The Reality of Retail Shrinkage


Retail executives have been grappling with the issue of “shrink” – referring to losses incurred due to theft, fraud, or employee mistakes. A spate of headlines highlighting violent organized thefts at stores has further intensified discussions on this matter. However, according to a recent report from the National Retail Federation (NRF), the increase in this metric was relatively modest in the past year.

The NRF, a retail industry group, discovered that the average shrink rate in 2022 ticked up slightly to 1.6% from 1.4% in the previous year, when measured against sales. These figures are consistent with those observed in both 2020 and 2019.

Nevertheless, these losses translated into billions of dollars, amounting to a staggering $112.1 billion compared to $93.9 billion in 2021, as emphasized in the NRF report. Additionally, the report shed light on the rising concern among retailers regarding the violence associated with these crimes.

David Johnston, the NRF’s vice president for asset protection and retail operations, stressed that the impact extends far beyond the financial realm: “Far beyond the financial impact of these crimes, the violence and concerns over safety continue to be the priority for all retailers, regardless of size or category.”

To compile this report, the NRF collaborated with the Loss Prevention Research Council, a research group established by some of the country’s largest retailers. The survey enlisted input from professionals in loss prevention and asset protection within the retail industry. Information and responses from 177 retail brands were included. The survey was conducted between May and July of this year.

Coinciding with the release of this report, Target Corp. made an announcement that it will be closing nine stores across four states next month due to theft and safety risks to employees.

“In this case, we cannot continue operating these stores because theft and organized retail crime are threatening the safety of our team and guests, and contributing to unsustainable business performance,” stated Target.

This report provides a glimpse into the grim reality of retail shrinkage, emphasizing the need for continuous vigilance and strengthened security measures within the industry.

Retailers Address Rise in Organized Retail Theft

Retailers across the board are grappling with the escalating issue of organized retail theft, prompting some to close stores and raise concerns about the impact on their financials. While executives have acknowledged a surge in theft incidents aimed at reselling stolen goods, their perspectives during earnings calls have varied slightly. However, retailers are also contending with other challenges, such as the fallout from inflation, which is adding to their concerns.

Factors Contributing to the Problem

To make matters more complex, the battle against retail theft has turned into a partisan issue, with some attributing the surge to what they view as lenient crime policies in major cities. On the other hand, analysts highlight that changes in foot traffic patterns due to the pandemic have made it difficult to draw definitive conclusions about crime rates. Assessing the state of crime, particularly in retail settings, in any given area proves challenging due to the ambiguous and subjective nature of the available data.

Retailers Bear the Brunt

According to a survey conducted by the NRF (National Retail Federation), more than two-thirds of retailers reported experiencing an increase in violence and aggression stemming from organized retail theft compared to the previous year. Distressingly, 28% of respondents revealed that they were forced to shut down specific store locations as a result. Additionally, 45% confirmed that they had to reduce their operating hours, while 30% had to alter or curtail their product selections within stores.

Widening Range of Targeted Products

The NRF emphasized that shoplifters no longer focus solely on high-value items. Instead, they have expanded their scope to encompass a broader range of products that are easy to resell quickly. These can include not only high-end fashion pieces but also everyday items. The diverse selection of targeted merchandise now includes outerwear, batteries, energy drinks, designer footwear, and kitchen accessories.

Retailers find themselves caught in a battle against organized retail theft, with incidents on the rise. As companies grapple with the consequences, it remains imperative for different stakeholders to address the issue collectively. Only by working together can retailers deter criminals and protect their businesses effectively.

Leave a Reply

Your email address will not be published. Required fields are marked *

Previous Post

Microsoft Corp. Shares Slide 1.70% Amidst Market Downturn

Next Post

Surface Transforms Reports Widened Pretax Loss for H1 2021

Related Posts