6 million store thieves in
2007, 87.5% of whom were customer thieves and 743,499 were
employee thieves. Most employee thieves were apprehended
by North American retailers, while the majority of customer
thieves (3,481,490) were apprehended by European retailers.
The average amount stolen or admitted by apprehended
customer thieves was $270, while employee thieves stole an
average of $1,967, seven times more than customer thieves.
• 30.9% of internal losses suffered by retailers occurred at
the checkout or cashpoint, 36.5% in the back of.ce, stockroom,
or delivery bay, and 32.6% on the sales .oor. The most
common method of internal fraud was theft of merchandise,
representing 41.1% of internal losses; cash, coupons, and
vouchers, 26.5%; refund fraud and false markdowns 15.3%;
collusion, 10.2%; and large .nancial frauds, 6.9% of internal
fraud.
• Global loss prevention costs were $25,590 million, 0.35%
of retail sales. Revenue costs were $17,303 million and capital
costs $8,287 million. Security employees accounted for 54.6%
of loss prevention spending, while spending on security
equipment was 32.4% ($8,290 million).
• The global costs of retail crime, based on the costs of
thefts by customers, disloyal employees and suppliers and
vendors plus the costs of loss prevention were $108,093
million, equivalent to $283.61 per household.
• The most-stolen items of retail merchandise within the 32
countries included branded and expensive products: cosmetics
and skincare, alcohol, womenswear/ladies’ apparel, perfume
and .ne fragrances, and designerwear. Other highly stolen
lines included razor blades, DVDs/CDs, video games and
video consoles, small electric items, and fashion accessories.
• Retailers protected only 61% of their ten most-vulnerable
product lines (including spirits, perfumes and razor blades).
Electronic article surveillance was the single most-used
protection method (used on 35.4% of lines) and safers and
locked boxes were used on 11.3% of products.
• Electronic article surveillance source tagging (ST,
applying tags during manufacture or the logistics chain) was
used by 39.8% of retailers, including 45.2% in North America,
39.7% in Europe and 27.4% in Asia-Paci.c. A further 25.5%
of retailers expected to introduce source tagging within the
next two years, implying that by the end of the decade 65.3%
of retailers will use source tagging. The average number of
product lines that were source tagged was 268 (providing
16.4% of retail sales). In North America, source tagging had
much higher levels of penetration, responsible for 21.3% of
sales.
11
North America
Data was provided by 196 U.S. and 32 Canadian retail
corporations with combined sales of U.S. $341 billion.
Retail Shrink and Loss
• U.S. shrink as a percentage of sales was 1.52% in the 12
months to June 2007 (an increase of 2.0% or $786 million at
current prices compared with 2006) and cost a total of $39.854
billion. All shrink .gures are expressed against retail selling
prices.
• Shrink in Canada at 1.49% was slightly lower than the
U.S., but had increased by 4.2%. Canada’s total cost of shrink
was $3.63 billion.
• In North America, the highest shrink rates were found
in cosmetics/perfume/beauty supply/pharmacy (1.89%),
auto parts/hardware/building materials retail (1.83%) and
supermarkets/large grocery (1.63%). The lowest rates were
in liquor/wine/beer (0.61%), books/newspapers/stationery
(0.85%) and toys and games/hobbies and craft (0.92%).
The Causes of Shrink
• Disloyal employees were seen as the greatest source of
loss: 46.0% of losses in the U.S. and 43.5% in Canada. Next
were shoplifters, 32.3% in the U.S. and 35.2% in Canada,
administrative error, 16.3% in the U.S. and 16.6% in Canada
and vendor theft and fraud estimated to be 5.4% in the U.S.
and 4.7% in Canada.
• Employee theft cost U.S. retailers $18.3 billion and in
Canada $1.57 billion. Shoplifting crime was estimated to be
$12.87 billion in the U.S. and $1.28 billion in Canada.
• North American retailers apprehended 2.3 million store
thieves in the period 2006-2007, 0.664 million of these being
fraudulent employees, 28.6% of the total apprehended.
Loss Prevention Spending
• Loss prevention spending in North America was $12.77
billion, equivalent to 29.3% of total shrink. U.S. revenue
spending on loss prevention (LP) was $8.1 billion and capital
LP was $3.67 billion; in Canada the .gures were $0.7 billion
and $0.27 billion respectively. U.S. spending by retailers on
loss prevention represented 0.45% of retail sales and 0.40% in
Canada. Capital spending was 0.14% of sales in the U.S. and
0.11% in Canada. These .gures exceed LP spending in most
other countries. Payroll costs accounted for 55.4% of total LP
spending in North America.
The Costs of Retail Crime
• The 2007 costs of retail crime were estimated to be $45.16
billion for the U.S. and $4.0 billion for Canada, a total of
$49.16 billion. This is an annual charge that has ultimately to
be paid by retailers and honest customers, equivalent to a tax
of $394.04 for every American family and $322.69 for every
Canadian household. This .gures comprised total retail crime
plus loss prevention costs. In 2007, these were: shoplifting
$14.15 billion, employee theft $19.9 billion, vendor fraud
$2.3 billion and LP costs $12.77 billion.
Methods of Internal Theft
• U.S. retailers estimated that 24.6% of internal theft
occurred at the checkout, 32.2% in the stockroom/delivery
bay and 43.2% on the sales .oor. These .gures were reversed
in Canada, where 44.5% of internal theft was thought to occur
at the checkout, 31.8% in the stockroom/delivery bay and
only 23.7% on the sales .oor. The most signi.cant method of
internal theft in North America was thought to be merchandise
theft ($9.77 billion or 49.1% of the total), followed by cash
thefts (24.7% of the total) (including coupons and vouchers),
refund fraud/markdowns (13.1%), collusion (9.5%) and large
.nancial fraud (3.7%).
Methods of Protecting the Most-stolen
Merchandise
• Almost two-thirds (62.5%) of the 10 most vulnerable
lines were individually protected, which means that 37.5% of
the most-stolen items were not protected. The most heavilyprotected
items were DVDs (only 10.3% of which were
unprotected), razors and video games. The most signi.cant
security method used was electronic article surveillance
(EAS) protecting 38.0% of the most vulnerable lines (8.8%
of which was provided by tags applied at source), safers and
locked boxes (9.5%), empty carton and ticket systems (6.2%),
locked cabinets and shelves (5.4%) and chains, cables and
loop alarms (3.4%).
EAS Source Tagging and Open
Merchandising.
• North American retailers led the application of EAS source
tagging, which was used by 45.2% of retail corporations. The
percentage of non-users that expected to introduce ST in the
next two years was 23.5%. Among North American ST users,
21.3% of their sales came from ST items, compared to 15.9%
in Europe and 6.1% in Asia-Paci.c.
12
Europe
The European data is based on information from 489 European
retailers from 25 countries of West and Central Europe. They
operated 43 276 stores with a combined sales turnover of
€371 453 million ($505 billion). The €:US$ rate used was
€1=$1.3618. The Global Retail Theft Barometer replaces
what would have been the seventh European Retail Theft
Barometer.
Retail Shrinkage and Loss
• Europe’s shrinkage rose in 2007 to 1.26% of turnover
(measured against retail selling prices), an increase of 1.6%
(costing €454 million) over last year’s average rate of 1.24%.
This reverses the four-year trend of regular decreases.
Shrinkage cost European retailers and consumers a total of
€29 285 million.
• Countries with the lowest shrinkage rates were: Austria
(0.94%), Switzerland (0.96%) and Iceland (1.00%). The highest
shrinkage rates were the Baltic States (Latvia, Lithuania and
Estonia) (1.42%), the Czech Republic (1.41%), and Greece,
Slovakia and Hungary (all 1.36%).
The Causes of Shrinkage
• European retailers believed that their major source of theft
was customers (including organised retail gangs), who were
responsible for 48.5% of shrinkage (€14 188 million) and a
small number of disloyal employees that caused 28.6% of
shrinkage losses (€8 389 million). Other sources of loss were
suppliers (6.9% or €2 019 million) and pricing errors and
administrative failures (16.0% or €4 689 million).
Security Spending
• Spending on security and loss prevention in Europe
reduced slightly by 0.3% to a total of €7 821 million, but capital
spending on security equipment and technology increased to
32.6% of this total, emphasising how ‘smart’ loss prevention
is of growing importance. However, security spending as
percentage of retail sales was 23% lower in Europe than in
North America. Staf.ng costs accounted for 51.7% of security
spending.
The Costs of Retail Crime
• The costs of retail crime in Europe were estimated to be
€32 417 million in the 12 months to June 2007, an increase of
€417.5 million. This charge on retailers and honest customers
was equivalent to a tax of €168.51 upon every household in
Europe. Customer theft was €14 188 million, employee theft
€8 389 million, supplier fraud €2 019 million and security
costs €7 821 million.
Methods of Internal Theft
• In Europe, retailers estimated that 34.2% of internal
(employee) theft occurred at the checkout, 41.7% in the
stockroom/delivery bay, and 24.1% on the sales .oor. The
most important method of internal theft in Europe was thought
to be cash thefts (32.6% of the total) (including coupons and
vouchers), followed by merchandise (24.5%), refund fraud/
markdowns (18.3%), collusion (12.6%), and large .nancial
fraud (12.0%).
EAS Source Tagging and Open
Merchandising.
• EAS source tagging was used by 39.7% of large European
retailers. 29.6% of European non-users expected to introduce
ST in the next two years.
Asia-paci.c
Data was provided by 103 retailers from Australia, India, Japan,
Singapore, and Thailand with combined sales of US$65,418
million.
Retail Shrinkage and Loss
• Shrinkage in Australia, India, Japan, Singapore and
Thailand was an average of 1.24% of retail sales in the 12
months to June 2007 (a fall of 4.6%) and cost retailers a total
of $15,264 million. All shrinkage .gures are expressed against
retail selling prices.
• Shrinkage was highest in India (2.90%), followed by
Thailand (1.65%), Australia (1.39%), Singapore (1.25%), and
lowest in Japan (1.04%). Although Singapore and Australia’s
shrinkage increased by 5.0% and 2.2% respectively, signi.cant
reductions were seen in India (-9.4%), Thailand (-6.3%), and
Japan (-4.6%).
• In the .ve countries of Asia-Paci.c, the highest shrinkage
rates were found in vehicle parts/hardware/building materials
(1.80%), cosmetics/perfume/beauty supply/pharmacy (1.70%),
and apparel/clothing and fashion/accessories (1.69%). The
lowest rates were in footwear/shoes/sports & sporting goods
(0.68%), liquor, wine, beer (0.84%), and jewellery/watches
(0.88%).
The Causes of Shrinkage
• Customer theft was seen as the greatest source of loss
for the .ve Asia-Paci.c countries amounting to 52.6% of
shrinkage ($8,031 million). Next were employee thieves
(21.9% or $3,335 million), administrative error (18.1% or
13
$2,764 million), and supplier/vendor theft and fraud estimated
to be 7.4% ($1,134 million). Australian retailers estimated that
employee theft was their largest source of shrinkage (45.8%).
• The .ve countries surveyed apprehended 108,720
customer thieves and 10,929 employee thieves (employees
were 9.1% of the thieves apprehended). More than one-half of
the thieves apprehended were caught in India.
Loss Prevention Spending
• Loss prevention (LP) spending in Asia-Paci.c was $2,169
million, equivalent to 14.2% of total shrinkage. Revenue LP
spending was $1,292 million (0.11% of retail sales) and capital
$877 million (0.07% of sales). Apart from Australia (which
spent 0.35% of sales on LP), Asia-Paci.c expenditure on LP
as a percentage of retail sales was lower than the European
average (0.34%) and the North American average of 0.45% of
sales. Payroll costs accounted for 48.9% of total LP spending.
Methods of Internal Theft
• Asia-Paci.c retailers believed that 33.1% of internal theft
occurred at the checkout, 33.4% in the stockroom/delivery
bay, and 33.6% on the sales .oor. The most important method
of internal theft in Asia-Paci.c was thought to be merchandise
theft (50.0% of the total), followed by refund fraud/markdowns
(18.6%), cash thefts (16.5% of the total) (including coupons
and vouchers), collusion (6.7%), and large .nancial fraud
(8.3%).
EAS Source Tagging and Open
Merchandising.
• EAS source tagging was used by 27.4% of large retailers
in the Asia-Paci.c region (including 40% in Australia). The
percentage of non-using retailers in Asia-Paci.c who expect
to introduce ST in the next two years was 19.9%.

