Hollinger, the director of the Security Research Project in the UF Department of Criminology, Law and Society, is still compiling the latest shrink data for 2008 and spoke with CSO about what he is hearing from loss prevention pros on what to expect this year.
CSO: The survey for 2008 isn't complete yet. But what are you anticipating?
Richard Hollinger: From what I can tell, there is really a dramatic disconnect between what happened in '07 and what seems to be happening now. I just got back from meetings with many loss prevention vice presidents. I serve on the advisory council for the national retail federation and sat in a room with many of these people. All seemed to be suggesting that '08 will be very different year. Incidents of shoplifting and employee theft look to be way up in '08.
However, actual dollar amounts might not be that dramatic. Most of the people doing the stealing aren't -types with million-dollar appetites. They are blue-collar, Joe the Plumber-types who are working in retail or who are stealing from retail. So, overall losses may not be dramatically higher because people really can't steal a lot in these stores without being caught.
Why it is so much harder to steal now?
The mantra of loss prevention and retail for last decade has been 'leverage technology.' Stores have really done that using EAS tags and also surveillance cameras. Now there are even point-of-sale integrated camera systems with which they can do exception monitoring. These things just weren't possible in past years. Now stores can make better use of personnel and cover more space with the same amount of technological investment.
But still, theft happens -- or at least they try. You're hearing theft incidents will likely be up in 2008? Why?
One reason may be customer service. If stores have less money to spend, coverage on the floor will go down. So, a shopper will go in to a big box store and have to look for someone to wait on them. In previous years, there were plenty. The first line of defense has always been sales associates. In large stores, with a large amount of square footage and less people put on floor, that means more amateurs that might consider stealing will have the opportunity to try.
Also, internal theft may have increased. If stores are making do with fewer employees, there will be more opportunity for workers to be alone in a store. It is that kind of scenario that can lead to employee theft.
Vendor theft and fraud may also be impacted. As vendors bring merchandise into the store, a manager or staff person needs to check the merchandise in. If a store is busy, or understaffed, there will less chance for that to happen on a thorough basis. If a vendor says they have 100 units, but there are only 75, and a manager can't thoroughly check on that, there is 25 percent shrink right off the bat. So, the worry is that there won't be the level of cross-checking and auditing in place to prevent that kind of theft.
How do you think 2008 might compare to other years when you've done the survey?
Last year, if you look at numbers, we saw the lowest level of shrink in 16 years since we've done study. Even though the economy was starting to go down hill, one of the reasons I think we saw lower shrink in '07 is because a number of retailers that were previously in the study were not included in '07. Either the stores chose not to be included or they are no longer in business. The number of stores that participated dropped from the 150's to the 130's because there are fewer major retailers in the country. They are merging or acquiring one another.
In terms of comparison, 1994 was the worst year for shrink in the survey. Much of that was due to the function of record stores that were still in business. When that sector was part of the survey, we saw our highest levels of theft. Records, CDs, were easier to steal. But since the 90's, CDs sales have plummeted. Most people buy music digitally from now. So that whole sector that was having problems with shrink has just sort of disappeared. That has definitely impacted the results.