Retailers Misperceive Extent of Their Own Shrink: Study

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Retailers Misperceive Extent of Their Own Shrink: Study

CAMBRIDGE, Mass. -- Most major retailers perceive wrongly that shrink is a bigger problem for their competitors than for their own organizations, according to a new research report by shrink prevention research firm Loss Prevention Research Council (LPRC).

According to the study, a survey of more than 100 major US retailers, only 10 percent characterized their shrink as high compared to their competitors, while 65.5 percent said it was average. Twenty-four and half percent said their annual shrinkage was lower than average.

One reason for this misperception, according to LPRC may be there is no agreed-upon method of shrink measurement, a fact that it said also emerged from the study. While 42.9 percent of respondents said their companies measure shrink "at cost," some 57.1 percent reported their companies measure shrink "at retail price." The discrepancies exist within and between retail segments.

"Our research indicates retailers often believe shrink isn't a serious problem for them," said Dr. Read Hayes, director of LPRC. "But, it's a major issue that retailers measure their shrink differently. They use so many different minute calculations regarding product pricing and distribution center levels. And if you compare apples to oranges, you are likely to obtain illogical results. That's why our research team strongly encourages retailers to standardize how they really measure shrink, preferably using the retail method."

In addition, the report found 86 percent of respondents said they spend the most or second-most time working on loss problems related to internal product theft. Some 62 percent said they spend the most or second-most time working on loss problems related to internal cash theft. And 32 percent said that they spend the most or second-most time working on external theft, including organized retail crime.

The 20-question study, which was underwritten by IntelliVid, a provider of intelligent video analysis software for retail loss prevention, also looked at other issues, including the use of loss prevention technologies. While all respondents said their organizations have digital recording systems, just over one-fifth (21.4 percent) said in-store personnel monitor CCTV cameras continuously. More than one-fifth (21.4 percent) of those with CCTV systems say in-store personnel rarely monitor cameras. Almost two-thirds (65.5%) of respondents think implementing new technology is very important for their companies' loss prevention endeavors.

The loss prevention survey targeted a sample of 107 major U.S. retailers selected from grocery, mass merchants, department stores, pharmacy/drug stores, apparel, and specialty stores (books, auto parts, home technology, and others).

A summary copy of the 54-page report is available here:

LPRC uses fact-based research to develop crime and loss control solutions aimed at improving the performance of its members and the industry. Its members include The Home Depot, Sears, Kmart, Macy's, AutoZone, Wal-mart/Sam's Club, Pep Boys, Limited, CVS, P&G, and Walt Disney World.