Rise in shopping crime costs US retailers millions of dollars

US retailers are warning of a rise in thefts, some of them worth hundreds of millions of dollars, as they try to dodge organized criminals with added security and surveillance.

Target has alerted investors that the “shrink” – an industry term covering shoplifting, employee theft and organized retail crime – will cut into its profits by more than $500mn this year compared to 2022.

DIY retailers such as Home Depot and Dollar Stores, including Dollar Tree, said the shrinkage had cut several basis points into their gross margins in the first quarter, while Foot Locker was among several retailers citing year-over-year growth. there was one.

Retailers’ concerns about shoplifting grew through the economic and social upheaval of the pandemic, with the industry poised to shrink in 2021 by nearly $100bn, according to the National Retail Federation. But the problem has gotten worse since then, industry members say, scaring off employees and scaring off customers.

New York Mayor Eric Adams said the city had seen a 45 percent increase in retail theft complaints in the past year since he announced plans earlier this month to “end crime at our retail stores.”

According to Jack L. Hayes International, a “loss prevention” consultant, losses at more than 80 percent of U.S. retailers increased last year. Its survey respondents caught 46 percent more shoplifters and dishonest employees, recovered 70 percent more in stolen goods, but for every dollar they reported losing more than eight dollars from theft.

Reid Hayes, a crime expert at the University of Florida and director of the Loss Prevention Research Council (LPRC), said retailers are facing more frequent, costlier and more violent incidents this year than ever before.

He said this has led to a “huge” increase in spending for companies trying to secure goods and employees. A survey by Insuranks.com found that 56 percent of retail workers feel unsafe.

LPRC is working with retailers and technology companies including Nvidia, Lenovo and Intel to come up with artificial intelligence-powered surveillance systems ranging from tags tracking stolen goods to identifying repeat offenders and their vehicles and weapons Is.

Some retailers admit that their efforts have not had the impact they had hoped.

Ulta Beauty’s chief financial officer, Scott Setterstein, recently told analysts: “Going into 2023, we thought the trend of shrinkage was going to be a little bit less because of some of the investments that we were putting behind the mitigation strategy. But they haven’t resonated yet.

Other retailers, along with REI and Nordstrom, have completely closed the outlets, following Starbucks in closing stores in West Coast cities. The owner of the vacated San Francisco mall Nordstrom told local media that his exit reflected the city’s “lack of enforcement against rampant criminal activity”.

“Ultimately, the shrinkage will be resolved either through defensive sales, store closures and/or government action at the local level,” Dollar Tree Chief Executive Officer Rick Dreiling told analysts.

One piece of industry-backed legislation, the Informed Consumers Act, passed Congress last year and aims to make it harder for criminals to sell stolen goods by monitoring online marketplace 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 law enforcement agencies’ ability to prosecute criminal groups.

“Retail can’t solve this issue on its own. Communities have to step up and enforce laws to be able to get this issue back under control,” John Furner, head of Walmart’s US operations, told analysts. “

The retail crime wave is feeding an ongoing debate about criminal policy in the nation’s largest cities. “Decriminalization of certain crimes, bail reforms and progressive (district attorneys) are exacerbating the problem of shoplifting,” said Mark Doyle, president of Jack L. Hayes International, adding that thieves now view shoplifting as a “low risk/high reward activity.” Are.

Bob Eddy, chief executive of BJ’s Wholesale Club, echoed that message on the retail chain’s latest earnings call. “It’s a more pronounced problem in some places, especially on the West Coast, or places like Chicago or Albuquerque, where there are blue states or local blue governments that don’t really feel like prosecuting crime,” he said.

As retailers wait for further action, they are locking down more items to secure high-value items shoppers plan to sell to and cheaper products for people to feed themselves. Needed.

“We used to say you don’t see anybody running out of spam bins,” said LPRC’s Hayes. “Now in some parts of New York they’re putting Spam in polycarbonate cases.”