Retail Crime Costs in the UK

There are several official and unofficial surveys of retail crime in the UK, including the Home Office Crime Against Business 2018, the British Retail Consortium’s Retail Crime Survey 2018, the Association of Convenience Stores’ The Crime Report 2019, as well as Sensormatic’s Global Shrink Index and Checkpoint’s Global Retail Theft Barometer. Each one has a different methodology and covers a slightly different purpose. CRR has worked with most of these organisations at some time to help develop their surveys of retail crime, and ran the Global Retail Theft Barometer for eleven years.

Methods. For this report, Retail Crime Costs in the UK 2019, we identify the main costs of crime in summary form. We have taken account of the different studies published in 2018-2019 to further authenticate our findings, although CRR has carried out a survey of its own, involving 264 retailers drawn from different kinds of business, with a total of 19,000 stores and more than 400,000 employees. To prevent differences in the response rate from skewing the results, these are weighted by vertical market and by size of business.

Shrinkage. This is a shrinkage survey. Shrinkage is a measure used to check the loss rate by deducting the actual level of retail sales in a year from what retail sales should have been (based on goods delivered). The difference between the two values, adjusted for price increases/reductions and wastage is termed ‘shrinkage’ and is usually negative, meaning that stock has somehow disappeared.

Shrinkage and the losses caused by crime. The average shrinkage rate of the respondents to our study was 1.42% or almost £5.5bn. However this figure includes administrative errors, such as incorrect pricing or delivery mistakes, so it is not all crime. Table 1 shows the breakdown of the average shrinkage figure in 2019.

However if error is deducted from the shrinkage figure, and external thefts such as robbery, cybercrime and criminal damage (see Table 2) are included, then total UK retail crime losses in 2019 are estimated to be £4,821mn.

Shoplifting. Table 1 gives a figure for external theft of £1,993mn, equivalent to 34.6% of total shrinkage. This category is mainly shoplifting and organised retail crime committed by gangs. In a world where everyone now seems to carry a rucksack, goods can be hidden in their bag or a pushchair, clothes can be tried on in the cubicles and neither paid for nor returned, goods can be stolen and later returned for a full refund, or a ‘shopper’ can simply empty a shelf and walk out of the store with the products. The fact that the police now often avoid being involved in dealing with low-level retail crime and that an offender who has stolen less than £200 no longer needs to attend court, but can plead guilty by letter (Anti-Social Behaviour, Crime and Policing Act 2014), may have made potential offenders more willing to commit crime (Evans, 2019). The police in the year ending March 2019 recorded 374,395 shoplifting cases (Home Office, 2019), but the actual number of shoplifting cases is likely to be 15-21 times higher. Retailers have to ‘manage’ their use of the police to deal with shoplifters. They feel that unless they do this there is a danger that the police will not turn up at all. However if an offender is violent, the police normally respond speedily.

Organised Retail Crime (ORC). ORC consists of gangs or groups of criminals stealing merchandise, data or cash from retailers. It is not one single type of theft. This might involve theft from consignments, delivery vehicles or warehouses. It can involve large-scale organised shoplifting and refund fraud using a network of small-time thieves, some of whom may well have been trafficked by the same gang. Gangs may also use violence to ensure compliance by shop staff.

On average our respondents estimated that 28.2% of their losses from external crime was caused by ORC, a total of £562mn.

Self scanning. The growing use of self-scanning by retailers has been associated with some increase in theft by customers, because there is no one to look over them. Retailers that have installed self-scanning are examining ways they can minimise losses by theft or customer error when using this equipment.

Staff theft. It is difficult to estimate the true level of staff theft as it can be hard to detect. Our respondents estimated staff theft to be around 22.1% of shrinkage or £1,305mn. Some of it often involves collusion between a members of staff and customers, eg a relative or a friend, although there is evidence that some ‘collusion‘ is the result of intimidation. Staff can mis-scan items, give too much change, or place merchandise in the wrong part of the store which they then steal. Goods in perfect condition can be left outside near the waste bins for later collection, or fake refunds can be given on goods that are never returned.

Suppliers & Warehouse. Retailers found large-scale fraud also involving their warehouses and suppliers, costing £915mn (18.0% of shrinkage). Warehouses operating 24 hours a day can be places where large-scale thefts occur as well as small-scale pilfering. In warehouses dealing with fashion or electrical goods, even pilfering can have a large price tag.

Errors. Administrative error, or simply ‘errors’, was estimated to cost retailers £1,202mn or 25.3% of shrinkage. This large figure is ‘error against planned sales’ and has multiple different reasons. The computer price file may have the wrong price for certain items, the wrong change can be given, or merchandise may be sent to the wrong store. Although retail is detail, companies increasingly accept that a significant part of their losses are caused by incorrect information in the central system, maladministration and failure by staff to adhere to agreed protocols.