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Home News Why retail theft is soaring: inflation, the economy – and opportunity

Why retail theft is soaring: inflation, the economy – and opportunity

by Chanel Rowe
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Originally Published: 23 MAY 23 09:32 ET

By Parija Kavilanz, CNN

New York (CNN) — Retailers large and small say they’re struggling to contain an escalation in store crimes — petty shoplifting to organized sprees of large-scale theft that clear entire shelves of products.

Target last week said it was bracing to lose half a billion dollars this year because of rising theft. Nordstrom, Whole Foods and some other big chains said they were abandoning San Francisco because of changing economic conditions or employee safety. Many other retailers have blamed crime for closing stores.

It’s not clear that crime is growing significantly more serious. But as economic fears grow amid inflation and rising borrowing costs, shoplifting often comes with the territory, industry watchers say.

Need and opportunity become forceful catalysts for driving up incidents of retail crime, experts said.

“A community might be struggling with heavy job losses and people can’t easily find another job. Now they can’t afford basic necessities,” said Read Hayes, criminologist at the University of Florida and director of the Loss Prevention Research Council, which has members including retailers such as Walmart, Target, Home Depot and Gap.

He described two types of store theft plaguing retailers currently.

“There is a trend of people who may have never stolen before, they are unsophisticated in how they steal. They’re taking necessities like bread and meat. We are seeing some of that,” he said.

The bigger bucket, however, is crime of opportunity. “This is organized retail crime. It’s an opportunistic crew stealing specific items from a specific place or one item from many places to resell them,” said Hayes. The stolen goods are most often sold online or to neighborhood mom and pop shops or at street fairs, for example.

Americans are hurting

Among the triggers for shoplifters is inflation. Although inflation is cooling — slowly — US prices are still on the rise, even after a two-year slog of consumers enduring painfully high prices on everything they need to sustain themselves and their families.

Economic distress is amplified on budget-strapped consumers during inflationary periods, said Burt Flickinger, retail expert and managing director of retail consultancy Strategic Resource Group.

“Millions of Americans can’t afford to fully buy their groceries or a full tank of gas, pay for public transportation, their home bills or pay their credit card debt,” he said.

According to a recent Gallup poll, three in five Americans, or 61%, are suffering financial hardship because of rising prices. Among them, lower-income households reported feeling the greatest strain versus higher income brackets.

“Even as inflation has been cooling, the effect of continued high prices has broadened the financial pain Americans are feeling,” the Gallup report said. The recent slowing of inflation, it said, “has so far done little to provide relief for Americans, and it may take more dramatic changes in prices for the harmful effects of inflation to subside.”

Deepening the financial burden for many in those households is the loss of Covid-era boosts to food aid earlier this year, which is likely creating more constraints on families, he said.

“What’s happening in the overall economy matters when you analyze retail crime overall, but also what is happening more locally, in towns and neighborhoods,” said Hayes.

A changing view of crime

Mark Cohen, director of retail studies at Columbia Business School, agreed that the “multi-layered” problem of escalating retail crime does shine a light on social distress at any given point in time.

“We’re in a period where bad behavior is legitimized, even normalized,” said Cohen. “Gun violence has exploded, bad behavior among citizenry has exploded, civil discord is high and Americans are very polarized.”

Retail crime, he said, is an unfortunate consequence of this as well.

“It’s a manifestation of bad behavior. I can sympathize with someone stealing a sandwich because they are hungry, but not with a thief clearing an entire shelf of products and calmly walking out of a Target store.”

According to the National Retail Federation, the industry’s biggest trade group, large-scale store theft is becoming a bigger part of annual retail “shrink,” a term that refers to merchandise that goes missing due to theft, fraud, damage and other reasons.

The NRF said total annual shrink reached $94.5 billion in 2021, up from $90.8 billion from 2020. Nearly half was attributed to large-scale theft of products. The group said retailers on average saw a 26.5% increase in this type of theft over the previous year.

Retailers are losing profit

For Target, the scope of the challenge is immense, Target’s CEO Brian Cornell, told analysts during the company’s earnings call last week.

“The problem affects all of us, limiting product availability, creating a less convenient shopping experience and putting our team and guests in harm’s way,” said Cornell, who pegged it as an urgent issue “not just for Target, but across the entire retail industry.”

The retailer told CNN that it was experiencing a large number of incidents of shoplifting and organized retail crime in Target stores nationwide.

While no item is being spared, it said many of the products frequently stolen are necessities, such as soaps, shampoos and other personal care items.

But the issue goes far beyond Target, the company believes. “While we’re doing all we can to address the problem, it’s an industry and community issue that can’t be solved by a single retailer,” Cornell said.

But even with a retail bellwether like Target sounding the alarm on store theft as a pervasive, persistent and worsening trend, the gravity of the problem itself can be difficult to prove.

Within the industry, at least one major player, for instance, has argued that the problem is being overhyped.

Walgreen’s earlier this year changed its tune on store theft hurting its business, saying, “Maybe we cried too much last year.”

Target’s rival Walmart (WMT), which has more than 100 million shoppers head to its stores in the US every week, said rising store theft could force it to raise its prices if the trend doesn’t correct itself. “If that’s not corrected over time, prices will be higher, and/or stores will close,” Walmart (WMT) CEO Doug McMillon said in a CNBC interview in December.

At the same time, Walmart has also been closing stores because of its poor performance and sagging sales, not because of crime.

Despite these conflicting signals, what can’t be argued is that retailers have, and will continue to be, vulnerable to shoplifting, said Flickinger.

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