Key Takeaways
- External theft is the largest single source of retail loss at 25%, but 75% of losses originate elsewhere, including supply chain, returns, e-commerce fulfillment and administrative errors.
- Return fraud rose for 68% of retailers even though they rank fraud prevention fifth among seven loss priorities, and only retailers spending more than 2% of sales on loss prevention reported more declines than increases in loss.
A new IHL Group and Sensormatic Solutions joint study shows how complicated retail shrink really is and why leaders need to begin redefining loss within their operations.
IHL Group’s Beyond Shrink: 2026 Global Total Retail Loss Study found that while external theft remains the largest individual source of loss (25%), the bulk of losses (75%) originates in other areas of the retail business.
The study examined five key areas of the business where retailers experience loss— store theft, supply chain, returns/reverse logistics, e-commerce fulfillment and administration— challenging retailers to look beyond the traditional front-door view of shrink and understand loss as a connected, enterprise-wide issue.
How Is Data Changing Retailers’ Understanding of Loss?
Investments in digital data collection and analytics systems have fundamentally changed retailers’ understanding of loss within their stores and supply chains, said Greg Buzek, founder and president of IHL Group.
“The impact of external theft and shoplifting, including organized retail crime (ORC), is real, and it is rising globally— but it’s not where the majority of loss dollars actually go,” said Buzek in a statement. “The report identifies and quantifies this gap with new clarity, laying bare how outdated benchmarks and measures turn into tunnel vision, gaps in deterrents and lost opportunities.”
Where Does Most Retail Loss Actually Come From?
The study’s findings highlight the ways in which precise, connected data is expanding retailers’ understanding of shrink and changing how leaders approach loss prevention. Internal losses aren’t always intentional as retailers report that administrative process errors cost an average of $103.40 per incident, nearly matching the $107.00 average cost of employee theft.
Returns remain a significant blind spot. Return fraud increased for 68% of retailers, nearly matching the 69% reporting increased shoplifting in their retail locations. Even so, retailers rank fraud prevention fifth among seven when prioritizing loss-related performance measures. The data shows that:
- Supply chain losses add up fast.Supplier fraud, warehouse/sales-area shrink and goods-receiving loss together account for 33% of retailers’ total losses.
- ORC is growing globally.Australia reported the highest rate of ORC growth in the study, with 80% of retailers reporting increases, while 71% of U.S. retailers and 67% of Spanish retailers also reported rising ORC activity, reinforcing that ORC is now an international challenge.
- Scale changes exposure.External theft and ORC account for 26% of total loss among retailers generating $1 billion+ in revenue; for retailers with revenue under $250 million, it drops to 17%. A similar gap surfaces in shoplifting frequency, with 71% of the largest retailers surveyed seeing increased shoplifting, compared with just 28% of the smallest retailers.
Does Higher Loss Prevention Spending Reduce Retail Loss?
Investment levels are associated with different loss outcomes. The average loss prevention budget reported in the study is about 1.2% of sales, and retailers reporting spending above 2% of sales were the only cohort in the study to report more declines than increases across loss vectors. Retailers that align staffing and monitoring to traffic patterns report better loss outcomes, with 91% citing peak traffic periods and 89% citing event-driven crowd surges as key drivers of loss.
Tony D’Onofrio, president of Sensormatic Solutions, noted the industry for years has understandably focused on the most visible forms of retail loss, but what’s readily visible doesn’t always provide a full picture.
“This research shows that loss is moving across the enterprise into supply chains, returns, digital commerce and operational processes,” said D’Onofrio. “The opportunity now is to use data, technology and a broader view of the business to understand where losses really occur, respond accordingly, and make retail better.”
For a comprehensive look at the findings and their implications for retailers worldwide, download the full Beyond Shrink: The 2026 Global Total Retail Loss Study by clicking here.
