Retailers say theft is exploding, and some data from retailers along with numerous videos of violent store robberies and looting seem to support the claim.
But some retail analysts and researchers, bolstered by local crime statistics, say stores may be over-stating the extent and impact of theft. Why? Its a useful deflection, camouflaging weak demand, mismanagement and other issues denting business right now. And it forces lawmakers to respond.
Across the country, the actual increase in rates of theft at stores does not correspond to the increase in company commentary and actions on theft, according to a new report by retail analysts at William Blair. Retailers are increasingly vocal on the subject, in part to draw out government action, the analysts wrote.
To be sure, theft is impacting retailers much more than it was before the pandemic. Thats because theft has also gotten more visible and more violent, retailers say, and has put employee safety at risk in some cases.
But a host of other issues, from inflation to rising costs, are impacting retailers, too. Theft is just one of many structural issues chains are facing, most notably the shift to online shopping and over-expansion of brick-and-mortar retail.
Companies are also likely using the opportunity to draw attention away from lower profit margins due to higher promotions and poor inventory planning in recent quarters, William Blair retail analysts Dylan Carden and Phillip Blee said in a report this week. Many retailers misjudged how much merchandise they needed to carry and now have a glut.
The analysts noted that overall shrink merchandise losses due to external and internal theft, damaged products, inventory mismanagement and other errors makes up just 1.5% to 2% of retailers sales. That percentage has remained steady for years, despite retailers sounding the alarm more than ever about theft.
The National Retail Federation said that retailers losses, known as shrink, increased 19% last year to $112 billion, based on a survey of 177 retailers. But shrink as a percentage of sales fell during the height of the pandemic as stores temporarily closed and grew in 2022 as stores re-opened.
This hit to profits is relatively small and fleeting not reason enough alone to close stores according to the analysts. At nine major retailers that have increasingly cited the rising impact of theft, shrink as a percentage of sales increased just 0.4% in 2022, they found. ... Alex Vitale, a professor of sociology at Brooklyn College who studies policing, said business leaders had turned retail theft into a moral panic to mobilize a stronger police and criminal justice response.
It shows us the way certain crimes in certain moments get mobilized far beyond their impact to play into a set of political and social debates, he said. ... One analysis by journalist Judd Legum at Popular Information found that the stores Target is closing in both New York and San Francisco had lower reported theft rates compared to other nearby locations.
We believe companies like Target could indeed be using the current narrative around shrink to take broader action in lagging parts of their business, the William Blair analysts said. We have to acknowledge potentially ulterior, more opportunistic motives. Target could be using shrink to mask other issues, including poor inventory management, which came to a head in 2022 following supply chain disruption and is closing stores to boost overall margins. Target has not shared data about those store closures directly. A Target spokesperson said that organized retail crime increased 50% in its stores since 2021. The company also said that theft incidents involving violence or threats had grown.
Other retailers strategies, such as self-checkout and low staffing levels, have also unintentionally made shrink worse. Costco management said this year that shrink increased in part we believe due to the rollout of self-checkout.
Five Below said that shrink at stores with more self-checkout lanes was higher. The company plans to increase the number of staffed cash registers in new stores.
Meanwhile, businesses are pushing for tougher criminal penalties on thieves and asking for police and prosecutors to crack down on theft.
They have called for local and state government to more aggressively prosecute organized retail crime, lower the dollar thresholds for theft to rise to a felony, and reverse policies to eliminate cash bail.
According to the Chamber of Commerce, 12 states have created new statutes, revised existing statutes, or created enhanced penalties for organized retail crime.
But its not clear that lowering the thresholds for felony theft is an effective deterrence.
In early research on the topic in 2017, Pew Charitable Trusts examined crime trends in 30 states that raised their felony theft thresholds between 2000 and 2012. Pew found that raising the threshold had no impact on overall property crime or larceny rates.
I imagine a lot of the responses ITT will sarcastically feign surprise, but it is important to have data and evidence behind even beliefs that seem straightforwardly obvious.