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'Shrinkage' brings major losses to retail business

COPENHAGEN — Noting that shoplifting and other forms of theft have resulted to enormous losses in revenues among American and European retail businesses, security experts have urged retailers to embrace the latest technology in network video surveillance.

Loss prevention expert David Gorman, consultant at American firm David Gorman & Associates, said US retailers lose almost Dh92 million ($25 million) in daily revenues due to "shrinkage" from employee theft and some 50,000 shoplifters.

He added that each shoplifter who was caught once admitted that he or she had been successful in at least 48 counts of retail theft, which also includes organised retail crime, administrative error or vendor fraud.

Speaking during the fourth Axis Press and Media Event 2007, Gorman said that "retail shrinkage", or inventory losses from various forms of theft, is equivalent to 20-40 per cent of retail profits in Europe.

According to "Business Secured: Retail Makes the Business Case for Network Video Surveillance", a paper released by Axis Communications, said that last year retail crime costs every citizen in 24 European countries surveyed Dh370.49 (71.23 euros).

This is due to the rule of "33" being embraced by retailers in which they expect a Dh521.713 (100 euros) item to yield a net profit of Dh15.65 (three euros). If this item is stolen, a retailer has to sell 33 of the same to pay for the cost of one theft.

A global provider of internet protocol-, or IP-based video solutions headquartered in Sweden, Axis said that in the US, 139 retailers testified that their retail shrinkage was 1.61 per cent of sales or Dh152.75 billion ($41.6 billion) for 2006.

"Getting control of these losses is critical to any company's long-term success, and requires a very holistic security approach," Gorman said. "Network video surveillance, combined with intelligent video analytics, is an important tool to address this challenge."

He said that Finland and the UK registered the highest rate of retail shrinkage at 1.34 per cent and 1.33 per cent respectively while Denmark posted 1.24 per cent. He was quoting a survey done by the largest and most respected retail theft rating agency, European Retail Theft Barometer, which five years ago put UK's retail shrinkage at 1.77 per cent.

Experts said there could be similar retail theft situations in other countries or region but there are just no available data or rating agencies doing what needs to be done.

Flemming Bang Dammann, corporate director of Security at Denmark's Dagrofa Group, which operates 33 retail companies, said that while the majority of retail stores worldwide have CCTV (closed-circuit television) cameras installed, they don't monitor these in real time.

Axis officials said this is the reason why they keep on innovating network video products that can monitor activities as well as alert authorities or store personnel.

Gorman said this is a very important development considering that a human being can only last 20 minutes of continuous monitoring of network video.