THE GLOBAL RETAIL THEFT BAROMETER
PART ONE: INTRODUCTION AND GLOBAL REPORT
Monitoring the Costs of Shrinkage
and Crime on the
Global Retail Industry
The First Worldwide Shrinkage Survey
16
The Global Retail Theft Barometer 2007
Introduction
The Global Retail Theft Barometer 2007 reports on losses
from crime and waste suffered by the retail businesses of 32
countries in North America, Europe and Asia-Paci.c, having
a total population of more than 2 billion people. Retailers in
the countries surveyed had combined sales of US$7,269,110
million ($7.3 trillion), making this the largest survey of retail
theft and crime ever undertaken.
There are some commentators who view retail crime as a
harmless or intriguing social phenomenon or simply as a ‘cost
of doing business’. This ignores the impact of criminal gangs,
international organized crime often linked to traf.cking, drugrelated
retail crime, fraud, extortion and growing levels of
violence against staff. It also ignores the cost of retail crime to
the general public, which in the 12 month period to June 2007
cost every household worldwide $283.61.
The data has been collected and processed by the Centre for
Retail Research in Nottingham, England, which has been
carrying out international research on retail crime for almost
20 years directed by Professor Joshua Bam.eld. Further
information about the samples and the methods used in the
survey can be found in the Appendix.
The Global Retail Theft Barometer is sponsored by Checkpoint
Systems, Inc. as a contribution to debate within the retail
industry. Checkpoint’s support in developing this research is
warmly appreciated and acknowledged.
Survey Information
The Barometer covers all retail sectors and vertical markets in
32 countries (see Table 1.1 for further detail) in order to capture
the scale of crime-related losses and shrinkage and to examine
trends in loss prevention policies adopted by retail corporations.
The Global Retail Theft Barometer is divided into four sections.
Part I provides global comparisons for all the 32 countries
surveyed, followed by regional surveys of North America (Part
II), Europe (Part III) and Asia-Paci.c (Part IV). Details of
survey methods and the number of retailers surveyed in every
country can be found in the Appendix. So that each regional
survey can be read independently without having to read the
whole Barometer, some information about the study’s methods
and .ndings is repeated.
The results from the Global Retail Theft Barometer are derived
17
from a con.dential structured survey of large retail companies
in all types of business in the 32 countries surveyed. The
data is based on a 24-question con.dential survey sent to the
Loss Prevention or Security Vice President or Chief Security
Of.cer of 3,600 large retail corporations: useable responses
were received from 820 businesses (a 22.8% response rate)
with combined sales of $947,766 million and a total of 138,603
retail outlets. This response rate was perfectly satisfactory for
a survey of this kind. The participating retailers represented
13% of North American retail sales, 16% of European and 5%
of Australian and Asian retailers. Further information about the
responses and the methods can be found in the Appendix.
De.nitions
All shrinkage .gures in this Report are based on average
selling (retail) prices. Average shrinkage rates within each
country are calculated as ‘weighted’ averages rather than
simple averages, with proportionally greater signi.cance being
given to larger companies and larger countries. This may mean
that comparisons with other crime surveys based on simple
arithmetic averages are dif.cult. The choice of countries to
participate in the survey was designed to provide an extensive
spread of experience.
The values in this Report are converted into U.S. dollars at the
rate of exchange applying on July 1, 2007. The European results
have been calculated in Euros (with conversions from other
currencies, where necessary, at the rate of exchange applying on
July 1, 2007).
References here to ‘North America’ refer exclusively to Canada
and the United States. The term ‘Europe’ is used in this Report
to include 25 countries of Western Europe and Central Europe
that are covered by this survey. It does not mean the European
Union (EU), although a majority of these countries are
members. ‘Asia-Paci.c’ in this survey refers to Australia, India,
Japan, Singapore and Thailand. The choice of countries to
participate in the survey was designed to provide an extensive
spread of experience. The inclusion or non-inclusion of any
country carries no implications of good or bad loss prevention
practice and no political implications are meant or implied.
We are grateful to all LP managers who have participated in this
Global Retail Theft Barometer.
18
Global Shrinkage Rates Are Increasing
Total retail shrinkage in the 32 countries covered by the Global
Retail Theft Barometer amounted to $98,630 million in the
period July 2006-June 2007 (Table 1.2).
‘Shrinkage’ (comprising inventory losses from crime and waste)
in 2007 cost retailers 1.36% of their annual sales turnover.
Regionally, the average shrinkage rate varied from 1.52% of
sales in North America to 1.24% in the Asia-Paci.c region.
While these shrinkage .gures – to an outsider – may seem
comparatively small, the overall cost of shrinkage has to be met
by consumers, stockholders and employees through a mixture
of higher prices, lower pro.ts and lower bonuses and wage
levels. This year, shrinkage has cost every single individual in
the countries surveyed (excluding India) an average of $98.14
per person.
Figure 1.1 shows the main contributors by country of the
$98,630 million global shrinkage total. The .ve largest national
‘contributors’ to global shrinkage were the U.S., Japan, the UK,
Germany and France.
There were great differences in the average rates of shrinkage
between countries, as shown by Figure 1.2 and Table 1.3. The
highest shrinkage rates were seen in India (2.90%), Thailand
(1.65%) and the United States (1.52%). The lowest rates of
shrinkage were found in Austria (0.94%), Switzerland (0.96%)
and Iceland (1.00%).
Global shrinkage in this period rose from 1.34% to 1.36% of
sales between 2006 and 2007, an increase of 1.5%.
Sixteen countries from the 32 (i.e. 50% of the countries
surveyed) showed an increase in their average shrinkage rates
compared to 2006 (see Table 1.3). Both in North America
and in Europe, shrinkage rates rose in 2007 (by +2.7% and
+1.6% respectively), although they fell by an average of -4.6%
in Asia-Paci.c. This came after a period when most experts
agree that shrinkage in Europe and the U.S. (although high)
had been declining. Now it is getting worse. The current retail
climate in most countries is unforgiving, with retailers of all
types facing signi.cant cost pressures, weak consumer demand
and an uncertain economic outlook. It is unfortunate, but it is
no surprise, that in these circumstances at least one-half of the
countries surveyed by the Global Retail Theft Barometer are
facing problems caused by increased shrinkage.
19
20
Shrinkage By Business Type
In order to analyse how shrinkage rates vary between
different kinds of business (or vertical markets), we classi.ed
retailers using 16 categories (derived from the Hoover’s, Inc.
categorization of the global retail marketplace). Care should be
taken, when making comparisons, as many businesses could
classify themselves in a number of ways.
The highest average rates of shrinkage (Figure 1.3) were
found in vehicle (auto) parts/hardware/building materials retail
(1.77%); cosmetics/perfume/beauty supply/pharmacy (1.70%);
and apparel/clothing and fashion/accessories (1.66%). The
lowest rates were in liquor, wine, beer/off-licence (0.73%);
footwear/shoes/sports goods and sporting goods (0.82%); and
electrical goods/computer centre/electronics store (0.89%).
Although specialist liquor/wine/beer outlets have the lowest
shrinkage rate, alcohol (mainly spirits) is the fourth most-stolen
product.
21
Sources Of Retail Shrinkage
There is considerable debate about the main causes or sources
of retail shrinkage, in particular whether employee theft is a
greater problem for retailers than customer theft or shoplifting.
Figure 1.4 shows that retailers reported that $41,504 million
was lost to customer thieves (42.0% of total shrinkage) and
$34,671 million to employee theft (35.2%). Internal error
(including pricing mistakes, accounting errors, and process
failures) cost retailers $16,248 million (16.5%) and crime
losses caused by suppliers or vendors (and supply-chain fraud)
amounted to $6,207 million (6.3%). Globally, therefore, losses
from customer theft were thought to be almost 20% higher than
losses from internal crime, including fraudulent employees
placed in retail organizations by organized crime. The main
methods used to commit internal fraud are discussed later in the
Report.
However, opinions or perceptions about what were thought to
be the causes of retail shrinkage varied considerably between
areas (Figure 1.5). North American retailers reported that
employee theft accounted for 45.8% of shrinkage compared to
32.5% of losses apparently caused by customer thieves. The
position in Europe and Asia-Paci.c (except for Australia) was
the opposite: customer theft was thought to comprise 48.5% of
European shrinkage and employee theft was 28.6%. In Asia-
Paci.c, the proportions were 52.6% (customer theft) and 21.9%
for employee theft.
Closer examination of the data by country shows there are not
two main views about the scale of employee crime, but three.
First, there are countries like the U.S. (where employee theft
is 46.0% of shrinkage), Canada (43.5%), Australia (40.2%)
and Iceland (39.0%) that see employee theft as the largest
cause of shrink or equal in size to shoplifting. Second, there
are countries, including Poland (35.1%), Hungary (35.0%) and
the United Kingdom (34.0%) where employee theft is seen
as a major problem, but not (yet) as large in total as customer
theft. Third, there are countries such as Greece (17.0%), Japan
(18.3%), India (19.3%) and Austria (22.4%), where retailers
report that employee theft is very small.
These estimates result from the perceptions of Loss Prevention
specialists, based on their current understanding of the major
problems they face. Most shrinkage is unseen at the time it
occurs, so the issues about its sources are not as unambiguous
as, for example, data about sales revenues and need to be treated
with a degree of caution.
22
Apprehended Customer Thieves And Dishonest
Employees
Table 1.4 shows that almost 6 million customer and employee
thieves were apprehended by retailers in 2006-2007. The great
majority of these (87.5%) were customer thieves: the number
apprehended was 5,225,857. The average amount stolen or
admitted per customer theft incident was $270.
Almost three-quarters of a million employee thieves were
apprehended (743,499), the average amount stolen or admitted
per incident being $1,967. Globally, therefore, the employee
fraudster stole on average more than seven times the value
stolen by the average shoplifter, explaining the increasing
importance that retailers in most countries place upon detecting
and apprehending theft by dishonest employees.
There are clear differences perceived between the main regions.
Employee thieves represented 28.6% of persons apprehended
by retailers in North America, 9.1% in Asia-Paci.c, and only
1.9% in Europe. North American retailers apprehended the
great majority of dishonest employees (663,555 persons), while
European retailers apprehended a total of only 69,015 employee
thieves. In contrast, European retailers apprehended almost
3.5 million customer thieves compared to the North American
total of more than 1.6 million. While there can be a number
of reasons for these differences, they may explain why North
American retailers report employee theft as being considerably
greater than customer theft.
23
The average amount detected or admitted per incident for
customer theft was $54 in Asia-Paci.c, $112 in Europe, and
as high as $622 in North America (in.uenced particularly by
organised retail theft). The average employee theft incident was
$5,145 in Europe, $1,666 in the U.S., and $206 in Asia-Paci.c.
European retailers believe they have a considerable problem
with large .nancial frauds, which may partly explain their high
average amount stolen. There may also be legal or cultural
differences, which affect the value of theft admitted. The types
of thieves apprehended will, of course, re.ect LP policy as well
as the number of offenders stealing from the business
The Location And Methods Used For Internal
Fraud
Theft and fraud by employees (or internal fraud) cost retailers in
the 32 countries $34,671 million. Where, and how, did this theft
occur?
Table 1.5 shows globally where retailers believed that their
main internal losses took place. The checkout or cash desk was
thought to be responsible for 30.9% of losses (costing $10,713
million), the back of.ce, stockroom, or delivery bay for 36.5%
($12,655 million) and 32.6% ($11,303 million) of losses were
thought to occur on the sales .oor itself. Again, these .gures are
perceptions. These .gures varied somewhat between different
regions with North American retailers relating 41.5% of their
internal losses to the sales .oor, while European retailers, on
average, thought that 41.7% of their internal losses occurred
in the back of.ce, stockroom, or delivery bay and Asia-Paci.c
reported that each location had an approximate equal share in
internal fraud.
What methods were used by dishonest employees to steal
merchandise, property or .nancial assets from retailers? Figure
1.6 shows that retailers reported that 41.1% of internal fraud (or
$14,239 million) was stolen directly as merchandise. More than
one-quarter (26.5%) was stolen as cash, coupons, vouchers or
gift cards ($9,181 million). Refund frauds and false markdowns
comprised 15.3% of internal fraud ($5,321 million) and
collusion was 10.2% or $3,551 million. Large .nancial frauds
accounted for 6.9% of internal fraud ($2,378 million).
Major differences between regions included large .nancial
frauds which European retailers thought constituted 12.0%
of internal fraud, collusion (which was considered to be only
6.7% in Asia-Paci.c, but 12.6% in Europe), and cash, coupons
and voucher fraud (considered to be 16.5% in Asia-paci.c
and 32.6% of internal fraud suffered in Europe). Note that
Figure 1.6 refers to key methods of internal theft. Cash will
also normally be the method used for large .nancial frauds and
refund frauds/false markdowns, whilst collusion is most likely
to involve the theft of goods.
