Shrinkage, otherwise known as a reduction in inventory due to shoplifting, employee theft or other errors, significantly impacts a retailer’s bottom line.

Tyco Retail Solutions, a global leader in data-driven loss prevention, has released the industry’s most extensive study conducted in recent years of senior retail executives, providing insights into the sources and impacts of global shrink. The report is a culmination of research that measures world-wide retailer performance, allowing them to benchmark their shrink rates to others in the same vertical and region.

Tyco commissioned global retail market intelligence provider PlanetRetail RNG to conduct the 2018 Sensormatic Global Shrink Index which included more than 1100 retail decision makers across four regions, 14 countries representing the world’s leading economies and 13 vertical markets. They operate more than 229,000 stores and generated an estimated US$1.56 trillion in sales during 2017-2018. The retailers work in the world’s leading economies, which account for 73 per cent of global Gross Domestic Product (GDP), and retailers account for 80 per cent of total retail sales.

The scope and coverage of the study includes how loss prevention professionals are measured and incentivised, the technologies and services being leveraged, the most-often stolen items and brands, and data elements being used to monitor and predict shrink.

According to the Sensormatic Global Shrink Index, shrink cost retailers nearly $100 billion globally last year. Out of this, 24 per cent comes from the Apac region, amounting to $24.04 billion, which makes it the third-ranked region. Shrinkage across retail stores in Apac accounted for 1.75 per cent of sales, slightly below the global rate (1.82 per cent). Countries included in this study for Apac are Australia, China, India, Japan and South Korea.

Other key Apac findings:

• India, with 2.13 per cent shrinkage, had the world’s second-highest rate. This could be attributed to the lower level of LP technology investment locally.

• While China took seventh spot (1.96 per cent), its shrinkage value amount to $13.52 billion, which makes it the second biggest loss as a country after the US ($42.49 billion).

• Japan has the second lowest shrinkage rate in the world (Germany being the lowest).

• Main sources of shrink are from external sources – namely shoplifting (29 per cent) and vendor/supplier fraud (29 per cent). Japan leads the region with a reported 35.5 per cent from the latter, the highest reported in the region.

• Drugstores, pharmacies and perfumeries have the highest rate of shrink by retail vertical at 2.62 per cent.

• Public view monitor is most popular loss prevention investment, followed by closed-circuit television (CCTV) and Electronic Article Surveillance (EAS).

These statistics highlight the magnitude of shrink’s impact on retail, and affords the opportunity to dive deeper into the sources of shrink and the various loss prevention tools used to combat loss.

“Shrinkage is still a pressing issue for retailers today. It adversely affects their bottom line. With the concepts of “New Retail” and burgeoning of online retailers disrupting brick-and-mortar stores in Apac, reducing shrinkage will allow more resources to be directed into improving customers’ experiences. This profitability risk can be combated by the implementation of solutions such as Electronic Article Surveillance (EAS) and Radio Frequency Identification (RFID) Inventory, thereby safeguarding store merchandise and securing profits”, said Jack Wu, GM, Apac at Tyco Retail Solutions.

“The Sensormatic Global Shrink Index benchmarks retailer performance globally and sheds light on other factors affecting loss prevention. Knowing the state of shrink helps retailers better assess the challenges and solutions to make merchandise secure yet accessible for a better customer experience.”

Tyco Retail Solutions is a globally trusted leader, helping retailers discover new ways to control loss and leverage it as an opportunity to increase profitability. Download the 2018 Sensormatic Global Shrink Index here.

PlanetRetail RNG is a global intelligence and advisory business exclusively focused on retail.