New research by security technology firm Thruvision and Retail Economics highlights that UK retailers are under growing pressure from theft across distribution centres (DCs), as well as in stores.
The research forecasts the value of retail theft will be £7.9bn in 2023. Shoppers account for 60% of the value of theft (£4.7bn), while employees working in DCs, distribution and stores account for 40% (£3.2bn). Theft in DCs is a current hot spot for employee crime that is under-reported by retailers – some 42.6% of total employee theft is from DCs.
Around two-thirds of retailers interviewed for the study noted that over the past decade the opportunity for crime in DCs has accelerated. Among those that have seen an increase in employee theft over the past year, 70% state they’ve seen an increase in organised crime in DCs.
Colin Evans, CEO of Thruvision, commented: “That employee theft is a rapidly growing problem is not a surprise, but the scale of financial losses suffered by UK retailers in their distribution centres really is. What is even more surprising is that so few retailers seem to be prepared to deal with this very serious problem when proven technology solutions exist.
”Our fast, effective and employee-friendly security technology is used to check quickly many thousands of loyal and hard-working staff every day in DCs across the UK, and is proven to deter criminals, petty and organised, from stealing from their employers.”
In a survey of 100 managers and directors responsible for loss prevention at large UK retailers, a net balance of a fifth (20.9%) has seen an increase in employee theft over the past year.
Two-thirds of respondents believe financial pressure as a result of the cost-of-living crisis has driven an increase in theft by employees at DCs over the past year to some degree.
A quarter (26.4%) believe the type of products being stolen in DCs has changed over the past year, shifting towards smaller items and valuable electrical products that are easy to resell. Additionally, there has been a shift towards essentials such as groceries and clothes, as the recent economic backdrop bringing high inflation and rising interest rates contributes to growing crime.
The step up in theft is particularly impacting food retailers. A net balance of a third (33.4%) of food retailers are suffering an increase in theft, with one East Midlands-based grocer (£300m+ turnover) seeing a rise in “all types of food” being stolen over the past year.
When asked to consider the current main drivers of employee theft (Figure 2), the cost-of-living remains a key issue for almost half (48.1%) of loss prevention managers.
But there are structural shifts in the labour market impacting crime, with half (50.9%) of retailers considering a reliance on temporary staff as a key driver of theft. Retailers grappling current vacancies rely on a transient workforce. Although minimum wages have increased in recent years, there’s perception of declining job satisfaction as the intensity of work changes and greater sickness in the labour force impacts full-time work.
Among retailers that have seen an increase in employee theft over the past year, 70% state they’ve seen an increase in organised crime in DCs, exploiting the labour shifts, which leaves retailers more exposed to widespread theft at scale.
Around two-thirds (59.8%) believe that over the past decade the opportunity for crime in DCs has accelerated. Opportunities for crime are twice as likely to be prevalent among larger retailers (£1bn+ turnover) than smaller players, given the scale of goods handled and distribution network making crime more possible.
When considering the main reasons for increasing theft in DCs over the past decade, issues are concentrated around automation, complexity of operations and reliance on subcontractors, which all impact the pool of labour and workforce culture.
Meanwhile, over a third (35.9%) of loss prevention personnel stated that they do not believe their security equipment and internal policies are fit to deal with the level of theft being experienced.
Retailers investing in loss prevention are focused on better tracking of inventory (69.7%) and staff training such as code of conduct (58.6%).
There are gaps between existing tools and the real-world challenges of theft, reducing the effectiveness in deterring, detecting and addressing theft. Critically, just one in six (15.7% of) retailers are investing in detection and deterrence technology to solve DC theft, and only two in five (39.7%) are focusing on information sharing (e.g. with other retailers and with law enforcement).
It comes as 55.5% of retailers do not routinely attempt to prosecute employees who steal from DCs. Among reasons why retailers do not pursue prosecution, more than half (55.7%) believe “police do not take theft seriously enough”, which is leading to more than a third (37.6%) to take matters in their own hands, prioritising internal disciplinary over legal prosecution.
This results in crimes going unrecorded, making it easier for businesses to unknowingly hire criminals, which has the potential to perpetuate theft across retail.
Richard Lim, CEO of Retail Economics, commented: “Retail crime adds to a backdrop of rising operating costs that have squeezed profitability in recent years. A startling 40% of theft stems from a minority of retail employees. The nature of theft becoming more organised demands a widespread and holistic approach incorporating deterrence, detection, and industry-wide collaboration.
“Proactive measures not only curb the impact of theft but also cultivate a safer environment, attracting talent and fortifying the industry. Striking a balance between fairness among honest employees and deterrence is now pivotal as structural shifts leave retailers vulnerable to disconnected workforce and supply chain complexity.”
NAM Implications:
- Two distinct and different problems.
- Instore:
- The need for a trade-off between access to products.
- And restricting access, leading to less impulse selling, at least.
- Or dilution of regular purchases at most.
- DC Theft:
- Underpaid staff can feel that topping up remuneration ‘on the job’ is permissible…
- If remuneration is adequate, then a zero-tolerance policy re theft is part of the deal.
- Why go bust people because some people don’t want to pay?