24
Retail Loss Prevention And Security Spending
Historically the retail industry has always had to protect its
assets from crime and fraud, but changes in policing methods
have meant that stores increasingly have to police themselves.
Spending by retail businesses on loss prevention and security
was $25,590 million in the 12 months ending in June 2007,
equivalent to an average of 0.35% of retail sales (Table 1.6).
Asia-Paci.c retailers spent a smaller proportion of their sales
on loss prevention - $2,169 million or 0.18% of sales. The
European .gure of $10,648 million was near to the 32-country
average of 0.34% of sales turnover.
Global revenue spending of $17,303 million was 67.6% of
total loss prevention spending, with capital spending (including
depreciation) of $8,287 million.
The breakdown of retail global loss prevention and security
spending can be seen in Figure 1.7.
Security employees accounted for more than one-half of loss
prevention spending ($13,976 million or 54.6% of spending),
with contract (third-party) employees costing $8,159 million
and direct employees $5,817 million.
Security equipment including electronic surveillance, software
and hardware was $8,290 million (32.4% of total security
spending). Retailers also spent $1,885 million on armoured car
cash collection (7.4%) and ‘other’ spending of $1,438 million
was equivalent to 5.6% of the loss prevention budget.
25
The Costs Of Retail Crime
Shrinkage is not a complete measure of retail crime, because it
includes an allowance for administrative error (such as pricing
mistakes, accounting errors, and process failures). The Costs of
Retail Crime (Table 1.7) exclude administrative error and focus
on crime-based losses. To capture all the costs of crime, the
totals of loss prevention spending by retailers are included in
crime costs
The total global costs of crime for the 32 countries were
$108,093 million, comprising the costs of customer
theft+employee theft+supplier/vendor theft+the costs of loss
prevention.
This represented a tax imposed on honest people by retail
criminals of $283.61 for every single household in the 32
countries. The highest cost of crime was found in North
America (an average of $394.04 per household), $322.69 per
household in Europe, and in Asia-Paci.c it was equivalent to
$195.05 per household.
26
THE MOST STOLEN ITEMS
Globally, the .ve most-stolen items of retail merchandise
amongst the 32 countries were: cosmetics and skincare, alcohol,
womenswear/ladies’ apparel, perfume and .ne fragrances, and
designerwear (Table 1.8). Other highly stolen lines included
razor blades, DVDs/CDs, video games and video consoles,
small electric items, and fashion accessories.
What products stocked by retailers are most vulnerable to theft?
Research into this question shows that (with some exceptions)
the most stolen items tend to be expensive designer or heavilybranded
products mainly used for entertainment/ leisure,
personal care or clothing, as well as alcohol and electronics.
Particularly where organized retail crime is involved, the
products stolen are those that can readily be sold to others.
Many items are comparatively small such as razor blades,
memory cards or cosmetics, and can be hidden relatively easily
by the thief. As a result, the same basic range of merchandise
items appears in the most-stolen list of the great majority of
countries.
27
Store Audit Programs And Lp Compliance
To ensure that agreed corporate policy for loss prevention and
security is carried out in practice, globally 70.1% of retailers
had a store audit programme in place. This programme usually
involved an audit of store policy and procedures one or more
times every year. The results were .nely balanced, with 35.1%
of retailers conducting store audits three or more times per year
and 35.0% carrying audits out once or twice every year.
The highest proportion of retail businesses using audits was
found in North America (81.2%), where 59.0% of retail
corporations carried out store audits three or more times per
year.
Protecting The Most-stolen Merchandise
For ten of the most vulnerable product groups, retailers
were asked to state what proportion of lines were specially
safeguarded or protected and to indicate what percentage of
each group were protected in speci.c ways. The product groups
included the most vulnerable items such as DVDs, video games,
spirits, perfume, clothing and small electronic goods. The
results are shown in Table 1.9.
The retailers of all 32 countries protected 61% of their ten
highly vulnerable product lines and 39% of products went
unprotected. In Table 1.9, the products are arranged in
descending order of the extent to which they were protected.
Video games were the most protected product: the ‘% of
product not protected’ shows that only 10.8% were unprotected
– or 89.2% were protected. In contrast, 71.4% of shoes were not
protected, according to the data provided by retailers.
The main methods used were electronic article surveillance
(used for 35.4% of these products, of which source tagging was
8.3%), safers and locked boxes (11.3%), empty cartons and
ticket systems (6.2%), locked cabinets and shelves (5.0%) and
chains, cables and security loops (3.2%).
Note that these .gures relate to the speci.c methods used to
combat theft for these ten products, which are among the most
frequently-stolen articles, rather than about the general use of
these anti-theft systems in retail.
EAS was most likely to be used on trousers (50.4%), spirits
(46.1%), video games (40.7%), and DVDs (38.4%). Safers/
locked boxes on video games (30.4%), DVDs (29.6%), and
razors (21.7%); chains, cables and loop alarms on smaller
electronic goods (15.9%); empty cartons and ticket systems for
razors (15.5%), DVDs (10.6%) and video games (8.7%); and
locked cabinets and shelves for razors (10.3%), video games
(9.4%), and DVDs (8.2%).
28
Electronic Source Tagging Of Merchandise
Electronic tagging of merchandise, generally known as EAS
(electronic article surveillance), uses small devices that alarm if
the tagged merchandise is removed from the store without being
deactivated. Retailers were asked about their progress with
source tagging, which involves including these devices in or on
the item or its packaging at source before the goods arrive in the
shops (Table 1.10).
The percentage of retailers in the survey claiming to use source
tagging was 39.8%, including 45.2% in North America, 39.7%
in Europe and 27.4% in Asia-Paci.c. A further 25.5% expected
to use source tagging within the next two years. Thus by the end
of the decade, 65.3% of major retailers would be using source
tagging including. In Europe and North America, less than
one-third of retailers had no current plans for source tagging,
including those for whom it was a longer-term prospect and
those who made no use of EAS.
The average number of product lines that were source tagged
was 268 (16.4% of retail sales). In North America, source
tagging had much greater levels of penetration, responsible for
21.3% of sales, while currently in Asia-Paci.c only 6.1% of
products were source tagged.


THE GLOBAL RETAIL THEFT BAROMETER
PART TWO: NORTH AMERICA
Monitoring the Costs of Shrinkage
and Crime on the
Global Retail Industry
The First Worldwide Shrinkage Survey
32
The Global Retail Theft Barometer
Survey Information
One hundred and ninety-six large U.S. retailers took part in the
survey and they operated 69,639 retail stores with combined
sales of U.S. $341.457 billion. In Canada, 32 retail corporations
with total sales of Can$37.3 billion (U.S.$35 billion) participated
in the study. The retail businesses taking part accounted for 13%
of North American retail sales.
The Global Retail Theft Barometer is based on a 24-question
con.dential survey sent to the Loss Prevention Vice President or
Chief Security Of.cer of 3,600 large retail corporations drawn
from different kinds of business worldwide. It covers all retail
sectors and vertical markets in the United States and Canada and
uses the same methods to examine retail shrink and crime in 30
other countries. The shrink .gures used here are based on retail
selling prices and data from retailers that use cost prices or a
combination of cost and retail selling prices have been converted
to retail selling prices. The calculations of average shrink rates
within each country and for each geographical area use ‘weighted’
averages rather than simple averages, with proportionally
greater signi.cance being given to larger companies and larger
countries.
For convenience, all values in this part of the Report are
converted into U.S. dollars at the rate of exchange applying on
July 1, 2007.
SHRINK RATES IN NORTH AMERICA
Based on the sample of 228 North American retail corporations
with combined retail sales of $376 billion, average shrink
(stockloss from crime or waste expressed as a percentage of retail
sales) in the 12 months to June 2007 was 1.52% of U.S. retail
sales and 1.49% of Canadian retail sales. The overall cost of
retail shrink in 2007 for U.S. retailers was almost $40 billion and
in Canada $3.6 billion, a combined total of $43.5 billion (Table
2.1).
To an outsider, these shrink .gures may seem comparatively
small, but the shrink .gure of $43.5 billion has to be met
ultimately by consumers, stockholders and employees through
a mixture of higher prices, lower pro.ts and lower bonuses and
wage levels. This year, shrink has cost each man, woman and
child in the U.S. $139.06 and U.S. $112.59 in Canada.
Table 2.1 shows that average shrink rates were increasing in
both countries in common with one-half of other countries
33
surveyed (globally, shrink rose by 1.5% to 1.36%). U.S. shrink
rose by 2.0% (from 1.49% to 1.52%) and in Canada the average
shrink rate rose 4.2% (from 1.43% to 1.49%). The current retail
climate in most countries is unforgiving, with retailers of all
types facing signi.cant cost pressures, weak consumer demand
and an uncertain economic outlook. It is unfortunate, but it is
no surprise, that in these circumstances at least one-half of the
countries surveyed by the Global Retail Theft Barometer are
facing similar problems of increased shrink that are seen in the
U.S. and Canada.
The U.S. and Canada have relatively high rates of shrink compared
with most of the countries surveyed. They are positioned third
and fourth with the highest shrink rates after India (2.90%) and
Thailand (1.65%). A full list can be found in Part I.
These .gures and all shrink data in this Report are calculated
as a proportion of retail selling prices with the shrink rates of
those retailers using cost prices or a combination recalculated to
retail selling prices. ‘Shrink’ is an accountancy term, re.ecting
the difference between the .nancial revenue the business should
have received (based upon inventory and purchases) and the
amount actually received. Shrink losses are caused mainly by
people stealing goods or money from the company and also
by a range of small or large process errors, accounting lapses
and pricing mistakes that produce apparent inventory losses. In
addition to the actual loss of inventory, declared ‘shrink’ rates
will also be affected by company policy, accounting rules and
tax regulations that will in.uence practice and account for some
differences in results.
34
SHRINK BY BUSINESS TYPE
Different kinds of businesses normally have different shrink
problems and may even account for shrink differently. We
classi.ed retailers using 16 categories (derived from the Hoover’s,
Inc. categorization of the global retail marketplace). Care should
be taken, when making comparisons, as many businesses could
classify themselves in more than one way. Figure 2.2 shows how
the average shrink rate varied between different kinds of retail
business in North America.
The highest average rates of shrink (Figure 2.2 and Table 2.2)
were seen in cosmetics/ perfume/beauty supply/pharmacy
(1.89%), auto parts/hardware/building materials retail (1.83%)
and supermarkets/large grocery (1.63%). The lowest rates were
liquor/wine/beer (0.61%), books/newspapers/stationery (0.85%)
and toys and games/hobby and craft (0.92%). Although specialist
liquor/wine/beer outlets have the lowest shrink rate, alcohol
(mainly spirits) is the fourth most-stolen product.
Signi.cant increases in average shrink (Table 2.2) were seen in
electrical goods/computer center/electronics (+4.5%), cosmetics/
perfume/beauty supply/pharmacy (+4.4%) and supermarkets/
large grocery (+3.8%). Reductions in shrink were fewer but
included books/newspapers/stationery (-5.6%), footwear/ shoes/
sports and sporting goods (-4.5%) and liquor/wine/beer (-3.2%).
The ranking from high shrink to low shrink types of retail business
is, with some exceptions, similar in North America to other parts
of the world. However, supermarkets/large grocery tend to have
a lower shrink elsewhere while convenience stores and books/
newspapers/stationery in other parts of the world suffer much
higher rates of shrink than in North America.
35
Sources Of Retail Shrink In North America
What were the main sources of retail losses according to the
retailers who took part in the survey? Retailers found the
largest source of loss was attributed to a number of dishonest
employees, responsible for 45.8% of retail shrink (Figure 2.3).
This proportion also includes fraudulent employees placed in
retail organizations by organized crime. The total costs of crime
by dishonest employees were $19.912 billion, consisting of
$18.333 billion suffered by U.S. retailers and $1.579 billion in
Canada (Table 2.3). The main methods used to commit internal
fraud are considered in a later section.
The second most signi.cant source of retail shrink loss in North
America was reported to be shoplifters, responsible for 32.5%
of shrink ($14,151 million). Retailers are focusing vigorously
on the issues caused by organized retail crime (ORC), which
is a major contributing factor to shoplifting. U.S. losses from
shoplifting were $12.873 billion and Canada’s losses were
$1.278 billion, a combined total of $14.151 billion.
Vendor crime (including losses in the distribution chain and
theft by delivery employees) was responsible for 5.4% of
shrink, $2.152 billion in the U.S. and $0.171 billion in Canada.
