Australian consumers are forced to pay the equivalent of an extra two weeks grocery shop to compensate retailers for growing theft and loss. According to the second annual Global Retail Theft Barometer, Australian retailers had the world’s highest employee theft, fraud and loss rate contributing to almost $2,996 million (US$2,051 million) lost in the past 12 months; a figure that puts an additional cost of $425.88 (US$291.57) for each Aussie household to make up the shortfall.
“The cost of retail shrink is not just borne by retailers, but by consumers and society at large,” said Mark Gentle, managing director, Checkpoint Systems, Australia, which sponsored the study.
“Whilst shrink is a serious threat to retailers’ bottom lines, the hidden ‘tax’ on consumers is an additional unfair hit, especially as they are already dealing with the strain of tightening household budgets during the economic downturn.
“When you compare the amount to two weeks of shopping for the average household, it demonstrates the effect to the consumer’s bottom line too.”
Global retail shrinkage has cost retailers $152.54 billion (US$104.5 billion) over the past year, equivalent to 1.34 per cent of retail sales. Australia ranked above this global benchmark (1.42 per cent) with a shrinkage increase of +2.1 per cent over the past 12 months, bucking the downward trends being set by other Western markets, as well as APAC as a whole.
Australian retailers reported that stolen merchandise accounted for 37.4 per cent more than $180 million (US$124 million) of internal fraud, while almost one-quarter (23.9 per cent) of internal losses were in the form of refund fraud and false markdowns (more than $115 million (US$79 million). In APAC, merchandise theft was responsible for nearly half of the total internal losses.
“The results show that in most countries the main source of shrinkage is related to criminal theft. However the report covers the period before the world economy entered into a financial tsunami. Most retailers are already reporting worsening crime problems and we expect this to continue for the next two years as a result of tightened budgets and prices rises affecting food products and fuel,” explained Professor Joshua Bamfield, director of the Centre for Retail Research.
Current loss prevention systems and processes helped retailers apprehend nearly 5.3 million customer and employee thieves in 2007-2008, the majority of which were customers (84.6 per cent). The average amount stolen or admitted per customer theft incident was US$328. Employee theft sums were more than 5.6 times greater per incident, averaging US$1,842. The total value recovered, including customer and employee theft, was US$3 billion.
“With the uncertainty surrounding our current climate, we believe the industry can learn quite a bit from the data revealed in this year’s GRTB,” noted Rob van der Merwe, president and CEO of Checkpoint Systems.
“We suspect the increase in organised retail theft uncovered in the study could be directly attributed to the downturn in our economy.”
Global loss prevention costs were US$25.47 billion or 0.33 per cent of retail sales, a decline from last year’s 0.35 per cent.
“We hope retailers will use this year’s Global Retail Theft Barometer as a tool to better understand current global shrink trends,” concluded van der Merwe.
“During a weak economic climate, shrink is more likely to increase, so it is even more important for retailers to remain vigilant. Our goal in sponsoring this report is to help the retail industry and loss prevention professionals formulate new and more advanced responses to combat shrink in an ever-changing global economy.”