Retail Theft and Crime: The Universal Woe

Theft, fraud and crime are issues that face all retailers in every country. Some retailers in certain countries may be fortunate: their crime losses are lower than elsewhere. Retailers in the countryside tend to suffer from lower crime than those in densely populated cities. Be that as it may, to combat or prevent crime, even the most fortunate retailer has to spend money on procedures, training, security staff and equipment if the business is to keep crime losses low. The overall impact of crime upon retail businesses is massive.

For most retailers, it is fairly clear what the most stolen items are; nevertheless, retailers are normally only able to identify a small proportion of their losses through crime. They may not even be completely certain whether the majority of their losses are caused by ‘customers' (shoplifters) or by their own staff.

Therefore, there are two ‘problems of crime' for retailers. The first problem is, of course, the cost of crime. Simply to replace a stolen item costing €100, the retail business may have to sell additional goods with a value of up to €1,500. For some retailers, crime costs are equivalent to one-half or more of the surplus they make from their retail outlets. Because the actual net profit made by stores is only a small percentage of turnover, shrinkage costs of say 1 per cent to 2 per cent can have a major impact upon business performance.

The second problem is ignorance. If retailers do not really know where and how their losses occur or how they compare with similar retailers elsewhere, then it is impossible for them to take effective action.

The costs of retail crime
Our own research shows that in Europe, crime cost retailers €32, 867 million (US$43,403 million) in 2006. This was equivalent to a ‘crime tax' on households of €178 every year.

These figures are drawn from the European Retail Theft Barometer, a survey of retailers in 24 European countries that we carry out every year and is now the largest survey of its kind in the world. The combined population of these countries is 461 million, which is obviously a lot smaller than India's one million-plus, but the potential crime costs to be suffered by the expanding and dynamic Indian retail sector is immense.

Indian businesses have to face the possibility that part of the gains of progress may be taken from them by criminals.

The average overall rate of shrinkage (as a percentage of retail sales) in Europe was 1.24 per cent in 2006, a small fall from the previous year's 1.25 per cent. Shrinkage, or stock loss, is calculated from the difference between expected receipts (based on deliveries to stores) and actual receipts, and is critical to close control of retail losses. However, shrinkage itself is affected by waste, accounting errors and poor price control as well as crime, which also need to be scrutinised regularly in order to keep losses under control.