Lastly, administrative error, which includes accounting
mistakes, pricing errors and process failures, cost retailers
$7.099 billion (16% of shrink losses). This was made up of
$6.497 billion in the U.S. and $0.602 billion in Canada.
36
In a majority of other countries, however, most retailers
reported that shoplifters represented a larger proportion of their
losses than employees (Table 2.4).
These estimates of the contribution to shrink loss made by
employees, shoplifters, vendors and administrative error are of
course based on the perceptions of Loss Prevention specialists,
based on their current understanding of the major problems they
face.
37
Apprehended Shoplifters And Dishonest
Employees
Table 2.5 shows the numbers of shoplifters and employee
thieves apprehended in 2006-2007 and the average amount
stolen per incident or admitted.
U.S. retailers apprehended 2,270,176 thieves and Canadian
retail corporations apprehended 29,066 persons, a combined
total of 2.299 million. These were made up of 663,555
employee thieves (28.9% of the total) and 1,635,687 shoplifters
(71.4% of total apprehensions). Slightly more than one-third of
thieves (33.8% or 9,826 persons) apprehended in Canada were
dishonest employees and U.S. retailers apprehended 653,729
employee thieves (28.8% of total thieves apprehended). The
number of employee thieves was 663,555, or 28.6% of the total.
The high proportion of employee thieves apprehended justi.es
retailers’ perceptions that dishonest employees in North
America are likely to be responsible for a larger proportion of
their losses than shoplifters.
Shoplifters stole or admitted to stealing an average of $622
per incident, and employee thieves to $1,666 per incident.
Average values were lower in Canada (an average of $241 per
shoplifting incident and $693 per employee theft case) than in
the U.S. (an average of $658 per shoplifting incident and $1,755
per employee theft incident). There may be legal or cultural
differences, which affect the values of theft admitted. The types
of thieves apprehended will, of course, re.ect LP policy as well
as the number of offenders stealing from the business.
38
As Figure 2.4 shows, North American retailers apprehended a
larger total and proportion of employee thieves than retailers
elsewhere. Asia-Paci.c retailers apprehended 110,000 thieves
(9.1% of which were dishonest employees) and European
retailers 3.55 million thieves (only 1.9% of which were
dishonest employees.
The average amount admitted or proven for shoplifters in
Europe and Asia-Paci.c was much smaller than in North
America, $112 and $54 respectively. However the average
employee theft incident in Europe was $5,145 (re.ecting large
.nancial frauds) compared with $206 for employee thieves
apprehended by Asia-Paci.c retailers
The Location And Methods Used For Internal
Fraud
In the period of this survey, theft and fraud by employees
(internal fraud) cost U.S. retailers $18.33 billion and Canadian
retailers $1.6 billion (a total of $19.9 billion). This section looks
at where and how employee theft occurs.
In Table 2.6, responses from U.S. retail corporations indicated
that 24.6% of internal theft was believed to take place at the
checkout or cash desk, 43.2% on the sales .oor and 32.2% in
the back of.ce, delivery bay or stockroom.
In Canada the checkout was estimated to account for 44.5% of
internal losses, 23.7% of losses occurred on the sales .oor and
31.8% in the back of.ce, stockroom or delivery bay.
The location of losses is very important because it will
determine what means are used to prevent or detect internal
fraud. European retailers reported that losses from the
stockroom or delivery bay were 41.7%.
What methods were used by dishonest employees to steal
merchandise, property or .nancial assets from retailers in
North America? Figure 2.5 shows that retailers estimated that
almost one-half, 49.1% or $9.772 billion, was stolen directly
as merchandise. Almost one-quarter (24.6%) was stolen as
cash, coupons, vouchers or gift cards ($4.908 billion). Refund
frauds and false markdowns comprised 13.1% of internal fraud
($2.611 billion) and collusion cost 9.5% or $1.889 billion.
Large .nancial frauds accounted for 3.7% of internal fraud
($0.731 billion).
39
The proportions for Canada and the U.S. are given in Table
2.7. For the U.S., the .gures indicate that merchandise theft
was $9.2 billion, cash theft $4.4 billion, refund fraud and
markdowns $2.3 billion, collusion $1.7 billion and large
.nancial frauds $0.623 billion. In Canada, merchandise theft
was $584 million, cash theft $466 million, refund fraud and
markdowns $260 million, collusion $164 million and large
.nancial frauds $104 million.
In Europe, theft of cash, vouchers, coupons and gift cards was,
at 32.6%, estimated to be the largest method of internal fraud,
and theft of merchandise was 24.5%. Retailers in Europe and
Asia-Paci.c considered that they suffered high losses as a result
of refund fraud and bogus price markdowns, which were 18.3%
in Europe and 18.6% in Asia-Paci.c, compared with 13.1% in
North America.
40
Retail Loss Prevention And Security Spending
Spending by retail corporations in North America on loss
prevention and security was $12.773 billion in the 12 months
ending in June 2007, equivalent to an average of 0.45% of retail
sales (Table 2.8).
Loss prevention spending in the U.S. was $11.799 billion
(0.45% of retail sales), made up of revenue spending of $8.128
billion and capital spending on security equipment, IT and other
long-term assets of $3.671 billion. As a percentage of sales,
revenue spending was 0.31% of sales and capital 0.14%.
Loss prevention spending in Canada was $974 million (0.40%
of retail sales), made up of revenue spending of $706 million
and capital spending of $268 million. This was equivalent to
0.29% of sales for revenue spending and capital spending was
0.11% of sales.
Table 2.8 shows that combined U.S. and Canadian spending on
loss prevention of 0.45% of retail sales was higher than other
countries. For all 32 countries, the average spending on loss
prevention was 0.35% of retail sales.
The North American loss prevention spending of 0.45% of sales
is a very robust response to the issues of crime and fraud that
face retailers. It is equivalent to 29.3% of their shrink losses,
clear evidence of a strong commitment to preventing and
deterring crime.
41
The main focus areas for retail loss prevention spending in
North America are shown in Figure 2.6. The most signi.cant
LP budget heading was LP employees, which, at $7.084 billion,
represented 55.4% of total LP spending. Direct employees cost
$3.114 billion (24.4% of LP spending) and spending on contract
employees was $3.97 billion (31.0% of LP spending). Retailers
allocated $3.9 billion (30.8%) to security equipment including
electronic surveillance, CCTV, IT and depreciation. The
remaining budget heads were armored vehicle cash collection
($0.88 billion or 6.9% of LP spending) and ‘Other’ spending of
$0.88 billion (6.9% of the loss prevention budget).
As Table 2.8 shows, other regions spent less on loss prevention
and proportionately less on the capital budget. Generally
however the percentage allocation of loss prevention budgets in
other countries was not radically different from North America.
This is not surprising: the tasks faced by loss prevention
departments are similar across the world.
THE COSTS OF RETAIL CRIME
‘Shrink’ is not a complete measure of retail crime because
shrink includes an allowance for administrative error. The Costs
of Retail Crime provided in Table 2.9 exclude administrative
error and focus on crime-based losses. Because loss prevention
spending by retailers is obviously crime related, the costs of loss
prevention are included here in the costs of crime.
Table 2.9 shows that the total cost of crime in the U.S. was
$45.157 billion, which represented a tax imposed on honest
people by criminals of $394.04 for every single household in
the U.S. This was made up of $12.87 billion in shoplifting,
$18.33 billion in employee theft, $2.15 billion in vendor fraud
and $11.80 billion for loss prevention costs.
The Canadian .gures indicate that the total cost of crime in
Canada was slightly more than $4 billion and in 2007 this cost
every Canadian household $322.69. It comprised $1,278 million
for shoplifting, $1,579 million for employee theft, $171 million
in vendor fraud and $974 million for loss prevention costs
(Table 2.9).
For North America as a whole, the cost per household of retail
crime was $387.08 for a combined North American retail crime
.gure of $49,158 million. The cost per household was $394.04
in the U.S. and $322.69 in Canada.
42
Table 2.10 gives a global comparison of the costs of retail
crime (crime-related shrink plus security costs). The global
costs of crime were $108,093 million ($283.61 per household).
Costs per household were lower in other countries than North
America, although countries like the U.K., Ireland and Denmark
have costs per household that are almost as high as North
America. On average in Europe, costs per household were
$229.48 and in Asia-Paci.c $195.05.
43
The Most Stolen Items
What products stocked by retailers are most vulnerable to theft?
Research into this question shows that (with some exceptions)
the most stolen items tend to be expensive designer or heavilybranded
products mainly used for entertainment/leisure,
personal care or clothing, as well as alcohol and electronics.
Particularly where organized retail crime is involved, the
products stolen are those that can readily be sold to others.
Many items are comparatively small such as razor blades,
memory cards or cosmetics, and can be hidden relatively easily
by the thief.
Table 2.11 shows the merchandise items that North American
retailers reported as being most-frequently stolen. They are
listed in rank order, based on data provided by the retail
corporations that responded to the survey.
In 2007, the most heavily stolen products from retail stores in
North America were cosmetics and skin care.
The second most stolen was ladies’ apparel, followed by
perfume and fragrances, alcohol (particularly spirits such
as whiskey and vodka) and designer apparel. Razor blades
were the sixth most likely to be stolen, followed by video
games and consoles, small electronic items (including the
ubiquitous memory stick), DVDs/CDs and batteries.
Other items of note include infant formula, medicines,
vitamin tablets, watches, instant coffee, and hand tools.
Home security products, such as door and window locks
and CCTVs are also stolen.
How does the North American ‘most-stolen’ list compare
to those of other countries? There are many regional
differences, but similar types of items are stolen all over
the world. It’s a global marketplace for crime as well as
for honest consumers. The order of every product on the
list is slightly different in other countries, but lists from
Europe and Asia-Paci.c, similar to North America, are also
dominated by alcohol, cosmetics, perfumes, ladies’ apparel,
accessories and designer apparel, razor blades and high-cost
and specialty foods such as fresh meat, ham, seafood and
cheese.
44
Store Audit Programs And Lp Compliance
To ensure that agreed corporate policy for loss prevention and
security is carried out in practice, 81.4% of U.S. retailers had a
store audit program in place, as did 78.5% of Canadian retailers
(Table 2.12). This usually involved an audit of store policy and
procedures three or more times every year. Almost three-.fths
(59.4%) of U.S. retailers conducted store audits three or more
times every year and 54.2% of Canadian retailers. A little more
than one-.fth (22.0%) of U.S. retailers and 24.3% of Canadian
retailers carried out store LP audits one or two times per year.
The pattern elsewhere was that less than two-thirds of retailers
normally had a store LP audit program – 63.8% in Europe and
an average of 60.3% in Asia-Paci.c overall. As well as being
less likely to have an audit program, the frequency of audit was
also lower. In Europe 52.3% of retailers carried out audits only
once or twice a year, although the average was higher in Asia-
Paci.c with 39.9% of retailers conducting store LP audits three
or more times every year.
Protecting The Most-stolen Merchandise
For ten of the most vulnerable product groups, retailers
were asked to state what proportion of lines were specially
safeguarded or protected and how this was done. The results are
shown in Table 2.13.
The product groups chosen included the most vulnerable items
such as DVDs, video games, spirits, perfume, clothing and
small electronic goods. What means are used by the major
retailers to protect their most vulnerable merchandise from
theft?
The products are arranged in descending order of the extent
to which they were protected. DVDs were the most protected
product: the second column (‘% of product not protected’)
shows that only 10.3% are unprotected – or 89.7% are
protected. In contrast, 60.3% of shirts are not protected,
according to the data provided by retailers.
Table 2.13 shows that almost two-thirds of merchandise items
are protected – 62.5% of the ten most vulnerable lines are
protected. However, this means that 37.5% of vulnerable items
are not protected.
45
The main methods used are electronic article surveillance (used
for 38.0% of these products, of which source tagging was
13.0%), safers and locked boxes (9.5%), empty cartons and
ticket systems (6.2%), locked cabinets and shelves (5.4%) and
chains, cables and security loops (3.4%).
Note that these .gures relate to the speci.c methods used to
combat theft for these 10 products, which are among the most
frequently-stolen articles, rather than the general use of these
anti-theft systems in the entire retail industry.
For DVDs, the most-protected item, electronic article
surveillance (EAS) provided 40.7% (of which source tagging
was 14.4%), safers and locked boxes protected 26.9% of items,
empty cartons and ticket systems were used for 12.5% and
locked cabinets and shelves 9.6%.
EAS was most likely to be used on trousers (50.3%), spirits
(50.2%), perfumes (46.4%) and DVDs (40.7%); safers/locked
boxes on DVDs (26.9%), video games (22.4%) and razors
(17.5%); chains, cables and loop alarms on smaller electronic
goods (18.9%); empty cartons and ticket systems for razors
(17.2%), DVDs (12.5%) and video games (12.3%); and locked
cabinets and shelves for perfumes (10.9%), razors (10.2%) and
DVDs (9.6%).
