The surge in shopping crime has cost US retailers millions of dollars

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US retailers are warning of a rash of thefts, costing some of them hundreds of millions of dollars as they try to outwit organized criminals with increased security and surveillance.

Target has alerted investors that “shrink” — an industry term that covers shoplifting, employee theft and organized retail crime — will reduce its profits this year by $500 million more than in 2022.

DIY retailers like Home Depot and dollar stores including Dollar Tree said shrinkage reduced their gross margins by several basis points in the first quarter, while Foot Locker was among several retailers citing an increase “significant” from year to year.

resellers’ concerns about shoplifting it has grown through the economic and social upheavals of the pandemic, with the industry losing nearly $100 billion to shrink in 2021, according to the National Retail Federation. But the problem has since gotten worse, industry insiders say, scaring employees and scaring off customers.

New York City Mayor Eric Adams said the city saw a 45% increase in retail theft complaints last year as he announced plans earlier this month to “end the rush to crime in our retail stores”.

Over 80 percent of US dealers had an increase in losses last year, according to Jack L Hayes International, a “loss prevention” consultancy. Respondents arrested 46 percent more shoplifters and dishonest employees, recovered 70 percent more stolen goods, but for every dollar recovered, they reported losing more than eight dollars to theft.

Retailers are experiencing more frequent, more costly and more violent crashes this year than ever before, said Read Hayes, a criminologist at the University of Florida and director of the Loss Prevention Research Council (LPRC).

This has triggered a “huge” increase in spending to try and protect the companies’ goods and employees, he said. A survey, conducted by Insuranks.com, found that 56% of retail workers felt insecure.

The LRPC is collaborating with retailers and technology companies including Nvidia, Lenovo and Intel on answers ranging from tags for tracking stolen assets to AI-powered surveillance systems to identify repeat offenders and their vehicles and weapons.

Some retailers admit their efforts haven’t had the impact they hoped.

Scott Settersten, chief financial officer at Ulta Beauty, recently told analysts, “Going into 2023, we thought shrink trends would ease a bit due to some of the investments we were putting behind mitigation tactics. But they haven’t resonated yet.

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

“Eventually, the shrinkage will be resolved through defensive merchandising, store closures and/or through government action at the local level,” Rick Dreiling, chief executive officer of Dollar Tree, told analysts.

An industry-backed piece of 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 more government and police action as House and Senate committees revise the industry-backed Combating Organized Retail Crime Act, which would strengthen law enforcement’s ability to prosecute criminal groups.

“Retail cannot solve this problem on its own. It will take communities to step up and enforce the law to get this problem under control,” John Furner, Walmart’s US operations chief, told analysts.

The retail crime wave is fueling debates on criminal policy in the largest cities of the country. “The decriminalization of some crimes, bail and progressive reforms [district attorneys] they’re fueling the theft problem,” said Mark Doyle, president of Jack L Hayes International, adding that thieves now view shoplifting as “a low-risk/high-reward activity.”

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

As retailers await further action, they are locking up more items to secure both the high-value items shoplifters intend to sell and the cheaper products people need to feed themselves.

“We used to say you don’t see anyone ending up with cans of spam,” said LPRC’s Hayes. “Now in some parts of New York they’re putting spam in polycarbonate cases.”