It’s never fun to talk about the ugly side of running a business, but this year, retail theft came into focus in a new way that reached national heights.
- Companies, their CEOs, and special interest groups were extremely vocal about retail theft and how they said it was affecting store operations.
- The National Retail Federation said in a September survey that shrink—the retail term for any loss of inventory, both inside factors or external factors—accounted for $112.1 billion in losses in 2022, a significant increase from $93.9 billion in 2021.
But as claims about retail crime made headlines this year, so has scrutiny over the scale of corporations’ response—and more recently, questions about how big a problem it really is. The NRF even went so far as to remove a “mistaken” fact from a headline-grabbing report claiming that organized retail crime (ORC) made up “nearly half” of inventory losses in 2021.
Target was one of the more vocal major companies that expressed frustration with increased shrinkage. In September, the company claimed the reasoning behind closing nine locations was primarily because “theft and organized retail crime are threatening the safety of our team and guests, and contributing to unsustainable business performance.”
- Target CEO Brian Cornell reported during the company’s Q2 earnings that the retailer had a 120% increase in incidents of violence or threats of violence from January through May.
- Four of the closures were small-format stores in urban areas that Target opened only in the past few years. The company had planned to distinguish itself by expanding its footprint in these areas, while competitors like Walmart primarily stuck to suburban and rural areas.
Reel it in: When assessing the threat of shoplifting and theft, some retailers have admitted their claims may have been…wrong.
- “Maybe we cried too much last year,” Walgreens’s global CFO James Kehoe said during an earnings call at the start of the year in regard to theft. Kehoe also acknowledged that the company added too much extra security to staff stores—a major shift in tone from the year prior when Kehoe insisted, “This is not petty theft.”
- Meanwhile, the NRF retracted a claim that “nearly half” of all inventory losses in 2021 were due to retail theft—a figure the organization previously told Retail Brew was a “mistaken inference” made by an analyst.
The big picture: Shrink is certainly a topic that comes up in earnings calls nowadays, but breaking it down at scale can prove to be difficult, as Neil Saunders, managing director at GlobalData Retail, explained in the Los Angeles Times.
“It is clear that shrink is on the rise and is starting to have more of a material impact on business performance,” Saunders wrote in an op-ed. “On the other hand, retailers have been known to make excuses for poor performance, and understanding the nuances of crime data and trends can be complicated.”