US retailers are warning of a surge in thefts, costing some of them hundreds of millions of dollars as they try to outwit organised criminals with extra security and surveillance.
Target has alerted investors that “shrink” — an industry term covering shoplifting, employee theft and organised retail crime — will cut its profits this year by $500mn more than in 2022.
DIY retailers such as Home Depot and dollar stores including Dollar Tree said shrink had cut their gross margins by several basis points in the first quarter, while Foot Locker was among several retailers citing a “significant” year-on-year increase.
Retailers’ concerns about shoplifting grew through the economic and social upheavals of the pandemic, with the industry losing almost $100bn to shrink in 2021, according to the National Retail Federation. But the problem has worsened since then, say industry members, scarring employees and scaring off customers.
New York mayor Eric Adams said the city had experienced a 45 per cent increase in retail theft complaints last year as he announced plans earlier this month to “end the crime run on our retail stores”.
More than 80 per cent of US retailers had an increase in losses last year, according to Jack L Hayes International, a “loss prevention” consultancy. Respondents to its survey apprehended 46 per cent more shoplifters and dishonest employees, retrieving 70 per cent more in stolen goods, but for every dollar they recovered they reported losing more than eight dollars to theft.
Retailers are experiencing more frequent, costlier and more violent incidents this year than before, said Read Hayes, a criminologist at the University of Florida and director of the Loss Prevention Research Council (LPRC).
This had triggered a “huge” increase in spending to try to secure companies’ merchandise and employees, he said. One survey, from Insuranks.com, found that 56 per cent of retail workers felt unsafe.
The LPRC is working with retailers and technology companies including Nvidia, Lenovo and Intel on responses ranging from tags for tracking stolen goods to artificial intelligence-powered surveillance systems for identifying repeat offenders and their vehicles and weapons.
Some retailers admit that their efforts have not had the impact they hoped for.
Scott Settersten, Ulta Beauty’s chief financial officer, recently told analysts: “Coming into 2023, we thought the shrink trends were going to moderate a little bit because of some of the investments we were putting behind mitigation tactics. But they haven’t resonated yet.”
Other retailers have responded by closing outlets altogether, with REI and Nordstrom following Starbucks in shutting stores in West Coast cities. The owner of the San Francisco mall Nordstrom vacated told local media its exit reflected the city’s “lack of enforcement against rampant criminal activity”.
“Ultimately, shrink will either be resolved through defensive merchandising, store closures and/or through government action at the local level,” Rick Dreiling, chief executive of Dollar Tree, told analysts.
One piece of industry-supported legislation, the Inform Consumers Act, passed Congress last year and is intended to make it harder for criminals to sell stolen goods by making online marketplaces monitor high-volume sellers.
Executives are pushing for further government and police action as House and Senate committees review the industry-backed Combating Organized Retail Crime Act, which would strengthen the ability of law enforcement agencies to prosecute criminal groups.
“Retail can’t solve this issue all on its own. It will take communities stepping up and enforcing the law to be able to bring this issue back under control,” John Furner, head of Walmart’s US operations, told analysts.
The retail crime wave is feeding into debates about criminal policy in the country’s biggest cities. “The decriminalisation of certain crimes, bail reforms and progressive [district attorneys] are feeding the theft problem,” said Mark Doyle, president of Jack L Hayes International, adding that thieves now saw shoplifting as a “low risk/high reward activity”.
Bob Eddy, chief executive of BJ’s Wholesale Club, echoed that message on the retail chain’s latest earnings call. “It is a much more pointed problem in certain places, particularly on the West Coast, or places like Chicago or Albuquerque that have blue state or local blue governments that don’t really feel like prosecuting crime,” he said.
As retailers await further action, they are locking away more items to secure both high-value items shoplifters plan to sell and cheaper products people need to feed themselves.
“We used to say you don’t see anybody running out with cans of Spam,” said LPRC’s Hayes. “Now in parts of New York they’re putting Spam in polycarbonate cases.”
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