Retailers must look beyond discounts and sales promotions and focus on the dual threats of dishonest employees and shoplifters in order to turn a profit during this year's critical holiday shopping season, a new University of Florida retail study reports.

Inventory "shrinkage," a combination of employee theft, shoplifting, vendor fraud and administrative error, cost the nation's retailers $31.3 billion last year, according to the just released National Retail Security Survey, which analyzed theft incidents from 118 of the largest U.S. retail chains. The annual survey was conducted by the University of Florida with a funding grant from ADT Security Services, Inc., a unit of Tyco Fire & Security.

University of Florida criminologist Richard Hollinger, Ph.D., who has directed the National Retail Security Survey for the past 10 years, said the results show that in 2001 retailers lost 1.7 percent of their total annual sales to inventory shrinkage. Given that the surveyed portion of the retail economy annually transacts over $1.845 trillion dollars, this percentage of loss is worth over $31.3 billion, making inventory shrinkage the single largest category of larceny in the United States. This figure is larger than motor vehicle theft, bank robbery and household burglary combined.

"For the second year in a row, employee theft hit record levels, with retail security managers attributing over 48.5 percent of their losses this year to theft by disgruntled workers," Hollinger said. "Translated into dollars, employee theft cost retailers a record $15 billion."

Hollinger said in comparison, 31.7 percent of retail losses were the result of shoplifters, which cost retailers $9.7 billion in lost revenues. The remainder of retailer losses was due to paperwork errors (15.3 percent) and theft by vendors (5.4 percent).

Mike Snyder, president of ADT Security Services, Inc., said controlling losses from retail theft is even more critical during the holiday shopping season when stores are more crowded and are often staffed with temporary workers.

"The holiday shopping season is really a make or break season for many retailers. It is also an extremely busy time, which leaves stores more vulnerable to theft," Snyder said. "Many retailers are using security technologies such as anti-shoplifting, digital video and point-of-sale systems to help their staff zero in on theft problems."

Among the newest security technologies being used by retailers this year to control losses due to theft:

-- Point-of-sale data mining software solutions that detect potential
theft problems at the cash register and alert appropriate personnel in
real-time. These data mining packages can be tied to digital video
recorders to provide crisp, clear images of who sold what to whom with
a click of a button and delivered to any location around the world.

-- Source tagging programs where tiny anti-theft labels about the size of
a paperclip are placed inside an actual product or product package,
effectively hiding it from view.

-- Self-alarming anti-theft tags that broadcast an audible alarm
throughout the store when a shoplifter attempts to improperly remove it
from merchandise.

"Stores that utilize security technologies generally have lower overall inventory shrinkage than those retailers who do not," Snyder said. "Technology also allows employees to focus more time on assisting customers and less on patrolling the aisles."

Hollinger said it is not just retailers who should be concerned about retail theft this holiday season. Ultimately consumers are hurt the most in the form of higher prices.

"An average family of four will spend more than $440 this year in higher prices because of inventory theft," Hollinger said. "Thieves also generally target hot selling items, which means those must- have toys on your child's wish list are less likely to be available on the store shelves."