Supermarket Shrink Down for Third Straight Year,
Yet Organized Retail Crime Continues to Increase

ARLINGTON, VA — November 14, 2007 — Shrink in supermarkets declined for the third straight year, to a median of 1.52 percent of sales in 2006, as food retailers devoted more technology, training and employee vigilance to combat theft and other losses, according to the Food Marketing Institute (FMI) Supermarket Security and Loss Prevention 2007 report, which was released here today. The 2006 shrink figure is down from 1.69 percent of sales in 2005 and 2.00 percent in 2004.



At the same time, supermarkets continue to report increases in organized retail crime — thefts committed by sophisticated gangs that sweep baby formula, medicines and other expensive items off shelves and fence them through flea markets, pawn shops and Internet auction sites. Nearly six in 10 of the food retailers surveyed (59.6 percent) reported an increase in these crimes in 2006, about the same number in last year’s report (62.5 percent). The FBI estimates that these gangs steal up to $30 billion in products a year from all retailers.



Food retailers are taking action to thwart organized retail crime, according to the report. In fact, 93.6 of the loss prevention executives surveyed are allocating more resources to deter and detect it and to help law enforcement capture and prosecute the perpetrators. The measures include:



• Provide more loss prevention training, cited by 52.3 percent.

• Install more closed-circuit television (CCTV) cameras, 52.3 percent.

• Track these crimes regionally or nationally, 50.0 percent.

• Help develop legislation to address the problem, 47.8 percent.

• Add security personnel, 36.4 percent, and systems, 31.8 percent.

• Use product-marking technology to identify stolen products, 34.1 percent.



Retailers Seek a Federal Law to Fight Organized Retail Crime

Two FMI members, Safeway Inc. and Target Corp., presented the industry’s case to Congress for legislation to make organized retail crime a federal felony at an October 25 hearing of the House Judiciary Crime, Terrorism and Homeland Security Subcommittee.



Retailers spend an estimated $12 billion a year to fight retail theft, testified Target Vice President of Assets Protection Brad Brekke. For example, the company built forensic laboratories with latent fingerprint and other technologies to support investigations. Safeway created a whole division to fight these crimes throughout the U.S. and Canada.



"Organized retail crime is one of the most serious threats we face today," said FMI President and CEO Tim Hammonds in a statement released at the hearing. "These gangs endanger public health by adulterating products such as infant formula and cold medicines and selling them to unsuspecting consumers — often through illegitimate retail outlets and internet auctioneers. Law enforcement experts increasingly believe that some of the money earned through this illicit activity helps fund international terrorism.



"Too often, the gang members are charged with petty shoplifting misdemeanors and receive minimal fines and probation or little jail time. A law specifically recognizing organized retail crime under the U.S. Criminal Code would help reduce the billions in retail store losses and, most important, protect the safety of consumers."

Other Top-Line Results

Shoplifting

• Retailers apprehended 507 shoplifters per company in 2006, averaging 16 per store and $34 per incident.

• The most frequently stolen items were meat, health and beauty care products, over-the-counter medicines, liquor and razor blades.



Robberies and Bad Checks

• Two-thirds of companies reported at least one robbery, costing retailers an average of $8,891 per incident.

• Retailers accepted more than $28 million in worthless checks, resulting in a median loss of $284,124 per company in 2006.



Employee Theft

• Nearly 40 percent of all shrink was attributed to stealing by store employees in 2006, averaging 3.1 cases per store.

• Losses averaged $362 per store and $193 per incident.

• The checkstands and service departments continue to be the most vulnerable, accounting for a combined 75 percent of employee theft.



Gift Card Fraud on the Rise

• The growth in gift cards is spawning new forms of fraud. Examples include tampering with bar codes to increase the value on stolen cards and buying gift cards with worthless checks or stolen credit cards, effectively laundering them.

• Nearly all stores offer gift cards, and 76.7 percent of companies reported some type of fraud, theft or tampering in 2006 — up from 65.7 in 2005.



Methodology

The report was based on surveys from 47 companies operating 8,893 stores. It was made possible by the generous support of Checkpoint Systems, Inc. To purchase Supermarket Security and Loss Prevention 2007 (retailer/wholesaler FMI members $95, associate members $145, nonmembers $195), visit the FMI Store at www.fmi.org/store/.



Contact:

Bill Greer

202.220.0667

wgreer@fmi.org




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Food Marketing Institute (FMI) conducts programs in research, education, industry relations and public affairs on behalf of its 1,500 member companies — food retailers and wholesalers — in the United States and around the world. FMI’s U.S. members operate approximately 26,000 retail food stores with a combined annual sales volume of $680 billion — three-quarters of all retail food store sales in the United States. FMI’s retail membership is composed of large multi-store chains, regional firms and independent supermarkets. Its international membership includes 200 companies from more than 50 countries.