Shrink Cost US Retailers $54 Billion Last Year A Major New Study Reveals

A major new survey has revealed the extent to which fraud is damaging retail in the US – by $54 billion in just one year.

The study, commissioned by retail consultants Retail Knowledge, is the Volumatic Kount US Retail Fraud Survey 2013. It launches in the US this year following its success in the UK where it is regarded as the most authoritative and detailed loss prevention study, used by leading retailers to shape their LP strategies and reduce shrink.

The newly-launched US Survey, sponsored by payments experts Kount and intelligent cash handling specialists Volumatic, is based on primary research into the systems, processes and strategies used by 100 of North America’s leading retailers, a sample that represents over a fifth of the North American retail market*. It provides a detailed picture of the evolving fraud challenge for retailers, in all its dimensions.

Key findings include:

• Shrink accounts for an average of 1.3% of sales which translates at a total loss of $54 billion
• Credit cards, used universally by retailers online, account for 83% of all online fraud
• The largest area of store loss for retailers is employees, accounting for 37% of theft
• Prevalence of returns fraud, by both customer and employees, now around 30% of all shrink
• Mobile sales channels are overlooked in fraud prevention strategies, despite 34% of retailers having a mobile sales option available to their customers.

Paul Bessant, Managing Director of Retail Knowledge, who commissioned the Survey, said: “We are very excited about launching the Survey in the US. Its sister publication is established in the UK as an invaluable information tool for retailers, in developing their loss prevention strategies. It also enables retailers to benchmark their performance as well as providing compelling data when presenting an internal business case for new investment”.

James Harris, Commercial Director of Volumatic, co-sponsor of the study, commented: “I hope that the outputs of the study will help the loss prevention community benchmark themselves against their peers and identify opportunities to engage with their businesses and each other, to win back some of the multi-billion dollar hole in profits that is being created through shrinkage”.

Kount VP of Marketing, Don Bush, said, “As retail moves increasingly online, the threat of card-not-present fraud is skyrocketing. The results of the study show that even the largest retailers may not be prepared for online, especially mobile, fraud. We hope the study helps merchants identify where their security strategy needs some work to ultimately decrease preventable losses.”

*Martec International, who carried out the Survey on behalf of Retail Knowledge, conducted a detailed telephone interview with the Vice President or Director of Loss Prevention for each company covered in the report. In many cases they also interviewed the executive in charge of E-Commerce about their online fraud prevention systems and strategies. These represent retailers with annual sales totalling $898 billion, i.e. 22% of the total North American retail market and encompassing almost 120,000 stores.