Loss Prevention Research Council Weekly Series - Episode 121 - USA Retail Shrink Report 2022
With Dr. Read Hayes, Tony D'Onofrio, and Tom Meehan
2022 NRF Retail Security Survey
https://nrf.com/research/national-retail-security-survey-2022
This week I want to focus on the just published 2022 NRF Retail Security Survey. First of all, congratulations to NRF, the Loss Prevention Research Council, and Appriss Retail for publishing a great new edition of the USA retail security survey.
Similar to the last five years, the average shrink rate in 2021 was 1.4%. When taken as a percentage of total retail sales in 2021, that shrink represents $94.5 billion in losses, up from $90.8 billion in 2020. While retail shrink encompasses many types of loss, it is primarily driven by external theft, including theft attributed to ORC. In fact, retailers, on average, saw a 26.5% increase in ORC incidents in 2021. Beyond the loss of goods, these incidents are increasingly alarming. Eight in 10 retailers surveyed report that the violence and aggression associated with ORC incidents increased in the past year.
In terms of the size of retail teams, the majority of respondents’ AP/LP teams are remaining the same; however, a relatively large subset (37.1%) of the retailers indicated that their departments are growing, while only 11.9% of participating retailers reported that their LP/AP teams were shrinking in 2022.
Modern loss prevention teams are responsible for securing a variety of facilities and assets. 100% of respondents reported that their LP/AP teams were responsible for physical store locations; however, 85.5% indicated that they were responsible for securing the organization’s headquarters, and 83.9% reported that their LP/AP team was responsible for securing supply chain facilities.
One of the greatest changes in retail over the past 30 years has been the shift to ecommerce. As the results above show, 53.2% reported that their team is responsible for securing their ecommerce platform, but only 9.7% reported that they were responsible for the retailer app ecosystem.
A great question asked in this edition, “for your AP/LP department to become more successful, which of these skills do you believe need to be strengthened or further developed?” The majority of respondents reported needing greater analytic and investigative skills, which likely reflects the increasingly important role of business intelligence in the loss prevention industry, as well as retailers’ need to investigate organized retail crime.
Close to half (44.5%) of respondents reported that their 2022 LP/AP budgets were increasing compared with the previous year – 28.6% reported that budgets were increasing by 1% to 9.9%; 12.7% reported that they were increasing by 10% to 24.9% and 3.2% reported that they were increasing by more than 25%.
Most respondents are spending more on technology or capital/equipment, while a sizeable minority reported that budgets for guards or “other” were increasing.
On average, participating retailers attributed the greatest portion of shrink (37%) to external theft, including organized retail crime, followed by employee/internal theft and process/control failures.
Shrink control is only one aspect of loss prevention – these departments must also protect store associates, customers, facilities and many other types of non-merchandise assets. The majority of respondents report incidents of guest-on-associate violence, external theft and organized retail crime, in particular, have become more of a priority compared with five years ago. However, respondents also indicated that other violent threats such as mass violence/active assailants (57.9%) and gun violence (52.6%) have risen in priority in recent years.
Respondents were also asked to list their top three priorities for 2022. The responses can be categorized as offense-oriented (e.g., external theft, internal theft, violence, fraud, organized retail crime); tactic-oriented (e.g., target hardening, training, education, investigations); resource-oriented (e.g., personnel, technology); or operations-oriented (e.g., operational controls, policies, reporting).
The majority of respondents (56.9%) authorize LP/AP personnel to apprehend shoplifters, while only 19% authorize non-LP/AP personnel to make apprehensions, and 37.9% do not allow any of their team members to make apprehensions.
Additionally, just 12.7% of respondents reported that they have prosecution thresholds for internal incidents and 29.1% reported that they have prosecution thresholds for external incidents, while the vast majority (70.9%) reported that they did not have dollar-value prosecution thresholds for either internal or external incidents.
As retail risk changes, retailers must turn to new strategies and technologies to mitigate those risks. The greatest percentage of participating retailers reported that they were implementing or planning to implement: (1) RFID systems; (2) AI-based point-of-sale (POS)/self-checkout (SCO) video analytics; (3) license plate recognition; and/or (4) self-service locking cases or lockers.
In many ways, these technological changes represent a shift toward more intelligence-based loss prevention practices, as many of the technologies provide more data, and richer data, about offenders and loss events at stores and other facilities. This intelligence is necessary for investigating crimes, but it is also necessary for detecting where problems are occurring and addressing those problems.
Finally, COVID-19 has had tremendous implications for the retail risk landscape. Fully 89.7% of respondents reported that COVID-19 had resulted in an increase in the risk of violence within their organization. These echoes earlier findings showing that retailers are increasingly concerned about violence in their stores, as well as the safety of their employees. The majority of respondents also reported that overall risk increased, as well as the risk of shoplifting, organized retail crime and employee theft. In contrast, 60.1% of respondents said that COVID-19 had no impact on cargo theft risk at their organization.
Organized retail crime (ORC) has received increased attention from the media, public and policymakers during the past several years, and, year after year, the results in the NRSS have shown that ORC is of growing concern among retailers. This year was no exception.
The majority of participating retailers (68.5%) reported that they did not have an ORC team; in fact, only 31.5% reported that they did.
While nearly 53% responded Organized Retail Crime increased, 27.5% said it stayed the same, and nearly 20% were not sure.
The majority of participating retailers (81.2%) reported that ORC offenders are somewhat more or much more violent when compared with one year ago. This is concerning, especially since over one third (35.9%) reported that ORC offenders were much more violent when compared with one year ago.
Research suggests that some products are more likely to be targeted by offenders than others. For example, the CRAVED model suggests that some items are more likely to be stolen than others. CRAVED is an acronym that refers to items that are: (1) concealable; (2) removable; (3) available; (4) valuable; (5) enjoyable; and (6) disposable. Items that have more of these characteristics are more likely to be stolen.
Hot items can be found in almost all retail categories and the report provides a great list. Again, congratulations to NRF, the Loss Prevention Research Council, and Appriss Retail for publishing a great new edition of the USA retail security survey.
