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Retailers Lose Big Money in Fraud

According to industry research by the National Retail Foundation (NRF), losses associated with theft, fraud, and error cost retailers billions each year. 


From the NRF 2018 Survey:


In today’s challenging retail environment, shrink — a loss of inventory related to theft, shoplifting, error or fraud — continues to take a bite out of the bottom line. Whether perpetrated by a dishonest employee or organized retail criminals, shrink costs retailers about 1.33% of sales, on average — a total impact on the overall U.S. retail economy of $46.8 billion in 2017.


The 2018 National Retail Security Survey includes positive signs, as some of the spikes in the 2017 survey returned more to historical norms. However, overall shrink continues its upward trend — especially for those who see it as a higher percentage of sales. In 2015, only 17.1% of respondents reported shrink at 2% of sales or more. That is up to 20% in the 2018 survey.

[read the full survey here]

This infographic below summarizes the key findings, and shows that the largest contributor to "shrink" is shoplifting and fraud. The second largest contributor is employee theft.



Infographic: Retailers Lose Billions to Theft, Fraud and Human Error | Statista



For discussion:

In business schools, we learn about "Agency Theory."

  • What is agency theory? What are agency costs?
  • How does agency theory explain some of the findings of this key study?
  • How might retailers try to prevent shrink costs by changing how they address the principal-agency conflict?
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