Shoplifting is at its highest level for nine years but only around one in 10 of the crimes are reported to police, figures suggest.
Retailers also claim that organised crime gangs are targeting expensive items and have driven up the cost of the average theft by nearly two-thirds.
The British Retail Consortium's (BRC) annual crime survey found that among 30 retailers, who represent 51% of the retail sector by turnover, there were 631,391 incidents of customer theft in 2012-13, the highest level recorded in the survey for nine years.
Only 9% of these crimes were reported to police, a drop from 12% the previous year, in what the BRC suggests shows a lack of faith in law enforcement.
The report said: " This is an indication of the lack of confidence businesses have in the police response to customer theft and the perception that it is often perceived as a 'victimless' crime and as a result not taken seriously."
The companies surveyed estimated that around a quarter of customer thefts were never detected.
Figures also showed that the average value per theft had increased to £177, a 62% rise on the previous year and again the highest figure for nine years.
The report found that department stores and mixed retailers suffered the highest value thefts, at around six times the price of the average supermarket theft.
It said: "Respondents told us that organised crime gangs systematically targeting higher value items is a factor driving up the average cost of customer theft.
"The items targeted included branded electrical goods, designer clothing, handbags and power tools.
"As well as being prepared to travel further to commit such thefts, anecdotal evidence indicates that organised groups are also more willing to obtain a wide range of high value items, rather than focusing on theft of a particular brand or item as previously."
The average cost per incident has risen steadily from £69 since 2007-8, following a drop from £156 the previous year.
Helen Dickinson, director-general of the British Retail Consortium, said: "Theft from stores pushed the direct cost of retail crime up to £511 million last year, 166% higher than five years ago.
"Far from being victimless, we all pay for this increased stealing through higher prices and, increasingly, shop closures and damage to town centres as safety is reduced and communities are blighted."
Criminal damage was down by 21% but the average cost per incident went from £962 in 2011/12 to £2,062 in 2012/13.
Robbery was up by 48% and eight in 10 respondents reported a rise in online fraud.
Ms Dickinson said: "Last year we also saw a dramatic increase in fraud and e-crime with eight in 10 retailers reporting a rise in fraud and the majority of retailers telling us that cyber-attacks pose a critical threat to their business.
"Combined with the increase in organised theft, this means that retailers are facing an increasingly sophisticated criminal.
"We want to work closely with Police and Crime Commissioners and the new National Crime Agency and National Cyber Crime Unit to fight this serious crime, from fraud, to theft, to cyber-attacks. Our engagement has been positive so far, but it is still early days and it is important that they implement measures such as single points of contact and create dedicated business crime strategies."
The survey team wants to see a single definition of "business crime" to measure offences and allow better analysis of data.
Crime Prevention Minister Norman Baker said: "Crime has fallen by more than 10% since June 2010, according to the Independent crime survey, and it is clear that police reform is working.
"There are positive findings in this report, including a fall in numbers of burglaries and incidents of criminal damage.
"But we are not complacent, and are working closely with the retail sector and law enforcement to continue to improve our response to crime in this sector.
"We have also recently launched the Organised Crime Strategy and National Crime Agency to tackle the growing threat of serious and organised criminality."