Data breaches are eating into retailer’s profits

As more and more data breaches take place, retail merchants across the Garden State are seeing their profits drop, according to a recent study.

A new study by LexisNexis Risk Solutions finds retailers have lost 0.68 percent of their revenue to fraud this year, compared to 0.51 percent in 2013.

"Breaches wind up costing retailers more because we're contractually obligated with the banks and with the credit card companies, that if there are breaches that some of the costs are covered by the retailers," said John Holub, president of the New Jersey Retail Merchants Association.

Holub said "if it's somebody that bought a product, that product is out the door, and unfortunately that's also a loss on the retailers side as well."

According to Holub, one of the top concerns of retailers is the safety and security of all consumers data, but unfortunately criminals are becoming extremely sophisticated, data breaches are becoming more common and stopping them from happen is extremely difficult.

He also said this problem is not only with retail establishments, it's happening to financial institutions, colleges and universities, governments and hospitals.

"Data breaches have a significant cost on the bottom line for retailers, but I think really, when it comes to the safety and security of the information of our customers, I think that's the paramount issue for retailers and why they're placing such an emphasis on trying to combat this," Holub said.

He said the magnetic strip technology that is being used today "is equivalent to an eight track tape."

"We've been asking the banks and credit card companies to update the system for quite some time - but they've been very hesitant," he said. "However, I think we're seeing light at the end of the tunnel and by next year, credit cards will begin transitioning to the chip and pin, which is a much more secure system for data to be transferred and hopefully breaches will be a much more rare occurrence."

Consumer groups note that fraud related costs are usually passed along to the consumer in the form of higher prices for products.