The Winds of Change...

2011 research by FMI and The Retail Control Group into the ‘causes and cures’ of retail supermarket shrink indicates that 64% of store shrink is directly caused by a breakdown in or the absence of effective store operating best practices, while 36% of store shrink is cause by theft and/or misdeeds. This is causing a shift in the roll of Loss Prevention and Asset Protection.

  • 47% of companies report a growing shift in the roll of Loss / Asset Protection departments to focus more on operationally centric “profit protection and realization”.
  • There is a growing trend toward collaborative partnership between Loss / Asset Protection and Store Operations with shared accountability for shrink control.
  • 54% of companies report that they to not have formal LP training for District Managers, Store Managers, cashiers and/or employees.
  • Examination of loss prevention and shrink control budgets suggests a disproportionate allocation of budget dollars to technologies to “catch” theft versus budget dollars allocated to train of store personnel in effective store operating practices known to prevent shrink loss.
More findings revealed in the 2013 Shrink Survey

64% of all reported store shrink was caused by a breakdown in or the absence of Operational best practices known to control and/or prevent. This make Operational Shrink the #1 focus area for companies targeting lower store shrink as a Top 5 business imperative. 36% of all reported shrink was attributed to Theft and or Mis-Deeds. This does not diminish the importance of combating shrink from theft, but it does allow retailers to prioritize and focus resources to areas where greatest ROI can be gained.

55% of all Shoplifting instances were attributed to individuals shoplifting for personal gain and the average loss per shoplifting incident was $51.63, up 3.2% from the 5-year benchmark survey average loss per incident reported at $50.02. Survey respondents reported that 55% of all shoplifting instances were by amateurs, 26% by professionals and 19% was attributed to ORT. The number 1 defense to prevent shoplifting theft was properly trained employees. #2 was the use of Cameras and #3 was training and awareness of store management teams.

Cashier Theft accounted for 31% of shrink caused by Theft and/or Misdeeds. Cashier Theft is defined as acts of intentional fraud by the cashier to either benefit themselves or the people they are checking out (sweet-hearting) or both. 35% of Cashier Theft instances occurred as acts of Sweet-hearting and 61% of all instances involved cashier with less than 1 year of service to the company. 30% of Cashier Theft instances involved more than one cashier and when multiple cashiers/employees were involved, the amount of the loss more than quadrupled to $814.00.

General Employee Theft (not including cashier activity) accounted for 25% of shrink caused by Theft and/or Misdeeds. General Employee Theft is defined as those acts of stealing, pilfering, fraud and/or other misdeeds carried out by employees except cashiers of the store and/or company. 49% of General Employee Theft instances were reported to have been done by employees with less than one years’ service. 41% of all General Employee Theft instances – was by employees stealing product through the front door or the back door without paying for it.

Inefficient ordering accounted for 14% of total store shrink, or 22% of Shrink from Operations, making Ordering this year’s number one source cause of shrink loss. Ordering caused shrink includes; failure to take a proper on hand inventory before making an order, failing to use a formal ordering guide, failure to check previous movement information, failure to properly determine, use and accomplish Ordering Best Practice Standards, and over-ordering quantities not needed to meet immediate sales expectations.

Inefficiencies and/or errors in production planning were reported to account for 11% of total store shrink or 17% of Operational Caused shrink. Production planning caused shrink includes over-production, under-production, unsanitary production and/or failure to accurately plan or calculate Production needs to meet anticipated sales. Companies using formal production planning processes reported 6% lower perishable shrink than companies that do not embrace this practice. Further shrink reduction – up to 14% – was realized by those companies who reported using formal Production Planning methods combined with formal Known Loss recording practices.

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The 2006 survey expands the research and coverage of the trends and changes in retail loss prevention to include four retail segments: supermarkets, convenience stores, chain drug stores, and general retail stores. Within this retail shrink research we discovered numerous shifts and trends that were common in all four segments and of course, some unique conditions.

2013 research by FMI and The Retail Control Group into the ‘causes and cures’ of retail supermarket shrink indicates that 64% of store shrink is directly caused by a breakdown in or the absence of effective store operating best practices, while 36% of store shrink is cause by theft and/or misdeeds.

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