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White-Collar Crime - Retail Store Theft

percent employee shoplifting shrinkage

In the 2002 National Retail Security Survey Final Report (University of Florida, Gainesville, FL, 2003), an annual survey of retail theft prepared for the National Retail Federation, authors Richard C. Hollinger, Ph.D., and Jason L. Davis found that the average retail store surveyed in 2002 lost about 1.7 percent of its inventory to shrinkage (the industry term for the difference between the recorded value of inventory bought and sold and the value of the actual inventory at the end of the year). The shrinkage rate in 2002 was down from the 2001 rate of 1.8 percent. (See Figure 7.2.)

FIGURE 7.3
Sources of retail inventory shrinkage, 2002

Shrinkage is generally attributed to shoplifting, employee theft, administrative error, or vendor fraud. Respondents to the 2002 survey reported that 48 percent of their losses were due to employee theft (up from 45.9 percent in 2001), 32 percent to shoplifting (up from 30.8 percent in 2001), 15 percent to administrative errors (down from 17.5 percent in 2001), and 5 percent to vendor fraud (down from 5.9 percent in 2001). (See Figure 7.3.)

As in previous surveys, employee theft was reported as the single most significant source of inventory shrinkage among retailers, accounting for a little over $15 billion in losses (nearly half of the total $31.3 billion in losses due to inventory shrinkage in 2002.) The highest rate of inventory shrinkage due to employee theft in 2002 was experienced in convenience stores (82.5 percent), followed by supermarkets and grocery stores (59 percent), and men's apparel retailers (57.5 percent). Office supply retailers reported a 57.4 percent rate and consumer electronics/appliances retailers reported that 57.3 percent of their inventory shrinkage was due to employee theft. The lowest rates of employee theft occurred among book and magazine vendors (33.3 percent), followed by drug retailers (40.4 percent), and cards/gifts/novelties retailers (41.4 percent) (See Figure 7.4.)

Responses to employee theft include apprehension and termination of the employee, prosecution, and civil demand or recovery. In 2002 there were 35.2 employee theft apprehensions for every $100 million in sales among retailers, an increase from the 2001 rate of 30.3. About 41 percent of all apprehensions resulted in criminal prosecution. The rate of employee theft prosecutions was 14.5 for each $100 million, and the rate of civil court actions as the result of employee thefts was 35.8 for every $100 million in sales. The average amount stolen by each employee theft incident in 2002 was about $1,341, the first decrease in a decade.

Shoplifting, the second highest source of inventory shrinkage in 2002, accounted for $10 billion in losses to American retailers in 2002. Though employee theft accounts for a larger amount of total monetary loss, there are more incidents of shoplifting than there are of employee theft. There were 134.8 shoplifting apprehensions for every $100 million in sales. Prosecution of shoplifters rose in 2002. There were 108.4 shoplifting prosecutions for every $100 million in sales in 2002, up from 92.8 shoplifting prosecutions in 2001, and 149.5 civil demands per $100 million as the result of shoplifting in 2002 compared to the 2001 rate of 133.7 civil demands per $100 million for shoplifting. The average dollar loss per shoplifting case was $207 in 2002, an increase from the 2001 average loss of $195. (See Figure 7.5.)

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