My wife and I have been watching Breaking Bad (for the first time) and we just viewed the episode where one of the drug dealers working for the main characters was held up by some junkies and robbed of an ounce of meth. The main character, Walt, is super pissed that this happened while his partner Jesse claimed that it was no big deal — all businesses have “breakage” and lose some inventory.
Jesse is correct, missing inventory is a huge problem for retail businesses. The actual term for missing inventory is “shrinkage” and refers to the situation where actual inventory levels are less than than what is on the books. The main cause of shrinkage is theft.
Each year the National Retail Federation conducts a survey to determine inventory shrinkage and causes. In its 2020 survey (covering 2019), it found inventory shrinkage at an all-time high: it accounts for 1.62% of US retailers’ profits and totals about $62 billion annually.
Who Is Committing Theft?
While shoddy accounting and vendor fraud contribute to shrinkage, missing inventory is mostly attributable to theft which falls into two main categories: dishonest employees and shoplifting. Here’s the reported causes for shrinkage according to the National Retail Federation’s 2018 report:
Consumer theft isn’t confined to walking out of the store with concealed merchandise. It also occurs by consumers altering or swapping price tags, transferring goods from one container to another, and returning stolen goods or imitation designer products to receive cash. Robberies are less common, but are a source of theft. Online theft is a growing problem as well.
Employee theft is a shockingly huge problem: a study by a loss prevention consultant found that “one out of every 50 employees was apprehended for theft from their employer in 2019.” Plus, dishonest employees tend to steal more as the average dollar loss per employee theft runs about $1,100 vs. a $270 – $800 loss per shoplifter.
According to loss prevention consultant Security Tags, the common ways retail employees steal include:
Under ringing – In this scenario the cashier uses the Point of Sale to ring up an item at less than its listed price, collects the full amount and pockets the difference.
Product theft – This is just the straight theft of a product.
Skimming – An oldie, but still prevalent, skimming involves pocketing a small amount of money from the till in the hope it will go unnoticed or won’t matter when the till is counted at the close of day.
Sweet hearting – Sweet hearting can involve a series of strategies but sees employees fail to ring up or discount items for the benefit of friends.
Gift card theft – Typically difficult to detect, gift card theft involves an employee issuing fake refunds for gift cards that they keep. It also involves handing a customer a blank gift card while they keep the loaded one.
Refunds – In this case the cashier rings up a false refund and keeps the cash.
Why Is Retail Theft Growing?
There are myriad reasons that retail theft is a growing problem. Experts blame:
- Increased Organized Retail Crime (ORC) activity;
- Legislation raising Felony Threshold Levels reduces fear of adverse consequences;
- Less staff on salesfloor creating more opportunities for shoplifters;
- Growing prevalence of gift cards provides scam opportunities
- Increased self-checkout or mobile checkout
- Opioid addiction, mental health challenges and economic conditions
- Employee theft is sometimes attributable to bitterness about their situation or anger toward management, and is often emotionally driven.
Retail theft was on the upswing before COVID-19 and loss prevention experts expect theft to jump even higher due to the economic downturn.
I’ll leave you with the great song “Shoplifters of the World Unite” by the 1980s British superband The Smiths with lead singer Morrissey acting super sexy even though he’s basically asexual:
Speaking of Morrissey and sexuality, he sparked some controversy years ago when he claimed that “If more men were homosexual, there would be no wars because homosexual men would never kill other men — wars and armies and nuclear weapons are essentially heterosexual hobbies.”
My personal favorite Smiths song is “Girlfriend in a Coma”: