The statistical equation

Newspaper headlines earlier this month screamed that shoplifting has risen by 20%, and the recession-hit middle-classes were blamed for stealing to maintain their lifestyle.

But, although the economic contraction has undoubtedly had an effect on retail crime, the wild increases in theft that some may have forecast haven’t necessarily become a reality - thwarted mainly by retailers’ increased awareness. So what do the latest retail crime and shrinkage figures actually show?

According to the Centre for Retail Research’s Global Retail Theft Barometer, released this month, all but three of the 41 countries surveyed reported increases - reversing previous declines for many.

In the UK, shrinkage as a percentage of sales rose 5.4% in the year to June 2009. At 1.37% of turnover, this
ranks the UK 23rd in the world for its shrinkage as a percentage of sales.

In 2008 shrinkage fell 3% in the UK. However, report author Professor Joshua Bamfield warns retailers not to panic, pointing out that the shrinkage rates of many retailers have remained roughly constant, or have actually fallen, in the past year.

Upward movement

Despite the hype, shoplifting hasn’t risen substantially as a percentage of overall shrink in the UK - it’s up from 42.1% in 2008 to 43.5% of total shrink in 2009.

The rest of the total figure is comprised of internal theft (36.4%), internal errors (15.8%) and supplier theft (4.3%). And Bamfield estimates that the value of shoplifted items is up 8.6% on the previous year.

However, 40.7% of UK retailers have reported increases in attempted shoplifting - showing perhaps a dual effect of retailers’ increased focus on shoplifting and more clumsy efforts to shoplift by those that may not have attempted to steal before.
Because of retail business failures, some retailers are also seeing an increase in shrinkage, says Bamfield, as the num-ber of players in a market constricts.

So how do the figures compare with other research?

The British Retail Consortium’s annual crime survey won’t be available until after Christmas. But when the BRC published a snapshot survey in July, 92% of retailers said retail crime had risen in the previous 12 months, with half reporting it had increased by between 11% and 20%.
The British Crime Survey was published by the Home Office the same day as the BRC’s snapshot survey, and showed a 10% rise in the number of shoplifting offences recorded by the police compared with 2007/08, when a 1% fall had been recorded.

Again, these figures show a clear upward movement in customer theft, yet it is likely that the growth is also as a result of such shrinkage being taken more seriously and measured more thoroughly.Although in the BRC snapshot survey 80% blamed the rise on the recession, more than 40% also said it was a result of an increase in reporting.

It’s also not clear that the economic situation is the primary reason for the increased theft levels being seen, according to Bamfield. “Although the recession has affected crime, only a little over a quarter - 28.6% - of UK security managers felt that the recession was the main cause of increased crime,” he says.

Armed with the knowledge that the recession was likely, retailers have largely prepared for a rapid rise and adapted their crime prevention
methods to suit.

Sainsbury’s head of corporate security Philip Hagon, has just sent off his contribution towards the BRC’s annual survey. Although he won’t give specific numbers he agrees there haven’t been the wild jumps that some expected. “Because recessions are usually accompanied by rises in crime we have predicted that and raised our game to be more effective in our security measures,” says Hagon.

At Sainsbury’s this has involved initiatives such as better training. “Our security officers are trained to a higher degree and are very much intelligence led - for example they know what is being stolen in their store,” he says.

Further training

According to the Global Retail Theft Barometer, 71.4% of retailers worldwide had implemented fresh training for their staff to try to spot and deter theft and nearly 80% planned to carry out further training. Other key policies included pre-hiring screening for employees, new CCTV video surveillance, the hiring of more in-store loss prevention staff and increased spending on crime prevention IT.

“We are seeing more retailers move into product protection. For example, John Lewis, Marks & Spencer and Fenwick are moving into product protection where they didn’t have it before,” says Russell Holland, sales and marketing director with security system and tagging provider Checkpoint Systems, who the Barometer research was conducted on behalf of.

