Retail theft losses are staggering - Taking Stock - column

Discount Store News, April 15, 1991 by Jack Hayes

Retail Theft Losses Are Staggering

Here's a shocking statistic for you to consider: Based upon Hayes International's latest survey and calculations, we estimate that only 8 percent of the total retail theft dollar loss results in an apprehension. Here's how we arrived at this most staggering conclusion:

First, we took the retail sales ($18.6 billion) of those 10 companies (representing 1,498 stores) we survey annually. Next, we took E & Y's latest shrinkage average of 1.9% of sales and assigned a dollar shrinkage using this percentage ($353.4 million) to our sample group of stores. This figure represents a total loss of $353.4 million. We then deducted an extremely conservative "paper shrinkage" allowance of 50% ($176.7 million) from the $353.4 million total shrinkage loss. After this calculation, $176.7 million was still unaccounted for. We next subtracted the 10 chains' theft apprehension recoveries/admissions ($12,927,272) from this figure. Final calculation left us with $163,772,728 still unaccounted for, and presumed to be lost to theft. Acceptance of this calculation could cause one to reasonably believe that for every $1 recovered through an apprehension, another $12.67 is lost outright to retail theft!

In an effort to confirm or dispel the accuracy of this perception of the severity of our dollars-lost-to-retail theft ratio, we next analyzed E & Y's figures looking for consistency in their much larger data base. The same formula we used above, including the 50% "paper shrink" allowance, was again utilized.

Here's an overview of what we at Hayes International perceive E&Y figures to reflect:

* Only 10.5% of retail theft losses are recovered in apprehensions. * For each $1 recovered from an apprehension, $8.50 is lost to theft. * A staggering 89.5% of those shrink dollars allocated to retail theft sources remained unaccounted for.

The perception that for every $1 recovered during an apprehension another $8 to $13 is lost to theft is mind-boggling. Perhaps retailers should take a hard look at their loss prevention practices and procedures.

Jack Hayes is a leading security expert for Arthur Young.