OPERATIONS

NRF: Retail shrink evolves with the times

BY Dan Berthiaume

New data from the National Retail Federation (NRF) shows that loss prevention is becoming an omnichannel issue.

According to the annual National Retail Security Survey from the NRF and University of Florida, theft, fraud and losses from other retail shrink totaled $50.6 billion in 2018, up 8% from $46.8 billion the year before as industry security executives said there is a growing overlap between loss prevention and cybersecurity efforts.

Shrink averaged 1.38% of sales during 2018, up slightly from 1.33% in 2017. NRF analysis indicates shrink but has held steady around 1.4% over the past few years, with the increase in dollar amount due primarily to growth in retail sales.

The largest losses per incident came from robberies at an average $2,885.15 (down from $4,237.02 in 2017), followed by employee theft at $1,264.10 (up from $1,203.16), and shoplifting/organized retail crime (ORC) at $546.67 (up from $543.28). NRF analysis shows robberies are comparatively rare, while shoplifting/ORC and employee theft together typically account for about two-thirds of shrink each year, with most of the remainder coming from vendor or paperwork errors.

While 43% of those surveyed said the largest increase in fraud is occurring in stores, 30% said it is happening online and 22% said it is coming in multichannel sales, such as those where the purchase is made online but the merchandise is picked up in store.

Cyber-related incidents are the top issue, for loss prevention teams, according to 68% of those surveyed, while 65% also pointed to e-commerce crimes and another 51% cited return fraud, including incidents involving purchases made online but picked up in stores. ORC was cited by 65%, and internal theft by 60%.

A total of 89% said there is increasing overlap between retail loss prevention (LP) teams and cybersecurity teams, but only 30% of LP executives said they were regularly involved in cybersecurity issues. Most of the time, LP is brought in after the fact on cyber issues, with 60% of LP executives saying they are called in for incident response and only 26% involved in threat analysis.

LP executives are preparing for increased involvement in cyber issues, with 62% seeking analytical skills in new hires and 40% seeking cybersecurity skills.

“We are seeing dramatic changes in the risks faced by retailers, and loss prevention practices and priorities are evolving to meet those challenges,” NRF VP for loss prevention Bob Moraca said. “As criminals find new ways to steal, loss prevention teams are finding new ways to stop them. Increasingly, this is a battle focused on technology.”

The survey of 63 loss prevention and asset protection executives from a variety of retail sectors was conducted Feb. 27 through March 29.

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