WASHINGTON, DC — September 20, 2006 — Food retailers used technology, surveillance, hotlines and other methods to decrease losses from theft and other forms of shrink to 1.69 percent of sales in 2005, down from 2.00 percent the previous year, according to the Food Marketing Institute (FMI) Supermarket Security and Loss Prevention 2006 report, which was released here today.
     The most common methods to prevent theft:

  • Closed-circuit television (CCTV), used by 97 percent of the retailers surveyed.

  • Monitoring point-of-sale transactions, 76 percent.

  • Employee hotlines, 70 percent.

  • Biometric readers used in store check-cashing, door entry, time clocks and customer payments, 23 percent.

     "Retailers who reduce shrink are the most vigilant and foster a culture of low tolerance," said FMI Senior Vice President Michael Sansolo. "They detect more theft, worthless checks, counterfeit money and fraud, yet the impact on their bottom line is lower because they recover more losses and prevent more crime."

     Shrink among the top performers was a median of 0.67 percent of sales in 2005, compared with 1.69 percent for all stores, according to the report.

Organized Retail Crime Growing More Serious

Employee theft, shoplifting and organized retail crime (ORC) ranked as the top three most serious causes of losses. ORC is a growing problem with 62.5 percent of the retailers surveyed reporting an increase in these cases.

     Companies of all sizes are dedicating more resources to combat ORC, including 75 percent of independent retailers (1-10 stores) and 62.5 percent of regional food retailers (11-100 stores). Many large retailers have loss prevention units focusing exclusively on organized retail crime.

     The FBI has identified ORC as a major national issue costing as much as $30 billion a year with increasing evidence that the proceeds help fund terrorism. ORC gangs are sophisticated and fast, sweeping baby formula, medicines and other expensive items off shelves, repackaging the products and fencing them through flea markets and pawn shops and over the Internet at sites such as eBay.

     Other top-line results of FMI’s loss prevention survey:

Employee Theft

  • Nearly 40 percent of all shrink was attributed to stealing by store employees in 2005, averaging 4.3 cases per store — a figure that has remained stable over the past five years.

  • Losses averaged $467 per store and $235 per incident.

  • The cash register and service departments continue to be the most vulnerable, accounting for 62 percent of employee theft.

  • Retailers apprehended nearly one shoplifter per company per day in 2005, averaging 16 per store and $29.62 per incident.

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

Robberies, Bad Checks and Gift Card Fraud

  • Six in 10 companies reported at least one robbery, costing retailers an average of $3,543 per incident.

  • Retailers accepted more than half a million worthless checks, resulting in a median loss of $57,567 per company in 2005.

  • The explosive growth in gift cards has spawned a new form of fraud. These criminals, for example, tamper with bar codes to increase the value on stolen cards and buy gift cards with worthless checks or stolen credit cards, effectively laundering them. Two-thirds of retailers selling gift cards experienced some form of tampering, fraud or theft.

     For the first time, this report features detailed tables, in many cases presenting the results by company size measured in number of stores or sales volume. The report was based on surveys from 42 companies operating 7,260 stores.

     The report was made possible by the generous support of Checkpoint Systems, Inc. To purchase Supermarket Security and Loss Prevention 2006 (retailer/wholesaler FMI members $75, associate members $125, nonmembers $175), visit the FMI Store.