Retail Security Statistics 2009 Examined

Author: John Honovich, Published on Nov 03, 2009

How can retail security losses be used to justify the use of video surveillance and security systems?

Within the security industry, retail may be the most rigorously quantified market. Unlike many security applications that defend against very high value but rare instances (think government and terrorism), retail security deals with constant security threats that can be measured. This helps in calculating ROI for the use of technology systems such as video surveillance.

In October 2009, the annual National Retail Security (for the US market) was released. The headline was that shrink was up (from 1.44% to 1.51% between 2007 and 2008).

A main theme from the report is that while video surveillance is considered a 'hot' tool for retailers, it is one element in a larger system that requires other processes and technologies.

Final note, these numbers may be contrasted to a 3rd party report of 22 retailers from September 2008 (premium).

Shrink Statistics and Trends

Comparing results of this report over the last 18 years, shrink appears to be reducing. In the early 1990s, shrink was close to 2% but now is down to approximately 1.5% of sales.

2008 shrink was up from 2007 (1.51 vs. 1.44). However, given the fluctuations and the variances in who answers the survey, it may be difficult to draw a definitive conclusion (for instance in 2007, the survey received 134 respondents but only 106 in 2008).

In overall dollar terms, the $36.3 Billion annual loss to retailers from shrink is an estimation based on multiplying the shrink rate of 1.51% times the $2.4 Trillion in annual sales for the US retail sector.

Shrink Variance by Segment

Get Video Surveillance News In Your Inbox
Get Video Surveillance News In Your Inbox

The level of shrink varied significantly by segment of retailer. While the apparel retailers had significantly above average shrink, home improvement and furniture stores reported very low shrink. Companies should keep this variation in mind as they target or build solutions for various retail segments.

Breakdown of Shrink

Shrink comes from different sources. This survey breaks it down into 5 categories. Only 2 of these categories represent opportunities for the use of physical security technologies - employee theft and shoplifting. The other categories including vendor fraud and administrative would have little to no impact from the use of physical security technologies.

Excluding categories that physical security technologies cannot impact, the 'addressable' shrink is closer to 1.2% (as 20% of total shrink is reported to come from administrative and vendor fraud issues).

Employee theft and shoplifting remain the big two drivers of shrink with 42.7% of shrink coming from employee theft and 35.6% from shoplifting.

The higher percentage of employee theft is especially important to security system providers that focus on the more visible but less costly issues of shoplifting.

For those interested in the breakdown of shrink categories by retail segment, review the report. One limitation to keep in mind is that certain categories have only 1 or 2 retailers reporting which increases the probability of inaccurate numbers.

Loss Prevention Budgets Falling

According to the report, LP budgets are only .34% of retailer's 2007 annual sales. Compare this to early in the decade when budgets were over .5% of annual sales. Of that budget, 30% was used for capital equipment such as security systems.

Loss Prevention Strategies

While security systems are components of loss prevention strategies, the report noted 3 equally or more important tactics:

  • Pre-Employment integrity screening such as criminal conviction and past employment history check was classified as the first step.
  • Loss prevention awareness programs were very common with over 90% of retailers using anonymous telephone hotlines and bulletin board notices
  • Access control policies: The most common include refund controls and POS exception based reporting. Important for video surveillance professionals, over 90% of retailers reported using POS exception based reporting.
 
Use of Video Surveillance and Security Systems
 
Retailers used a wide variety of security systems. Video surveillance was the second most commonly used system next to burglar alarms (with 90.5% using digital video recording and 92.4% reporting the use of burglar alarms).
 
However, in terms of what retailers were looking to add (considered 'hot'), video surveillance dominated with remote video, live CCTV, digital recording and POS/CCTV integration taking 4 of the top 5 spots (the other went to using POS data mining).
 
Only about 25% of retailers reported POS / CCTV integration currently. Given the almost universal use of POS and CCTV, this is notably but not surprisingly low. Integration between these two systems has always been difficult because of the numerous incompatible DVR and POS systems. However, this is certainly an opportunity for those that can address this deficiency.
 
This growth looks to be at the expense of guards (9.5% plan to reduce usage) and article tags.
 