46
Electronic Source Tagging Of Merchandise
Electronic tagging of merchandise, or EAS, uses small devices
that alarm if the tagged merchandise is removed from the store
without being deactivated. Retailers were asked about their use
of source tagging, which involves including these devices in or
on the item or its packaging at source before the goods arrive
in the shops. Source tagging has been discussed by the industry
for a number of years and the technology has been developed to
meet most eventualities. The responses are shown in Table 2.14.
North American retailers led in the use of source tagging with
45.2% currently using source tagging and a further 23.5%
expected to introduce it in the next two years. By the end of the
decade, therefore, 68.7% of large retailers in North America
expect to be using source tagging of merchandise.
North American retailers that already used source tagging
were receiving an average of 396 product lines into their stores
already EAS tagged at source. This was almost double the
average number in use in Europe (219). The percentage of sales
from product lines that were source-tagged when being placed
in the store was 21.3% in North America.
The proportion of European retailers using source tagging
was 39.7% and in Asia-Paci.c it was 27.4%. The percentage
of retailers expecting to introduce the use of source tagging
over the next two years was 29.6% in Europe and 19.9% in
Asia-Paci.c, implying that 69.3% of large European retailers
would soon be using source tagging and 47.3% of Asian-
Paci.c retailers. An average of 219 product lines amongst large
European retailers was source tagged (15.9% of sales) and 97
in Asia-Paci.c (accounting for 6.1% of sales, although the
proportion in Australia was 19.3%). Considerable developments
in the use of source tagging are expected in North America and
the rest of the world.


THE GLOBAL RETAIL THEFT BAROMETER
PART THREE: EUROPE
Monitoring the Costs of Shrinkage
and Crime on the
Global Retail Industry
The First Worldwide Shrinkage Survey
50
The Global Retail Theft Barometer
Survey Information
Since 2001, European retailers have been sharing information
about the impact of retail crime through the European Retail
Theft Barometer. This research has grown in importance, as
shown by the increase every year in the number of retailers
who take part in the study. By 2006 the European Retail Theft
Barometer covered 25 countries in Western and Central Europe.
Using the same methodology, as the Global Retail Theft
Barometer it now includes Australia, Canada, India, Japan,
Singapore, Thailand, Canada and the United States.
The number of European retailers that took part in this year’s
study was 489. These companies had a combined turnover
of €371 billion and 42,071 stores. They represented 16% of
European retail turnover and the sample response rate was
22.8%.
Based on the period of twelve months to June 2007, the Global
Retail Theft Barometer covers trends in security spending,
the extent of theft by customers and by employees, current
information on what products are most stolen, estimates of the
means of internal theft and fraud, and how retailers protected
their most vulnerable merchandise. All shrinkage .gures used
here are based on retail selling prices. Data from retailers that
use cost prices or a combination of cost and retail selling prices
have been converted to retail selling prices. For convenience, all
values in Part Three of the Report were converted into euros (€)
at the rate of exchange applying on July 1, 2007 and the US$:€
rate used was $1:€0.734305.
The term ‘Europe’ is used in this Report to include 25 countries
of Western Europe and Central Europe that are covered by this
survey. It does not mean the European Union (EU), although a
majority of these countries are members. The results of certain
countries have been combined in order to ensure con.dentiality.
INCREASING CRIME AND SHRINKAGE RATES
This year, as predicted in the last Report, shrinkage (stock loss
from crime or wastage expressed as a percentage of retail sales
turnover) has started to rise. For Europe the average shrinkage
rate was 1.26% compared to the previous year’s rate of 1.24%
(an increase of 1.6%). Shrinkage cost European retailers a total
of €29 285 million. The increase in shrinkage cost €454 million
more than last year.
For consumers, the shrinkage rate represented a cost equivalent
to €61.95 per head.
Western Europe is the only area for which we have a series of
data since 2000. In 2007, the average shrinkage rate in Western
Europe was 1.25%, a rise of 1.6% above last year’s 1.23% (see
Figure 3.1). In Western Europe shrinkage had fallen continually
since 2002, until 2007, when this four-year trend was reversed.
Although the increase from 1.23% to 1.25% was comparatively
small it came after four years of shrinkage and crime reductions.
The current retail climate is unforgiving, with retailers of all
types facing signi.cant cost pressures, weak consumer demand,
and an uncertain economic outlook. It will be a matter of great
concern if increasing shrinkage exacerbates those cost pressures
further.
Shrinkage information for every European country can be seen
in Table 3.1. The lowest shrinkage rates occurred in Austria
(0.94%), Switzerland (0.96%) and Iceland (1.00%). The highest
identi.ed shrinkage rates were found in the Baltic States
(1.42%), the Czech Republic (1.41%), and Greece, Slovakia
and Hungary (all 1.36%). The reduction in variance around the
average shrinkage rate seen in previous years has continued.
The variance in shrinkage rates has fallen since 2002 as retailers
increasingly use common anti-theft approaches throughout
Europe and this has tended to iron out some of the substantial
differences in average shrinkage rates.
Shrinkage rates in Central Europe rose rapidly after 2004,
although this seems to have changed in 2007 with shrinkage
reductions in Slovakia, Hungary and the Czech Republic.
However a small rise in Polish shrinkage and a signi.cant
increase in shrinkage of the Baltic States counterbalanced this,
recording a small 1.0% rise in central European shrinkage from
1.35% to the new .gure of 1.36%.
Eleven European countries saw reductions in their average rate
of shrinkage, thirteen saw increases, and there was no change
in one country (Sweden). Signi.cant reductions in average
shrinkage rates were seen in Iceland (-5.7%), Denmark (-3.2%),
and Slovakia (-2.9%). In contrast, there were increases in
average shrinkage rates in the Baltic States of Latvia, Lithuania,
and Estonia (+7.6%), Ireland (+6.4%), and Switzerland (4.3%).
However in a number of these countries the increases come
after several years of shrinkage reductions and too much
signi.cance should not be given to moderate .uctuations
around an average.
51
In every European country there are retailers that have reduced
shrinkage as well as those where shrinkage rates have increased,
suggesting that shrinkage levels can be the result of policy and
strategy as well as the national environment. Countries that
have successfully reduced shrinkage tend to be those with more
of the .rst type than the second. Therefore adopting proven
loss-reduction strategies including those discussed in this
Report may help the retailer to reduce shrinkage or to prevent
it rising and hence improve the proportion of successful lowshrinkage
retailers in every country.
The 2007 increase in average retail shrinkage was predictable
from last year’s data (which showed increasing shrinkage in
many countries). The major question is whether the modest
rise in shrinkage seen this year will be followed in future years
by signi.cant increases in shrinkage or whether the downward
trend seen in 2002-6 will be resumed.
52
53
Shrinkage By Kinds Of Business
Different kinds of business often have different shrinkage
problems and may even account for shrinkage differently.
In Table 3.2 we show how the average shrinkage rate varies
between different kinds of retail business. Retailers classi.ed
themselves into one of 16 categories or vertical markets, which
provided a much fuller analysis than was used before. Care
should be taken, when making comparisons, as many businesses
could classify themselves in more than one way.
The lowest average rates of shrinkage in Europe were found
in discount stores/variety chains (0.76%), electrical goods/
computer centres/electronic stores (0.82%), and furniture/
textiles/carpets and curtains (0.83%). The highest average rates
were found in vehicle parts/DIY/hardware/building materials
(1.71%), books/ newsagents/stationery (1.69%), and cosmetics/
perfume/health and beauty/ pharmacy (1.53%).
There were considerable variations within and as well as
between each category. Individual retailers may have shrinkage
rates, which are signi.cantly higher or lower than the industry
average as shown in Table 3.2.
SOURCES OF RETAIL SHRINKAGE
Previous editions of the European Retail Theft Barometer
have shown that European retailers perceived customer
thieves and organised gangs to be the largest single cause of
retail shrinkage. The current Report replicates this .nding,
with customer thieves thought to be responsible for 48.5% of
shrinkage losses (see Figure 3.2). The next most important was
dishonest employees, estimated to cause 28.6% of retail losses.
The great majority of staff were honest, but employee theft
results from a very small number of disloyal staff including
fraudulent employees placed there by organised crime. Supplier
fraud and delivery theft were estimated to contribute 6.9%
to losses. Lastly, administrative mistakes, pricing errors and
process failures were believed to cause 16.0% of shrinkage
losses.
Customer theft was responsible for €14 188 million (Table
3.3), employees €8 389 million, suppliers €2 019 million, and
administrative error €4 689 million. Compared to the previous
Report, retailers believed that administrative error and supplier
fraud probably played a slightly greater part in shrinkage, with
error up from 14.3% to 16.0% and supplier fraud from 6.0% to
6.9%.
54
The percentages of the sources or causes of shrinkage are
perceptions or estimates made by retail security managers based
on their current understanding of the major problems they face.
But most shrinkage is unseen at the time it occurs and it may
be months before it is discovered, by which time it may be
too late to know the cause. Care should be taken, therefore, in
considering these estimates.
How do the sources of retail shrinkage differ between European
countries? Table 3.4 shows the perceived sources of shrinkage
by country. All European countries believed that their losses
from customer theft were greater than from employees.
Countries where retailers believed that customer theft was the
greatest proportion included Greece (58.0%), Austria (57.2%),
and Germany (55.9%). The lowest customer–theft percentages
were seen in Iceland (39.7%), Poland (40.5%), and the Baltic
States (42.2%). Countries where employee theft was believed
to have a relatively large part of shrinkage included Iceland
(39.0%), Poland (35.1%), and Hungary (35.0%). It is important
to point out that Iceland has a relatively low shrinkage rate of
1.00%. The lowest employee proportions of shrinkage were
seen in Greece (17.0%), Austria (22.4%), Spain (24.6%) and
Portugal (24.7%).
Although individual retailers that participated in the study
had different views about the sources of their shrinkage, the
averages for every country generally show a similar ranking:
customer theft was seen as most important, followed by
employee theft, administrative error and last, supplier fraud.
However, inspection of the European data shows that countries
can generally be classi.ed in one of two main groups. In some
countries such as Greece, Austria and Germany, ‘customers’
(including outside criminals) are seen as the dominant threat to
retailers: for these countries, theft by employees is believed to
be less than one-half that caused by ‘customers’. This should
not be taken as meaning that customers and tourists in those
countries are especially prone to commit fraud, simply that
retailers believe a larger proportion of their shrinkage losses
comes from customers.
In the other group, countries such as Iceland, Hungary and the
UK, retailers feel that staff theft is a considerable problem on
similar scale to theft by customers (although not necessarily
as great). These countries do not believe that their staff are
more disloyal than those of other countries, but have adopted a
different view about the causes of retail crime.
North American retailers saw employee theft as the biggest
problem they faced, responsible for 45.8% of shrinkage, and
signi.cantly larger than customer theft (32.5%). There are some
commentators who believe that the variation in beliefs/opinions
(as shown here) about the sources – or causes – of retail
55
shrinkage and crime may re.ect not national differences but
error. This may be true, but, if so, it rather undermines the
point of making inter-country comparisons. There seems to be
no reason why the experience of shrinkage and crime in every
country should be the same.
56
Apprehended Retail Thieves
Table 3.5 shows that in 2006-07 European retailers apprehended
3.55 million retail thieves. This .gure was made up of
3 481 490 customer thieves and 69 015 employee thieves. The
great majority of retail thieves (96.4%) were apprehended in
West Europe, Central European retailers apprehended 197 140
thieves. Only 1.9% of apprehended thieves were employees.
This can be compared to the 663 555 employee thieves
apprehended in North America (28.6% of the North American
total).
There was a signi.cant difference between the amount stolen
or admitted by employee thieves and customer thieves. In
Western Europe, the average value stolen or admitted by
apprehended employee thieves was €4013 and €87 by customer
thieves per incident (i.e. 46 times greater). In Central Europe
the average value stolen or admitted by employees was €434
and by customer thieves €18. There may be legal or cultural
differences, which affect the values of theft admitted. The types
of thieves apprehended will, of course, re.ect LP policy as well
as the number of offenders stealing from the business.
In North America, the average value admitted or stolen by
dishonest employees was much lower (€1223) and the average
value of customer theft incidents was considerably higher than
Europe at €457. The high average value of customer theft in
North America probably re.ects the results of organised retail
theft and the high European value of employee theft may
result from a higher perceived rate of large .nancial frauds.
