Discussions around retail theft often only refer to big industry players such as Target, which recently closed nine US stores due to rising crime.

However, new research from the National Retail Federation (NRF) and Software advice suggests that inventory shrink, particularly through theft, is a more prescient problem for small to midsize retailers (SMB).

Survey data reveals that 68% of SMB retailers are experiencing shrink rates above the industry standard of 1.5%. This rise marks a significant challenge for businesses with smaller margins and less sophisticated loss prevention strategies.

The survey findings also indicate an increase in shrink across contributing factors such as theft, inventory damage, and vendor fraud. In fact, 34% of SMB retailers report a rise in shrink over the past 12 months, and 46% have experienced more theft at their stores.

What is causing external theft and shrink for retailers?

Respondents attribute external theft to economic pressures and the rising cost of living.

In terms of operational factors, high employee turnover and inexperienced administrative staff are significant contributors, with some SMBs attributing this to the uptick in employee theft.

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By GlobalData

Rising shrink is also more pronounced in businesses operating a larger number of physical stores (20 or more), indicating that growing businesses with more exposure to the public must anticipate losing more inventory and revenue as they scale their operations.

What strategies can be used to combat theft and shrink?

Of the retailers who have observed more theft, 88% say they now consider loss prevention a top priority.

Over half (54%) of SMB retailers have installed or updated security cameras in the past year, a move indicative of their commitment to improving surveillance and reducing theft.

Additionally, the introduction of new inventory management system reporting software and training techniques reflects a shift toward a proactive, technological approach that can keep employees safe with minimal impact to customer experience.