A joint study by IHL Group and Sensormatic Solutions reveals that 75% of retail losses occur outside of traditional store theft. The research highlights that supply chain issues, return fraud, and administrative errors are the primary drivers of financial shrink across the industry.
The 75 percent of retail loss that doesn't happen on the shop floor
For years, the public narrative around "shrink" has been dominated by viral clips of organized retail crime and brazen shoplifting. However, according to the IHL Group and Sensormatic Solutions joint study, the vast majority of financial loss is actually happening in the shadows of the business—specifically within the supply chain, e-commerce fulfillment, and administrative processes.
This shift in understanding reflects a broader trend where the "visible" crime of a stolen handbag is far less damaging than the systemic failure of a warehouse or a digital glitch. for the modern consumer, this means the friction we feel at checkout or the tightening of store security is often a reaction to a misunderstanding of where the money is actually disappearing.
Why return fraud rose for 68 percent of retailers
One of the most significant "blind spots" identified in the research is the reverse logistics process. As the report stated, return fraud increased for 68% of retailers, a figure that nearly mirrors the 69% of businesses reporting a rise in traditional shoplifting. Despite this,retailers continue to deprioritize fraud prevention, ranking it fifth among seven key loss-related performance measures.
The financial bleed isn't always the result of a malicious actor,either. The study found that administrative process errors cost an average of $103.40 per incidet, which is nearly identical to the $107.00 avergae cost associated with employee theft. This suggests that corporate inefficiency is almost as costly as internal dishonesty.
Australia's 80 percent surge in organized retail crime
While the majority of loss is systemic, organized retail crime (ORC) remains a growing international threat. The IHL Group and Sensormatic Solutions data shows that Australia has seen the highest rate of ORC growth, with 80% of retailers reporting increases. This outperforms the growth rates seen in the U.S. (71%) and Spain (67%).
The scale of the business also dictates the level of risk. External theft and ORC account for 26% of total loss for retail giants generating over $1 billion in revenue. In contrast, for smaller retailers with revenue under $250 million,that figure drops to 17%, suggesting that larger targets are more attractive to professional theft rings.
The 91 percent of losses tied to peak traffic patterns
The report emphasizes that data-driven staffing is the most effective deterrent against loss. Specifically, 91% of retailers cited peak traffic periods and 89% cited event-driven crowd surges as the primary drivers of loss. Retailers who align their monitoring and staffing to these specific traffic patterns report significantly better outcomes.
However, several questions remain regarding the implementation of these "connected data" systems. The report mentions that digital analytics have changed the understanding of loss, but it does not specify which technologies—such as AI-driven cameras or RFID tracking—are most effective. Furthermore, while the report highlights the rise in return fraud, it remains unclear how retailers plan to curb this without alienating loyal customers through overly restrictive return policies.
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