Jon Marchese, director of business development at security tagging specialist Tag Company, agrees. He adds that retailers already using the technology are revisiting their tagging systems. “Retailers are looking at whether they have the right solution to protect their products,” he says.

The Global Retail Theft Barometer suggests loss prevention teams have reprioritised existing budgets rather than made huge increases in their security spend. “It’s a more sophisticated use of the assets we have got, to ensure people that are likely to steal are picked up more quickly. That action in itself acts as a deterrent,” says Hagon.
Holland agrees: “It’s about ensuring staff compliance on systems that have already been invested in,” he says.

However, while general crime may not have risen hugely, Hagon says there are some categories where the rises are huge. “Some categories such as violent crimes, and cash and valuables in transit (CVIT) attacks are definitely on the increase,” he admits.

Tony Benson, risk director for CVIT specialist Loomis UK explains the figures. “With over 42 billion banknotes in circulation the retail environment will always be a key focus for crime. According to industry figures, this year has seen 825 attacks on cash in transit vehicles up to September, a total loss of £14m, compared with 1,000 attacks in the whole of 2008, worth £19.8m. Ensuring that retailers safeguard not just their takings, but their staff and customers, should be a major focus in these recessionary times,” he says.

Kevin Eley, head of sales and marketing at loss prevention software provider Sysrepublic also believes there are new avenues opening up. “We are finding the proliferation of new methods of payment can incur losses,” he says.

Huge temptation

And with consumers likely to feel yet more pain, Hagon warns that retailers should not get complacent. “There are storm clouds looming. Police forces are looking at quite substantial reductions in their budgets and recessions do increase crime,” he says.

Retailers also need to be more aware that the risks are constantly evolving. Khuram Kirmani, chief executive of loss prevention and data management experts IDM Software, says that among his retailer clients there is a far greater awareness that they could be more at risk at the moment.

The recession is placing huge temptation in the way of staff and customers alike - particularly those that may feel disgruntled if they are facing redundancy. “There is always around 60% to 80% of people that may steal from you and now that’s the group that’s more likely to do it, particularly if people are doing it around them or they are facing redundancy,” says Kirmani.

Bamfield agrees: “The level of retail crime can rise very rapidly. There are many people who haven’t stolen for many years that are now back in business. The idea that shoplifters are bemused old pensioners or aggressive teenagers is wrong,” he says.

The risks online are increasing too, says Bamfield. “People I have spoken to have losses that are around 50% higher online than through their stores.”

Criminals are wising up to retailer’s preventative strategies. People who know something of online retailers’ decision making criteria are able to “use that information to rob retailers blind and it’s safer than shoplifting,” he says.

In the 2008 BRC survey, data on internet fraud was collected for the first time. Of those surveyed 85% had suffered from online fraud in the year to April 2008 and 64% said it had increased.

Progress with online safety?

Figures from UK Payments (previously Apacs) suggest cardholder-not-present fraud has actually fallen by 18% in the six months to June, with the thinking being that the Verified by Visa and MasterCard SecureCode security layers many retailers have now
added to their sites is cutting fraudulent transactions.

But IMRG director of business development Andrew McClelland warns that is unlikely to be a constant trend. “Anecdotal evidence suggests a slight increase in friendly fraud where shoppers say goods haven’t been delivered and demand a refund,” he says. “That is likely to increase in the run-up to Christmas.”

With internet crime constantly evolving, retailers must stay on top of the problem. “I don’t think we will ever be out of the woods because so many of our businesses are internet related and the degree of crime that is potentially there means we have to keep raising our game,” says Hagon.

Bamfield believes internet fraud needs a new type of security manager rather than the common ex-policeman approach of a typical security boss. “You need someone with more of an accountant or IT type background,” he says.

The recession does afford one huge opportunity for security staff though, according to Professor Bamfield. “This is the best opportunity retail security staff have got to integrate themselves much more closely with the business rather than being on the sideline, because there is so much crime - it’s rising, and they have the solutions. If they can do that they will be in a much better position in a couple of years when the money is flowing through and budgets are revived,” he says.