Shrink Down, Organized Retail Crime Growing: Study

ARLINGTON, VA - The increased use of loss prevention technology, training, and employee vigilance at retail contributed to a third consecutive annual drop in supermarket shrink, according to a new study by the Food Marketing Institute (FMI).

According to "Supermarket Security and Loss Prevention 2007," shrink in 2006 was a median of 1.52 percent of sales, down from 1.69 percent of sales in 2005 and 2.00 percent in 2004.

At the same time, however, supermarkets continue to report increases in organized retail crime - thefts committed by sophisticated gangs that sweep baby formula, medicines, and other expensive items off shelves and fence them through flea markets, pawn shops, and Internet auction sites.

Nearly six in 10 of the food retailers surveyed (59.6 percent) reported an increase in these crimes in 2006, about the same number in last year's report (62.5 percent), the FMI report found. The FBI estimates these gangs steal up to $30 billion in products each year from all retailers.

"Organized retail crime is one of the most serious threats we face today," said FMI president and c.e.o. Tim Hammonds. "These gangs endanger public health by adulterating products such as infant formula and cold medicines and selling them to unsuspecting consumers - often through illegitimate retail outlets and Internet auctioneers. Law enforcement experts increasingly believe that some of the money earned through this illicit activity helps fund international terrorism."

Food retailers are taking action to thwart organized retail crime, and 93.6 percent of the loss prevention executives surveyed are allocating more resources to deter and detect it and to help law enforcement capture and prosecute the perpetrators. These measures include:
i Increased loss prevention training (52.3 percent).
i Increased number of closed-circuit television (CCTV) cameras (52.3 percent).
i Tracking these crimes regionally or nationally (50 percent).
i Help to develop legislation to address the problem (47.8 percent).
i Adding security personnel (36.4 percent) and systems (31.8 percent).
i Using product-marking technology to identify stolen products (34.1 percent).

Safeway Inc. and Target Corp., both FMI members, recommended legislation to make organized retail crime a federal felony during an October 25 hearing of the House Judiciary Crime, Terrorism and Homeland Security Subcommittee.

"Too often, the gang members are charged with petty shoplifting misdemeanors and receive minimal fines and probation or little jail time," said Target v.p. of assets protection Brad Brekke. "A law specifically recognizing organized retail crime under the U.S. Criminal Code would help reduce the billions in retail store losses and, most important, protect the safety of consumers."

Other FMI study findings include:

i Retailers apprehended 507 shoplifters per company in 2006, averaging 16 per store and $34 per incident.
i The most frequently stolen items were meat, health and beauty care products, over-the-counter medicines, liquor, and razor blades.

Robberies and bad checks:
i Two-thirds of companies reported at least one robbery, costing retailers an average of $8,891 per incident.
i Retailers accepted more than $28 million in worthless checks, resulting in a median loss of $284,124 per company in 2006.

Employee theft
i Nearly 40 percent of all shrink was attributed to stealing by store employees in 2006, averaging 3.1 cases per store.
i Losses averaged $362 per store and $193 per incident.
i The checkstands and service departments continue to be the most vulnerable, accounting for a combined 75 percent of employee theft.

Gift card fraud on the rise
i The growth in gift cards is spawning new forms of fraud. Examples include tampering with bar codes to increase the value on stolen cards and buying gift cards with worthless checks or stolen credit cards, effectively laundering them.
i Nearly all stores offer gift cards, and 76.7 percent of companies reported some type of fraud, theft or tampering in 2006 - up from 65.7 in 2005.

The report was based on surveys from 47 companies operating 8,893 stores, and sponsored by Checkpoint Systems, Inc.

The full report is available for purchase at:
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