Employee Theft:The Largest Source of Shrink in North America

By Carlton Purvis

Employee theft was regarded as the greatest shrinkage problem in North and Latin America, according to retailers. Thirty-five percent of shrinkage was attributed to employee theft – an increase from 2010. And shrink, or unaccounted for merchandise in a store’s inventory, is higher worldwide according to the Centre for Retail Research’s Global Retail Theft Barometer for 2011 (GRTB 2011).

The report, released on Tuesday, came from an independent survey of trends in retail crime and shrinkage in 4,750 retail corporations in 43 countries. The report has been published annually since 2001 and contains information on theft trends, stolen items, the impact on companies, loss prevention policies, and how companies spend money on security. Other causes of loss noted in the report were vendor fraud, internal errors, and accounting mistakes.

Customer theft, including shoplifting and organized retail crime (ORC), was the main cause of shrinkage in most countries, costing retailers $51.5 billion in 2011. In North America, however, dishonest employees were the largest source, accounting for 44 percent of retail shrink -- $47 billion in shrinkage compared to $37.8 billion in 2010. The second largest source of retail shrink came from shoplifting and ORC. The shrinkage rate in North America rose by six percent in 2011.

“We’ve always had this result,” said Professor Joshua Bamfield, author of the report. Bamfield says the issue is two-fold. “In other countries there may be more employee theft that they don’t know about so they don’t report – when in the U.S. they’re so focused on the problem that they’re always looking for it so they apprehend a large number of employee thieves…,” he said in an interview with Security Management.

Bamfield said in past research he’s found that there is a positive relationship between employee theft and the use of seasonal or part-time workers. “Many are part time or short term and [working retail] until something else turns up,” he said. In many cases these people have less vested in the company and may not feel bad about swiping merchandise.

And when employees steal, they’re stealing more, the research shows. The average stolen by “customer thieves” is around $372, according to GRTB 2011. Employees who get caught admit to stealing almost five times that amount. In Latin America, the amount stolen by employees was eight times the amount stolen by customers. This demonstrates that preventing employee theft it is at least as important as preventing shoplifting, the report states.

The section of the report that addresses North America surveyed 197 North American retailers and 96 across Latin America.

GRTB 2011.pdf1.13 MB


How theft loss is determined

There is a basic flaw in the method used to determine overall loss due to shoplifting.  

When a shoplifter is apprehended, s/he has X dollars of merchandise that is recovered.  That is one shoplifter and X Dollar loss.

When an employee is apprehended, you have one employee and a total loss which is reconciled by the interviewer conducting the interview.  The theft history may go back years and the accumulative effect of each of those thefts are now summed for the $ loss for that employee.

If this were done with "comparative" numbers, the employee loss dollars would decrease dramatically.

Unfortunately, most shoplifters are not interviewed to determine prior theft history and it would be extremely difficult for a Loss Prevention Professional to even attempt this type of interview.

To quote the author, "Employees who get caught, admit to stealing almost five times that amount."  

I'd venture to say that you could multiply the $ recovered by a shoplifter by 2-3X and you'd probably have a more accurate number.

However, this is a non-tangible figure.

This type of study "suggests" that shoplifters were apprehended during their first shoplifting attempt without any prior thefts.  (Again, this would be impossible to prove unless the shoplifter "felt the desire"  to confess to her/his prior thefts.)

I agree

I completely agree with PChivers re the flaw.  I have been saying this for 20 years and I am so glad to see someone else state it.  Why this "flaw" is done is another matter.  Either out of ignorance, or many/most LP supervisors would rather do Employee Investigations then shoplifting, for many reasons.............

View Recent News (by day)


Beyond Print

SM Online

See all the latest links and resources that supplement the current issue of Security Management magazine.