Loss Statistics Useful in Building ROI Models
 
The report cites a number of interesting trends and relationships in shrink:
  • Average length of employee before a dishonest worker is caught is 10 months. Given the size of the internal theft problem, earlier detection could be a major value generator.
  • Most consistent indicator of shrink is rate of annual employee turnover (greater turnover, greater shrink - average turnover 76.7% sales associates, 31.9% management turnover).
  • Averaged admitted dollar loss for employee theft reported at $2,672 USD. If systems can catch or deter 1 or 2 employee thefts per site per year, the system may pay for itself (depending on the size of the store, total cameras deployed). Also compare to average shoplifting cost, which is significantly lower.
  • The average shoplifting cost is reported at $549.90 USD. 
  • Civil demand (or civil recovery) is increasing as a means for retailers to gain monetary restitution from shoplifters. This is an alternative to criminal prosecution. To the extent that civil demand's use and success increases, this will improve the value of using search tools. The historical limitation is that even if video or POS search found shoplifting, the likelihood of recovery was very low.
  • About 25% of shoplifting is attributed to organized retail theft. The average loss per ORC is $5,000 though the report does not indicate whether this is per event or overall per ring.

Related Reports

Directory of Video Surveillance Startups on Jul 18, 2018
This directory provides a list of video surveillance startups to help you see and research what companies are new or not yet broadly known entity...
FST Fails on Jul 17, 2018
FST was one of the hottest startups of the decade, selected as the best new product at ISC West 2011 and backed with tens of millions in...
Security Sales Course Summer 2018 on Jul 13, 2018
Based on member's interest, IPVM is offering a security sales course this summer. Register Now - IPVM Security Sales Course Summer 2018 This...
4 Most Difficult Camera Installs (Statistics) on Jul 12, 2018
Heavy housings, cumbersome brackets, heavy ladders required, and tricky field of view requirements will cause difficulties no matter the camera...
Arecont Acquisition By Costar on Jul 11, 2018
Arecont Vision acquisition by Costar Technologies has been approved by the court, concluding the bankruptcy process triggered by Arecont's...
Eastern and SavvyTech Merge, Form ENS, Targets ADI on Jul 09, 2018
ADI, ENS is coming for you. Or, at least, they hope. Two US distributors, NY based EasternCCTV and California based SavvyTech have merged, to...
Arlo IPO Filing Reveals Key Financial and Competitive Details on Jul 09, 2018
Arlo is going to IPO at a projected valuation greater than Axis. Now, Arlo has released their 175-page Form S1 Registration Statement for its...
Drops Dahua, Fenner Becomes ISS CMO on Jul 09, 2018
Hired to improve Dahua's miserable marketing just last year, Janet Fenner has quit Dahua, joining VMS manufacturer ISS as Chief Marketing...
UK VSaaS Startup Ocucon on Jul 03, 2018
Decreasing exposure to fraudulent slip-and-fall insurance claims and lawsuits is one of the oldest selling points of video surveillance for retail....
Pelco Is For Sale on Jun 27, 2018
Pelco is for sale, being shopped by an investment bank, IPVM has confirmed from multiple sources. The company, acquired by Schneider Electric in...

Most Recent Industry Reports

Axis ~$100 Camera Tested on Jul 17, 2018
Axis has released their lowest cost camera ever, the Companion Eye Mini L, setting their sights on a market dominated by Hikvision and Dahua. Can...
Amazon Ring Alarm System Tested on Jul 16, 2018
Amazon Ring is going to hurt traditional dealers, and especially ADT, new IPVM test results of Ring's Alarm system underscore. IPVM found that...
Hikvision Wins Chinese Government Forced Facial Recognition Project Across 967 Mosques on Jul 16, 2018
Hikvision has won a Chinese government tender which requires that facial recognition cameras be set up at the entrance of every single mosque...
Installing Dome Cameras Indoors Guide on Jul 16, 2018
IPVM is producing the definitive series on installing surveillance cameras. This entry covers one of the most common scenarios - installing dome...
Security Sales Course Summer 2018 on Jul 13, 2018
Based on member's interest, IPVM is offering a security sales course this summer. Register Now - IPVM Security Sales Course Summer 2018 This...
US Tariffs Hit China Video Surveillance on Jul 13, 2018
Chinese video surveillance products avoided tariffs for the first two rounds. Now, in the third round, many video surveillance products will be...
Last Chance - July 2018 IP Networking Course on Jul 12, 2018
Registration ends today, Thursday. Register now. This is the only networking course designed specifically for video surveillance...
4 Most Difficult Camera Installs (Statistics) on Jul 12, 2018
Heavy housings, cumbersome brackets, heavy ladders required, and tricky field of view requirements will cause difficulties no matter the camera...
Axis Perimeter Defender Video Analytics Tested on Jul 12, 2018
Axis 'high security' video analytics offering is Perimeter Defender, OEMed / developed with Digital Barriers. But how good is Perimeter Defender?...

The world's leading video surveillance information source, IPVM provides the best reporting, testing and training for 10,000+ members globally. Dedicated to independent and objective information, we uniquely refuse any and all advertisements, sponsorship and consulting from manufacturers.

About | FAQ | Contact