The differences in the volume and value of apprehensions may
explain part of the perceived differences in attitude to the scale
of employee fraud between Europe and North America.
57
Retail Security And Loss Prevention
Spending by retail businesses on security was €7 821 million
in the twelve months ending in June 2007, equivalent to an
average of 0.34% of retail turnover. This was a small reduction
of 0.3% in Western Europe compared to 2006 (see Figure
3.3), but capital spending increased to represent 32.6% of total
security spending.
In Western and Central Europe, security costs in 2007 were:
• Revenue security spending €5270 million (0.23% of retail
turnover: consisting of payroll, armoured car cash collection
etc).
• Capital security spending €2551 million (0.11% of retail
turnover: consisting of security equipment including EAS,
CCTV and information systems).
Direct security employees accounted for 19.1% of total security
spending (€1491 million) amongst European retailers (Figure
3.4). They spent 180% more on contract or third-party security
than on direct security employees. Cash collection by armoured
car accounted for 7.7% of security spending (€606 million), a
reduction from 8.8% last year.
Capital spending by security departments was not directly
comparable to last year, because this is the .rst time in this
survey that retailers have been asked to provide information
for this separately. Capital spending (including depreciation)
on information systems, EAS, CCTV, and other merchandise
protection was now 32.6% of total security spending (€2551
million), which could be compared to approximately 23.4% of
security spending in 2001.
European retailers’ average security spending was equivalent to
0.34% of retail turnover. This can be compared to US retailers,
who spent 0.45% of their retail sales on security and loss
prevention (0.31% of sales on revenue spending and 0.14% on
capital). Table 3.6 provides only a summary of European data:
the security costs for every country surveyed are given in Table
3.8.
European retailers committed a sum equivalent to more than
one-quarter of their total retail shrinkage to security spending.
Security spending of €7821 million represented 26.7% of
their shrinkage losses and thus provided a particularly robust
response to the problem of retail crime and shrinkage.
58
The Costs Of Retail Crime In Europe
‘Shrinkage’ is not the same as retail crime because shrinkage
includes an allowance for administrative error. The Costs of
Retail Crime provided in Table 3.8 exclude administrative error
and focus on crime-based losses. Because ‘security spending’ is
crime related, the costs of security are included here in the costs
of crime.
In the period of this survey, the costs of retail crime in Western
and Central Europe were €32 417 million. The .gure consists of
customer crime of €14 188 million, crime by employees, €8 389
million, thefts by suppliers and losses in the distribution chain
of €2 019 million, and security and loss prevention costs of
€7 821 million.
The costs of crime are equivalent to a tax imposed by criminals
of €168.51 each year on every household in Europe.
The methods used to calculate the costs of retail crime
have altered since last year, so direct comparisons are not
appropriate. However re-calculating last year’s cost of crime,
shows that crime costs have risen by €421.5 million since last
year, a further addition to the cost increases facing European
retailers.
59
Table 3.8 shows the combined costs of crime for each country
surveyed. ‘Crime-related shrinkage’ is the sum of losses from
customers, staff and the supply chain. The .gure for security
costs refers to retail spending on security. The total ‘Costs of
Crime’ are crime-related shrinkage plus security costs.
The countries with the highest cost per head of retail crime were
Ireland (€339.31), Iceland (€269.79), and Denmark (€255.92).
The lowest .gures were Slovakia (€60.81), the Baltic States
(€78.51), and Hungary (€97.20). The costs per household are
not necessarily a measure of criminality or ef.ciency, but
depend on the size of households, the amount spent on security
and the size of each country’s retail industry. A wealthy country
even with a low shrinkage rate is likely to have higher costs of
crime per household than one that is currently less well off. In
North America, the costs of retail crime represented €278.03 per
household and in Asia-Paci.c (excluding India) the .gure was
€143.23.
60
The Most Stolen Items
Previous editions of this study showed that (with some
exceptions) the most stolen items were expensive designer or
heavily-branded products mainly used for entertainment/leisure,
personal care or clothing, as well as alcohol and electronics.
They could therefore be easily sold to others. Many of them
were also comparatively small such as razor blades, memory
cards or cosmetics and could be secreted relatively easily by the
thief.
The ten most-stolen items revealed by this survey are shown
in Table 3.9. They are: alcohol, (including whisky, vodka,
and champagne); cosmetics and skincare, womenswear/ladies
apparel; perfumes and .ne fragrances; razor blades; DVDs/
CDs; childrenswear; accessories; designerwear; and high-cost
and speciality food such as fresh meat, ham, seafood, and
cheese.
It is important to note that every type of specialist store has
its own list of most stolen items. Medicines, vitamin tablets,
watches, instant coffee, batteries, power tools, and newspapers
are also heavily stolen. In hardware/DIY, even home security
products such as door and window locks and CCTV are stolen
– probably without the thieves understanding the irony of what
they are doing.
61
The Location And Methods Used For Internal
Fraud
Theft and fraud by employees (or internal fraud) cost Europe’s
retailers €8 389 million in the period of this report. This section
looks at where and how it occurs.
In Table 3.10, responses from European retailers show that
slightly more than one-third of internal theft (34.1% or €2 869
million) occurred at the checkout or cash desk. Losses from
direct theft on the sales .oor were estimated to be 24.1% and
from the stockroom or delivery bay were 41.7%.
Figure 3.5 deals with the main forms or methods of internal
theft. Amongst European retailers these were thought to be:
cash thefts (32.6% of the total) costing €2 735 million, thefts
of merchandise (24.5%) costing €2 055 million, refund fraud/
markdowns (18.3%) costing €1 535 million, and collusion
(12.6%) costing €1057 million. Twelve per cent of internal
theft was thought to result from large .nancial frauds. Note that
Figure 3.5 relates to the methods used to commit internal fraud:
large .nancial frauds and refund fraud often involve cash as
well as direct theft of cash, coupons and vouchers.
Store Audit Programmes And Lp Compliance
To ensure that agreed corporate policy for loss prevention and
security is carried out in practice, 63.8% of large European
retail businesses had a store audit programme (Table 3.11). This
normally involved an audit of store policy and procedures one
or two times every year, with 11.5% of respondents claiming
to carry out audits three or more times per year. Proportions
were higher in North America, where 81.2% of retailers had a
store audit programme in place, involving 59.0% of retailers in
carrying out audits three or more times every year.
62
Protecting The Most-stolen Merchandise
For ten of the most vulnerable product groups (Table 3.12),
retailers were asked to state what proportion of lines were
specially safeguarded or protected and how this was done.
The product groups included the most vulnerable items such
as DVDs, video games, spirits, perfume, clothing and small
electronic goods. So what means are used by the major
European retailers to protect their most vulnerable merchandise
from theft?
In Table 3.12, the products are arranged in descending order
of the extent to which they were protected. Video games were
the most protected product: the second column (headed ‘% of
Products Not Protected’) shows that only 6.9% is unprotected
– or 93.1% is protected. In contrast, 60.7% of shirts are not
protected according to the data provided by retailers.
Table 3.12 shows that more goods are protected now than last
year – 61.5% of the ten most vulnerable lines are protected
compared to 59.4% last year (i.e. the not-protected proportion
has fallen from 40.6% to 38.5%). However that still means that
38.5% of vulnerable items are not protected.
63
The percentage of large European retailers in the survey using
source tagging was 39.7% and within the next two years a
further 29.6% of large retailers expected to introduce source
tagging. Thus by the end of the decade, 69.3% of large retailers
in Europe will have taken advantage of source tagging. The
average number of product lines that were source tagged in
Europe was estimated to be 219, accounting for 15.9% of those
companies’ retail sales.
As might be expected, North American retailers led in the use of
source tagging with 45.2% currently using source tagging and
a further 23.5% expected to introduce it in the next two years
(a projected 68.7% of large retailers). Source tagging users in
North America were receiving an average of 396 product lines
into their stores already EAS tagged at source, responsible for
21.3% of retail sales.
The main methods used are electronic article surveillance (used
for 34.8% of these products an increase from 34.1% last year),
safers and locked boxes (12.5%), empty cartons and ticket
systems (6.4%), locked cabinets and shelves (4.6%, a reduction
from last year), and chains, cables and security loops (3.3%).
Note that these .gures relate to the speci.c methods used to
combat theft for these ten products, which previous surveys
have shown to be amongst the most frequently-stolen articles,
rather than about the general use of these anti-theft systems in
retailing.
The products most likely to receive speci.c protection in
retail stores were video games (only 6.9% were unprotected),
DVDs (18.3% unprotected), razors (19.4% unprotected), and
spirits (29.4% unprotected). From trousers onwards (34.8%
unprotected), a larger proportion of vulnerable items remain
unprotected. The level of protection has particularly increased
since last year for spirits (the proportion not protected has fallen
by 5%), re.ecting the high losses that can occur with this type
of merchandise.
Electronic Source Tagging Of Merchandise
Electronic tagging of merchandise, generally known as EAS
(electronic article surveillance), uses small devices that alarm if
the tagged merchandise is removed from the store without being
deactivated. Retailers were asked about their progress with
source tagging, which involves including these devices in or on
the item or its packaging at source before the goods arrive in the
shops. Source tagging has been discussed by the industry for a
number of years and the technology has been developed to meet
most eventualities. The responses are shown in Table 3.13.

THE GLOBAL RETAIL THEFT BAROMETER
PART FOUR: ASIA-PACIFIC
Monitoring the Costs of Shrinkage
and Crime on the
Global Retail Industry
The First Worldwide Shrinkage Survey
66
The Global Retail Theft Barometer
Survey Information
This part of the Report deals with all retail sectors and vertical
markets in Australia, India, Japan, Singapore, and Thailand as
part of an extensive global survey that also includes countries in
North America and Europe.
The Asia-Paci.c data for Australia, India, Japan, Singapore,
and Thailand was provided by survey information from 103
large retail businesses. They operated 16,230 retail stores with
combined retail sales of $65,418 million, equivalent to 6% of
retail sales in these .ve countries.
All shrinkage .gures used here are based on retail selling prices.
Data from retailers that use cost prices or a combination of cost
and retail selling prices have been converted to retail selling
prices. The calculations of average shrinkage rates within
each country and for each geographical area use ‘weighted’
averages rather than simple averages, with proportionally
greater signi.cance being given to larger companies and larger
countries.
For convenience, all values in this part of the Report are
converted into U.S. dollars at the rate of exchange applying on
July 1, 2007.
Crime And Shrinkage In Asia-paci.c
The average shrinkage (stockloss from crime or wastage
expressed as a percentage of retail sales) rate in Asia-Paci.c
in the twelve months to June 2007 was 1.24% for all .ve
countries, a reduction of 4.6% compared to 2006 when average
shrinkage was 1.30% (Figure 4.1). Asia-Paci.c was the only
region surveyed, where shrinkage rates were falling: in Europe
shrinkage rates rose by an average of 1.5% and in North
America by 2.7%. The Asia-Paci.c data has been calculated
from survey information provided by a sample of 103 Asia-
Paci.c retail businesses with combined retail sales of $65,418
million.
To an outsider, a shrinkage .gure of 1.30% may seem
comparatively small, but the cost of this shrinkage for the .ve
countries surveyed was a total of $15,264 million. In Australia,
India, Japan, Singapore and Thailand this shrinkage .gure
of $15,264 million has to be met ultimately by consumers,
stockholders and employees through a mixture of higher prices,
lower pro.ts and lower bonuses and wage levels. This year,
shrinkage has cost each person in the Asia-Paci.c region $58.44
(excluding India).
67
Shrinkage cost Japanese retailers $9,643 million even though
Japan had the lowest shrinkage rate in the region, $2,379
million in India (which has a high, though declining rate),
$2,008 million in Australia, $1,055 million in Thailand and
$179 million in Singapore.
Figure 4.1 and Table 4.1 show that shrinkage rates varied
between the .ve countries surveyed, as did the change in
shrinkage compared to 2006. The highest shrinkage rate was
found in India, 2.90%, a reduction of 9.4% over last year’s
3.20%. Japan had the lowest rate of 1.04%, which had fallen
by 4.6% from the 2006 rate of 1.09%. Australian shrinkage
was 1.39%, an increase of 2.2% over the previous rate, 1.36%.
Thailand’s rate of 1.65% was a reduction of 6.3%, whilst
Singapore’s 1.25% showed an increase of 5.0% since 2006.
