U. S. Retailers Expect $9 Billion in Fraud During Holidays

A new study conducted by the Centre for Retail Research, an independent research group in the United Kingdom, reports that retailers in the United States are expected to lose $8. 9 billion during the 2012 holiday season (mid-November via Christmas) due to shoplifting, employee theft, and vendor or distribution losses. That figure is up four percent from last year.

The report, funded with a grant from Checkpoint Systems, indicates that shoplifters will steal $3. 8 billion worth of goods. Employees will rip off retailers to the track of $4. 7 billion, while another $400 million will be lost due to vendor fraud or perhaps administrative errors.

Radio frequency identification probably cannot do much to stop shoplifting, as people will usually find a way to steal from retailers. But having serialized data on everything within a store would let a retailer know what has been taken, so that those products could then be replenished. There would be fewer cases of items sitting in the back because a retailer thinks thieved items are still on the shelf, which would equate to greater sales and fewer markdowns.

Even more important, RFID tags might help reduce the incidence of employee theft, which is a larger problem than shoplifting. American Apparel found that will at its RFID-enabled stores, internal shrinkage declined by an average of 55 percent¡ªand, at some stores, by around 75 percent (see RFID Delivers Unexpected Advantages at American Apparel). Stacey Shulman, American Apparel's VP of technology, attributes this decrease into a reduction in process errors, as well as a change in the company's tradition.

"Like many retailers, internal theft and process issues account for about 60 percent of our dissove, " Shulman told RFID Journal. "RFID, as it happens, affects internal shrink in a profound way. We all measure everything, and have accountability of every item. Every single item counts, and when we change that tradition, employees start treating product better. Internal theft will go down, and process errors go down. "

That may be something most retailers are not factoring into their return-on-investment (ROI) calculations. If theft keeps going up, but they might want to start thinking about RFID for lowering shrinkage.

In addition , the National Retail Federation (NRF) predicts return fraud will cost retailers another $2. 9 billion this holiday season. Return fraud occurs when people return stolen merchandise, use counterfeit statements or return items already worn and/or applied that are not defective. According to NRF's 2012 Return Scam Survey, completed by loss-prevention executives at 62 retail companies, the industry will lose an estimated $8. nine billion to return fraud this year, including $2. on the lookout for billion during the holiday season alone. Overall, NRF studies, retailers estimate 4. 6 percent of holiday break returns are fraudulent.

RFID can obviously reduce return fraud. By linking a unique item to some purchase, a retailer can know if the product being returned is legitimate. Of course , not all retailers require a receipt when you return an item, so RFID won't completely eliminate the problem. But if the technology can reduce return fraud by 20 percent, that would be a huge benefit for most retailers.

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