A Changing Narrative on Shoplifting
A year ago, many U.S. retailers declared a shoplifting crisis, closing stores in major cities, boosting security, and reporting significant losses. Fast forward to this year, and the story has shifted. Retailers are either reporting fewer issues or avoiding the topic altogether, suggesting a significant improvement in managing theft and inventory loss.
Target’s Turnaround
Last year, Target reported that theft and organized retail crime cost them over $500 million, forcing them to close nine stores. This year, however, the company’s Chief Operating Officer, Michael Fiddelke, shared a more positive update, saying that the company is ahead of its expectations in reducing inventory loss, also known as “shrink.”
Retailers’ Shrink Rates Are Improving
Many retailers have seen their shrink rates stabilize or improve. According to FactSet, mentions of shrink on earnings calls dropped by 20% in the first half of 2024 compared to the same period in 2023. This improvement comes as retailers get better at tracking their inventory losses. Initially, many retailers underestimated the extent of their lost products. After adjusting their metrics, some overestimated the impact of shrink.
Steps to Prevent Theft
Retailers have implemented various strategies to combat theft, including locking up merchandise and removing self-checkout stations. Additionally, state and local governments have stepped in to help. In California, Governor Gavin Newsom signed legislation to impose stricter penalties for retail theft, particularly for organized crime rings.
Was the Shoplifting Crisis Overstated?
The focus on shrink and shoplifting has raised questions about the actual severity of the issue. While videos of store break-ins spread across social media, some analysts suggest that the problem may have been exaggerated. For example, Walgreens’ former CFO admitted last year that they may have overstated the impact of theft. Retail analyst Neil Saunders from GlobalData suggests that while there was an issue, the severity might have been blown out of proportion.
What Exactly Is Shrink?
Shrink refers to lost inventory as a percentage of sales and includes not just theft but also employee-related losses, damaged goods, and administrative errors. The average shrink rate increased to 1.6% in 2022, up from 1.4% in 2021, aligning with pre-pandemic levels, according to a National Retail Federation survey. As retailers have reduced their inventory in recent months, the amount of shrink has also decreased.
Retailers Continue to Adapt
Despite improvements in shrink rates, theft remains a concern. David Johnston, VP of Asset Protection at the National Retail Federation, notes that theft can still impact store safety and lead to worker injuries, even if shrink has stabilized.
Shoplifting in major U.S. cities during the first half of 2024 increased by 24% compared to the same period in 2023, according to the Council on Criminal Justice. However, it remains unclear if this increase is due to more incidents or improved reporting by businesses.
Security Measures Impact Customer Experience
Retailers have locked up more products behind glass, removed self-checkout options, and installed new security measures, like body-worn cameras for employees. While these actions may reduce theft, they frustrate shoppers. An online survey revealed that over half of shoppers seek alternatives when products are locked behind cases.
Collaborating with Law Enforcement
Retailers are also working closely with law enforcement to tackle organized retail crime. Home Depot reported seeing success with their anti-theft initiatives, even though the broader problem of organized crime persists. Ulta Beauty also shared that their shrink rates remain steady, crediting improved security measures for preventing theft of small, high-value items.
Conclusion
While theft and shoplifting continue to be challenges for American retailers, many have made significant progress in controlling shrink and safeguarding their inventory. Through better inventory management, stronger security measures, and increased cooperation with law enforcement, retailers are steadily winning the battle against shoplifting.