Although the trends in shrinkage amongst 32 countries surveyed
are varied, the general pattern is that shrinkage rates are starting
to rise after some years of decline (in Europe there have been
four years of reductions). Asia-Paci.c stands out from that
pattern, with three of the .ve countries (India, Japan and
Thailand) recording reductions whilst Australia and Singapore
experiencing increased shrinkage. The average shrinkage rate
for all 32 countries was 1.36%. India (2.90%) and Thailand
(1.65%) had the highest shrinkage rates amongst the 32
countries surveyed, followed by the U.S. (1.52%) and Canada
(1.49%). Japan (1.04%) had the fourth lowest shrinkage rate.
The average shrinkage rate in Asia-Paci.c (1.24%) is similar
to Europe’s 1.26% and considerably lower than North America
(1.52%). Further details can be found in ‘Global’ section of this
Report (Part I).
As the ‘organised’ retail sector in India is comparatively
small and recent, in this Report Indian retail shrinkage data
relates only to shrinkage in the organised retail sector. These
.gures and all shrinkage data in this Report are calculated as
a proportion of retail selling prices with the shrinkage rates of
those retailers using cost prices or a combination recalculated
to retail selling prices. The calculations of average shrinkage
rates for every country including Asia-Paci.c nations are
based on ‘weighted’ averages rather than simple averages,
with proportionally greater signi.cance being given to larger
companies and larger countries. ‘Shrinkage’ is an accountancy
term, re.ecting the difference between the .nancial revenue
the business should have received (based upon inventory and
purchases) and the amount actually received. Shrinkage losses
are caused mainly by people stealing goods or money from the
company and also by a range of small or large process errors,
accounting lapses and pricing mistakes that produce apparent
inventory losses. In addition to the actual loss of inventory,
declared ‘shrinkage’ rates will also be affected by company
policy, accounting rules and tax regulations that will in.uence
practice and account for some differences in results.
68
Shrinkage By Kinds Of Business
Different kinds of business normally have different shrinkage
problems and may even account for shrinkage differently.
Figure 4.2 shows average shrinkage rates for different kinds of
retail business.
Sixteen categories of business type or vertical markets were
used. Retailers were asked to classify themselves into one of
the 16 categories. There are a number of businesses that could
classify themselves in more than one way so care should be
taken, when making comparisons.
The highest average rates of shrinkage were seen (Table 4.2)
in vehicle parts/hardware/building materials retail (1.80%),
cosmetics/perfume/beauty supply/ pharmacy (1.70%), and
apparel/clothing and fashion/ accessories (1.69%). The lowest
rates were footwear/ shoes/ sports goods & sporting goods
(0.68%), liquor, wine, beer (0.84%), and jewellery/watches
(0.88%).
There were considerable variations within and as well as
between each category. Individual retailers may have shrinkage
rates, which are signi.cantly higher or lower than the industry
average as shown in Table 4.2.
Signi.cant reductions in average shrinkage (Table 4.2) occurred
in supermarket/ hypermarkets/large grocery (-8.7%), electrical
goods/computer centre/electronics (-8.6%) and of.ce products
(-7.5%). Increases in shrinkage were fewer but included
discount/variety retail/warehouse clubs (+3.5%) and department
stores or large general stores (+2.7%).
The ranking from high shrinkage to low shrinkage types of
retail business is, with some exceptions, similar in Asia-Paci.c
to other parts of the world, although convenience stores have
higher shrinkage rates in Europe and shrinkage is higher in
North America supermarkets.
69
Sources Of Retail Shrinkage In Asia-paci.c
The main sources of retail crime and waste loss in Asia-Paci.c
are shown in Figure 4.3.
Taking an average across all .ve countries, retailers found
the largest source of loss was attributed to customer thieves,
responsible for 52.6% of shrinkage (Table 4.3). The total
amount stolen by customer thieves or shoplifters was $8,031
million.
The next most important source of loss was employees, a
small but signi.cant proportion of which were collectively
responsible for 21.9% of retail shrinkage or $3,335 million.
This proportion also includes fraudulent employees placed there
by organised crime. The main methods used to commit internal
fraud will be considered later in the Report.
Supplier or vendor crime including losses in the distribution
chain and theft by delivery employees was responsible for 7.4%
of shrinkage or $1,134 million.
Lastly, retailers reported that internal error or administrative
error, which included accounting mistakes, pricing errors,
and process failures caused 18.1% of shrinkage losses. This
involved a total of $2,764 million.
The perceived sources or causes of retail shrinkage for the Asia-
Paci.c countries and several other states can be observed in
Table 4.4. The dollar values of the different crimes committed
against retailers in each Asia-Paci.c country can be found in
Table 4.9, dealing with the Costs of Retail Crime.
There were some signi.cant differences of emphasis reported
between the .ve countries of Asia-Paci.c in this survey (Table
4.4). Employee theft in Australia, for example, was regarded as
being responsible for 40.2% of shrinkage losses, rather greater
than customer theft, seen as comprising 36.6% of shrinkage.
In contrast, Japanese retailers reported that 57.1% of their
shrinkage was perceived to have been caused by customers and
only 18.3% by their employees. In India, 22.0% of shrinkage
was regarded as being caused by administrative error, whilst in
Australia and Singapore the proportion was thought to be 16.4%
and 15.4% respectively. In Thailand, 9.2% of shrinkage was
considered to be the result of supplier and distribution fraud and
in Australia this was held to be responsible for only 6.8% of
shrinkage.
70
Table 4.4 shows that, on average, Asia-Paci.c retailers reported
that 21.9% of their shrinkage losses were caused by dishonest
employees. This is a low .gure (apart from Australia) compared
to other parts of the world. The highest proportions were seen
in North America, where dishonest employees were reported to
account for 45.8% of shrinkage.
These estimates of the contribution to shrinkage loss made by
employees, shoplifters, vendors and administrative error are of
course based on the perceptions of security and loss prevention
specialists, based on their current understanding of the major
problems they face. Most shrinkage is unseen at the time it
occurs. Although these estimates have considerable credibility,
therefore, they cannot be regarded as facts comparable to sales
revenue .gures and need to be considered with a degree of
caution.
71
Apprehended Shoplifters And Dishonest
Employees
Table 4.5 provides information about the number of thieves
apprehended by retailers in different countries. This information
is provided by retailers and concerns the number of people
apprehended, irrespective of whether they were dealt with by
the criminal justice system, and may not correspond to data
published by the police.
In the .ve countries of Asia-Paci.c in this survey, a total
of 108,720 customer thieves were apprehended and 10,929
employee thieves, a combined total of 119,649 (Table 4.5).
Employee thieves were less than one-tenth (9.1%) of the
total thieves apprehended. More than one-half of the thieves
apprehended (62.3%) were caught in India. Australia however
was responsible for 18,840 store thieves, of which 4,890 (26%)
were employee thieves.
The number of retail thieves apprehended by North American
retailers was 2.3 million and European retailers apprehended
3.55 million thieves.
Other important differences between countries relate to the
average amounts stolen or admitted. In the .ve countries of
Asia-Paci.c, the amount stolen or admitted by employee
thieves was an average of $206, almost four times higher than
the average amount stolen by customer thieves. This difference
was greatest in Singapore, where the employee theft average
was $863 (the highest amount in Asia-Paci.c) and the customer
theft average was $34. In Australia, the average stolen by
employees was $349 and by customer thieves, $83, the highest
in the .ve countries. There may be, of course, legal, cultural or
economic factors which affect the value of theft that is admitted.
The willingness or ability of dishonest employees to steal more
than customer thieves is an acknowledged feature of employee
crime. In North America the average stolen or admitted by
employee thieves was $1,666 (2.6 times greater than the
average customer incident of $622) and the European average
was $5,145 (46 times greater than the average customer incident
of $112
72
The Location And Methods Used For Internal
Fraud
Theft and fraud by employees (or internal fraud) cost retailers
$3,335 million in the Asia-Paci.c countries during the period of
this survey. This section looks at where and how employee theft
occurs.
In Table 4.6, responses from retailers indicated that 33.1%
of internal theft was believed to take place at the checkout
or cash desk, 33.6% on the sales .oor and 33.4% in the back
of.ce, delivery bay or stockroom. There was a fairly even split
between the three options. It was rather different in Australia,
where 46.9% of employee theft and fraud was thought to occur
at the checkout or in Thailand where 51.2% of internal losses
took place in the back of.ce, stockroom or delivery bay.
The location of losses is very important because it will
determine what means are used to prevent or detect internal
fraud. In North America around one-quarter of internal losses
were thought to occur at the checkout: 41.5% of losses occurred
on the sales .oor. The position in Europe was almost the reverse
of this. Checkout losses at 34.2% were higher, sales .oor losses
were only 24.1% and back of.ce, stockroom or delivery was
thought to be responsible for 41.7% of losses.
What methods were used by dishonest employees to steal
merchandise, property or .nancial assets from Asia-Paci.c
retailers? Figure 4.4 shows that Asia-Paci.c retailers estimated
that 50.0% of their internal losses ($1,668 million) was stolen
directly as merchandise. Refund frauds and false markdowns
comprised 18.6% of internal fraud ($619 million). Theft of
cash, coupons, vouchers or gift cards was responsible for 16.5%
of internal losses ($549 million) and collusion made up 6.7%
(or $223 million). Large .nancial frauds accounted for 8.3% of
internal fraud ($276 million).
Note that Figure 4.4 refers to key methods of internal theft.
Cash will also normally be the method used for large .nancial
frauds and refund frauds/false markdowns, whilst collusion is
most likely to involve the theft of goods.
The proportions for every one of the .ve countries in this
survey as well as North America and Europe are given in Table
4.7. The highest proportion of internal theft by cash, coupons
or vouchers was in India (38.7%) and Thailand (32.7%) and
the lowest was thought to be in Japan (12.6%). The highest
perceived proportional theft of merchandise by employees
was in Japan (55.4%) and Singapore (39.8%) and the lowest
in India (25.0%) Collusion was seen as a major source of loss
in Australia (19.6%) and India (19.2%) but very low in Japan
(2.9%). Refund fraud and false markdowns were signi.cant
73
in Japan (19.6%) and Australia (18.2%) and proportionately
lowest in Thailand (12.0%). Large .nancial fraud was
proportionately highest in Japan (9.5%) and lowest in Thailand
(4.0%), India (4.3%) and Australia (4.8%).
There were several differences between Asia-Paci.c retailers
and those of other countries. In North America, retailers thought
that merchandise theft represented one-half (49.1%) of internal
fraud, rather like Asia-Paci.c retailers, but believed that cash
theft (24.7%) was more important than in the Asia-Paci.c
region, collusion, at 9.5%, was more important, but refund
fraud/markdowns were proportionately lower (13.1%) and large
.nancial frauds were signi.cantly lower at 3.7%.
European retailers saw cash, not merchandise, as their major
source of loss at 32.6% of internal fraud, whilst merchandise
was only thought to be one-quarter of employee theft (24.5%).
Refund fraud/markdowns represented a similar proportion to
Asia-Paci.c retailers, large .nancial frauds were higher (12.0%)
and the proportion of collusion was thought to be almost double
that of the .ve countries.
74
Retail Loss Prevention And Security Spending
Spending by retail companies on loss prevention to prevent
crime and apprehend offenders in the Asia-Paci.c countries
was $2,169 million in the twelve months ending in June 2007,
equivalent to an average of 0.18% of retail sales (Table 4.8).
This was the equivalent of 14.2% of total retail shrinkage.
Australian retailers spent proportionately most on security,
0.35% of their retail sales or $506 million. Japanese retailers
spent $1,391 million on loss prevention, which was 0.15% of
their retail sales. Thai retailers committed the lowest proportion
of retail sales to loss prevention, 0.14% or $32 million.
Asia-Paci.c retailers spent $1,291 million on revenue costs
(payroll and services) and a signi.cant percentage of their
security budget went on capital (security equipment, IT and
other long-term assets) of $877 million. As a percentage of
sales, revenue spending was 0.11% of sales and capital 0.07%.
Figure 4.5 shows how loss prevention spending was allocated
between budget heads by retailers in the .ve countries. Almost
one-half of loss prevention spending (48.9%) went on security
employees, a total of $1,059 million. Thirty-one per cent of
security spending or $672 million went on direct employees
and 17.9% ($387 million) on contract employees. Spending on
security equipment including depreciation was comparatively
high at $877 million (40.4%), $180 million (8.3%) on armoured
vehicle cash collection, and other spending of $52 million made
up 2.4% of the security budget.
North American retailers spent an average of 0.45% of retail
sales on loss prevention and European spending was an
average of 0.34%. Revenue spending in Europe was 0.23% of
retail sales (capital spending was 0.11%) and North American
revenue spending was 0.31% of sales (capital spending 0.14%).
