Study: Retail Theft Jumps Nearly 9%

Retail theft jumped 8.8 percent this year, as the economy turned sour and U.S. merchants scaled back on security expenditures, according to a new report.

Shoplifting, employee theft and supply chain losses increased the “shrink” — a retailing term for the amount of stock lost from crime or waste, as expressed as a percentage of sales — during the 12 months ending in June, according to the Global Retail Theft Barometer 2009 report, conducted by the U.K.-based Center for Retail Research. These thefts caused a $42.2-billion loss for merchants in the U.S.

The increase was significant, considering that retail thefts rose 1.5 percent in the prior year. The report is based on a confidential survey of 1,069 large global retailers.

Employee theft cost U.S. merchants about $18.7 billion in the period; shoplifting cost sellers $15 billion; and processing and other supply chain errors or fraud cost retailers about $6.8 billion. The report estimated the cost of store crimes to consumers, in the form of rising prices, at about $208 per family over the past year.

Globally, retail theft reached $114.8 billion in 2009, representing an increase of 5.9 percent compared to last year’s total of $104.5 billion, according to the third annual report.

Integrators reached by SSI confirmed the report’s view that merchants aren’t rushing to add security systems, as budgets for such projects have tightened or vanished.

“Most retailers look at the tough economy being on top of the major factors in contributing to shrink,” says Paul Kataldo, vice president of global marketing at Checkpoint Systems, a provider of loss prevention solutions, which sponsored the study. “At this very time, retailers have decreased spending on security. There’s a lot of pressure on resources.”

As an affordable choice, smaller retailers and franchise operators are choosing video hosting rather than hardware-based DVR solutions for store surveillance, says Eugene Szatkowski, COO of Chicago-based Secure Integrations. The option is akin to cloud computing.

Retailers can add two cameras (front door and register/sales counter) for about $400, and sign up for $50 a month for video hosting via a Web platform. The video footage is stored at data centers offsite and can be easily accessed for review or live streaming, Szatkowski says.

The system is also vandal-proof, because even if cameras are damaged, video footage can be retrieved from the data center.

The cameras can easily be looped in to a store’s wireless network, and technology from a hosted security services provider such as Des Plaines, Ill.-based Secure-i employs an algorithm using public and private keys to improve security over a wireless network, Szatkowski added.

“The benefits of hosted are really driving smaller retailers to go to that type of environment,” Szatkowski says. “It’s a lower total cost of ownership. It’s shifting the paradigm from recording units to subscription-based. That takes the cost of the security element out of a capital budget and puts it into an operating budget.”

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