75
Although the proportion spent on capital in the .ve Asia-Paci.c
countries (40.4%) represented a high percentage compared
to many other countries (normally 28% to 34%), this relates
to security budgets that were relatively low by international
standards. In Europe, for example, there has been a rapid
increase in capital spending, which is now 32.6% of the total
loss prevention budget. In Europe, the proportion spent on
capital was 0.11% of retail sales and in North America capital
spending was 0.14% of sales, compared with 0.07% in the .ve
countries.
The Costs Of Retail Crime In The Asia-paci.c
Region
‘Shrinkage’ is not a complete measure of retail crime because
shrinkage includes an allowance for administrative error.
The Costs of Retail Crime provided in Table 4.9 exclude
administrative error and focus on crime-based losses. Because
loss prevention spending by retailers is obviously crime related,
the costs of loss prevention are included here in the costs of
crime.
The costs of crime in the .ve countries of Asia-Paci.c reached
$14,669 million in the period 2006 to 2007. This was equivalent
to an annual tax imposed by criminals on honest shoppers of
$195.05 on every household in Asia-Paci.c.
It is made up of $8,031 million of customer theft, $3,335
million of employee theft, $1,134 million of supplier theft and
loss prevention and security costs of $2,169 million.
The costs of crime for every Asia-Paci.c country in this survey
are included in Table 4.9. No ‘costs per household’ .gure has
been calculated for India in view of the fact that the organised
sector is comparatively small and the country’s population
is 1,086 million, so the .gure, at this stage, would not be
comparable with the other countries.
76
This estimate is not the same as shrinkage, which includes
internal error and does not include retail security costs. The
costs of retail crime measure the impact on the business
of crime losses as well as the burden of security costs. A
comparison between Asia-Paci.c and the other major countries
can be found in Table 4.10, which shows that the global costs of
crime per household are $387.08 in North America and $229.48
in Europe.
77
The Most Stolen Merchandise
What products stocked by retailers are most vulnerable to
theft? Research into this question shows that (with some
exceptions) the most stolen items were expensive designer or
heavily-branded products mainly used for entertainment/leisure,
personal care, clothing, and alcohol and electronics. Particularly
where organised retail crime is involved, the products stolen
are those which can readily be sold to others. Many items are
comparatively small such as razor blades, memory cards, or
cosmetics and can be secreted relatively easily by the thief.
Table 4.11 shows the most heavily-stolen merchandise items
that Asia-Paci.c retailers reported. In 2007, the most vulnerable
product in Asia-Paci.c retail stores was spirits.
The second most stolen was cosmetics and skincare (including
suntan lotion). This was followed by ladies fashion, perfume
and fragrances, high-cost and speciality food including fresh
meat, video games and consoles including iPODs, DVDs/CDs,
designerwear, razor blades and small electronic items (including
memory sticks).
How does the Asia-Paci.c ‘most-stolen’ list compare with those
of other countries? Quite simply, similar types of items are
stolen all over the world: it’s a global marketplace for crime as
well as for honest consumers. The order of every product on the
list is slightly different in other countries, but lists from Europe
and North America, similar to Asia-Paci.c, are also dominated
by alcohol, cosmetics, perfumes, ladies apparel, accessories
and designer apparel, razor blades, and high-cost and specialty
foods such as fresh meat, ham, seafood and cheese. There
are many regional differences of course but the products are
essentially the same.
78
Store Audit Programmes And Lp Compliance
To ensure that agreed corporate policy for loss prevention and
security was carried out in practice, 60.3% of retailers in the
.ve countries surveyed had a store audit programme in place
(Table 4.12). Singapore had the highest percentage involvement
in store audits (70.9%) and Thai retailers were least likely to
have a store audit programme (43.8%). The average Asia-
Paci.c .gure is similar to the European percentage of 63.8%.
North American retailers were most likely to make use of store
audits: 81.2% of retailers had audits in place.
In Asia-Paci.c, store audits normally involved an audit of store
policy and procedures three or more times every year, with
39.9% retailers conducting store audits three or more times
and 20.4% carrying these out once or twice per year. Highfrequency
store audits were common in Japan and Singapore,
whilst in Australia the practice was more likely to involve
audit only once or twice per year. The content of a store audit
programme may vary and it is not suggested that a policy of
‘more audits’ is superior to a programme of one or two every
year. High-frequency store audit programmes were common in
North America, where 59.0% of retailers carried out audits three
or more times per year. In Europe the standard was to have one
or two audits every year, with 52.3% of retailers doing so and
only 11.5% having more frequent audits.
For ten of the most vulnerable product groups retailers
were asked to state what proportion of lines were specially
safeguarded or protected and how this was done. The results are
shown in Table 4.13.
Protecting The Most-stolen Merchandise
The product groups investigated included the most vulnerable
items such as DVDs, video games, spirits, perfume, clothing,
and small electronic goods. So what means are used by the
major retailers to protect their most vulnerable merchandise
from theft?
The products are arranged in descending order of the extent
to which they were protected. DVDs were the most protected
product: the second column (headed ‘% of Product Not
Protected’) shows that only 4.2% is unprotected – or 95.8% is
protected. In contrast, 73.8% of shirts are unprotected.
Table 4.13 shows that almost two-thirds of merchandise items
are protected – 56.3% of the ten most vulnerable lines are
protected. However that still means that 43.7% of vulnerable
items are not protected. This is a higher proportion of
unprotected items than Europe or North America, where 38.5%
and 37.5% respectively are not protected.
79
The main methods used by Asia-Paci.c retailers are electronic
article surveillance (used for 30.7% of these products, of which
source tagging was 5.1%), safers and locked boxes (12.2%),
empty cartons and ticket systems (5.7%), locked cabinets and
shelves (5.3%), and chains, cables and security loops (2.4%).
Note that these .gures relate to the speci.c methods used to
combat theft for these ten products, which are amongst the most
frequently-stolen articles, rather than about the general use of
these anti-theft systems in retailing.
For videogames, the most-protected item in Asia-Paci.c,
electronic article surveillance (EAS) provided 42.6% (of which
source tagging was 14.1%), safers and locked boxes protected
36.6% of items, empty cartons and ticket systems were used for
6.4%, and locked cabinets and shelves for 10.2%.
EAS was most likely to be used on spirits (51.2%), videogames
(42.6%), and DVDs (39.5%); safers/locked boxes on video
games (36.6%), DVDs (36.0%), and razors (24.3%); chains,
cables and loop alarms on smaller electronic goods (10.0%);
empty cartons and ticket systems on razors (13.0%) and
perfumes (10.6%); and locked cabinets and shelves were used
particularly on razors (16.0%) and videogames (10.2%).
80
Electronic Source Tagging Of Merchandise
Electronic tagging of merchandise, generally known as EAS
(electronic article surveillance), uses small devices that alarm if
the tagged merchandise is removed from the store without being
deactivated. Retailers were asked about their progress with
source tagging, which involves including these devices in or on
the item or its packaging at source before the goods arrive in the
shops. Source tagging has been discussed by the industry for a
number of years and the technology has been developed to meet
most eventualities. The responses are shown in Table 4.14.
The percentage of retailers in the survey claiming to use source
tagging was 27.4% in Asia-Paci.c (including 40% in Australia),
45.2% in North America, and 39.7% in Europe.
Within the next two years, a further 19.9% of Asia-Paci.c
retailers reported that they would introduce source tagging
in their stores. By the end of the decade, therefore, 47.3% of
large Asia-Paci.c retailers expected to be using source tagging
of merchandise, compared with 68.7% in North America and
69.3% in Europe.
Those Asia-Paci.c retailers with source tagging were receiving
into their stores an average of 97 product lines that were tagged
at source. These lines accounted for an average of 6.1% of retail
sales, although in Australia source tagging represented 19.3% of
retail sales. Currently, 52.7% of retailers had no plans for source
tagging.
Source tagging in Asia-Paci.c was used less than by North
American and European retailers, where 45.2% and 39.7%
respectively of retail companies use source tagging. The
average number of product lines that were source tagged in
North America was 396 (accounting for 21.3% of retail sales)
and in Europe it was 219 (15.9% of retail sales).

82
Appendix:
Survey Methods
Objectives
The objective of the Global Retail Theft Barometer is to capture
the extent of crime-related losses and shrinkage suffered by
retailers throughout 32 countries in Europe, North America,
Australia and Asia and to note trends both in the scale of losses
and in the security policies adopted by companies. This study
has been funded by an independent grant from Checkpoint
Systems, Inc. as a contribution to discussion within the sector.
The Questionnaires
The loss prevention managers or .nance directors of 3600 of
the major retailers in the countries being surveyed were sent a
questionnaire for completion. The questionnaire consisted of 24
questions. Anonymity was guaranteed. The questionnaire was in
French, English, German, Italian, Japanese and Spanish and was
also available on-line.
Contact Details
The names and addresses of the companies were drawn from
a combination of commercial lists and the Centre’s own list of
retailers.
Cross Section By Country And By Type
The .nal composite list covered the major retailers in the 32
countries, drawn from all kinds of retail business. The number
of questionnaires sent out to retailers in each country was
proportional to the size of the retail industry in that country.
However between 25-45 questionnaires were sent to smaller
countries in order to encourage replies from a representative
sample of the sector as a whole in each country. The growth of
cross-border and international retailing meant that a number of
respondents would naturally have been providing information
about more than one country. The results for Luxembourg
were included with Belgium in order to protect commercial
con.dentiality and the results for Latvia, Lithuania and Estonia
were combined (as before) as ‘Baltic states’. Iceland was
included in the survey within Western Europe. No political
implications should be drawn from the process of grouping
certain states or from the inclusion or non-inclusion of any
country.
The Response
820 useable returns were provided including returns that were
made on-line. By continent, 228 responses were received
from North American corporations (total sales $376 billion
[€276 billion]), 489 from Europe ($505 billion [€371 billion])
– 5% more than last year - and 103 retailers from Asia-Paci.c
($65 billion [€48 billion]). The response rate was 22%,
which is perfectly satisfactory for a study of this kind. The
number of returns made by retailers in each country and the
collective scale of those retailers that responded can be seen
in the accompanying Table. The retailers who completed the
questionnaires were collectively responsible for a combined
sales of $947,766 million (€695 949 million) and operated
138,603 retail outlets.
Collating The Data
Retailers were allocated to one of 16 types of business. A
distinction was made between a ‘nil response’ (no reply was
entered to a question) and ‘0’. The ‘0’ was counted but not the
nil response. The data provided was consistent (no responses
needed to be abandoned because of material error), but it should
be noted that there were signi.cant differences between retailers
in the same country.
Calculating The Results
In a survey of this kind there is a danger that a small and
unrepresentative number of respondents can in.uence the
average – either exaggerating a ‘trend’ or minimizing a
problem. To avoid this, we have not used simple arithmetic
averages, but have weighted each reply in accordance with the
sales of the company involved. Thus the shrinkage result for
Germany is not a simple addition of the average shrinkages
of the companies which reported, but each result has been
weighted so that the shrinkage of a $500 million retailer is
calculated at .ve times more than a $100 million corporation.
83
Country Weightings
The results of retailers in each country have been weighted in
proportion to the total retail sales of that country to prevent
differences in the response rates between countries affecting the
overall result.
The results for 17 Western European countries are published
separately from the seven states in Central Europe. ‘Western’
and ‘Central Europe’ are used here as geographical expressions:
no political implications are intended through the use of this
terminology. No political conclusions should be drawn from the
groupings used, or from the inclusion or non-inclusion of any
country in this study.
Shrinkage
’Shrinkage’ is an accountancy .gure, re.ecting the difference
between the .nancial revenue the business should have received
(based upon inventory and purchases) and the amount actually
received. Shrinkage losses are caused mainly by people stealing
goods or money from the company but also by a range of
small or large process errors, accounting lapses, and pricing
mistakes that produce apparent inventory losses. In addition
to the actual loss of inventory, declared ‘shrinkage’ rates will
also be affected by company policy, accounting rules, and tax
regulations that will in.uence practice and account for some
differences in results.
Although ‘shrinkage’ is often used as a proxy for retail crime it
is not identical to crime against shops because it includes error
and waste as well as crime. It is a convenient .gure used almost
universally by retailers for management-control purposes. In a
later section, this Report provides an estimate of the total costs
of crime against shops from which ‘wastage’ and ‘error’ have
been subtracted.
84
85
The Centre For Retail Research
The Centre for Retail Research is an independent organization providing research and consultancy for the retail sector. It has
carried out a range of studies dealing with the costs of crime and the application of electronic and computerized systems to
combat shop theft and fraud in many parts of the world.
The Global Retail Theft Barometer has been written by Professor Joshua Bam.eld, Director of the Centre. He has researched
retail crime issues since the mid-1980s and has written extensively on this topic.