A nationwide retail theft epidemic cost the United States close to $100 billion in 2021. Stores are being forced to raise prices or shut up shop, insurers are refusing to help, and smaller mom and pop stores are being left behind. In this series, Mayhem on Main Street, the Washington Examiner will investigate the causes behind the scourge of shoplifting, the role of the cartels, the cost to stores big and small, and the complicity of lax prosecutors. Part three will focus on the economic impact. To read parts one and two, click here and here.
Retail theft has been plaguing businesses across the country, and the compounded effects of the crimes have big economic implications for the retailers and communities involved.
The growing instances of theft cost retailers nearly $100 billion in 2021, a number that illustrates the brutal economic reality of such crimes. Videos have proliferated on social media of individual thieves and hordes of criminals brazenly entering stores and stealing merchandise before fleeing, often with little resistance. The phenomenon has grown in recent years following the onset of the pandemic, hurting retailers and prompting calls for action from lawmakers and law enforcement.
The crime wave has hit both run-of-the-mill retailers and luxury stores alike, and while some might claim that the individual thefts have a minimal economic footprint, taken together, the numbers involved are eye-popping.
Lost product inventory, primarily driven by external theft, is referred to in the industry as “retail shrink.” The most recent fulsome study on how stealing and organized retail crime affects retailers was released last year by the National Retail Federation, the world’s largest retail trade association. It found that in 2021, retail shrink amounted to a whopping $94.5 billion in losses.
To put that into perspective, that is nearly equivalent to the entire annual budget of the state of Florida and more than the annual expenditures of some major countries. It is also about equivalent to retail giant Target’s entire revenue in 2022.
And the problem appears to have grown in recent years. The nearly $100 billion in losses borne by retailers in 2021 is up from an estimated $90.8 billion the year before. Retailers surveyed as part of the study saw an average 26.5% increase in incidents of organized retail crime in 2021 from 2020.
“It is growing. We’re seeing a lot of open and brazen acts — I’ve been at this for over three decades, and shoplifting and professional shoplifting is not new, but in past decades, it’s always been seen as more of an invisible crime,” David Johnston, the National Retail Federation’s vice president of asset protection and retail operations, told the Washington Examiner.
Johnston noted that the retail theft varies in scope and scale, ranging from opportunistic shoplifters to smash-and-grab thefts to highly organized retail crime operations that involve transnational gangs. He said the uptick is now across the board, regardless of product type or price point.
Beyond just the numbers, though, the crime has become increasingly more aggressive, something that is a concern for businesses that want to keep customers and employees safe while shopping.
Some 80% of retailers surveyed reported that violence and aggression associated with organized retail crime increased in 2021 from the year before. That finding is anecdotally borne out by the viral videos of brazen and aggressive thefts in recent years.
“Now we’re starting to see these large, open, brazen acts of shoplifting, which are causing more violence and threatening the safety and security of the consumer as well as the employee,” Johnston said.
SMALL BUSINESSES HELPLESS OVER SPIKE IN RETAIL THEFTS, SAY THEY FEEL ABANDONED BY LAWMAKERS
During a company earnings call this year, Target CEO Brian Cornell addressed how retail theft not only hurts the company but also is a threat to general safety.
“It’s an urgent issue, not just for Target, but across the entire retail industry,” Cornell said. “It is a problem that impacts the availability of product, [that] makes shopping conditions less convenient, and unfortunately, what I’m most concerned with is [that it] puts our team and our guests in harm’s way.”
But the apparently growing occurrences of retail theft don’t just affect big retailers and mom and pop businesses. It has ripple effects into local communities, particularly those facing problems with poverty.
Some stores that are struggling too much with retail theft have been forced to close down, closures that have the potential to be harmful to many. For instance, if the store in question is a grocery store, it could contribute to food insecurity for impoverished communities.
“It absolutely does impact everyone,” Johnston said, pushing back against the assertion from some that retail theft is a victimless crime.
Outside of closure, retail theft can have economic consequences for neighborhoods because stores might choose to change hours or reduce their inventory of certain items, forcing businesses outside the community and causing residents to commute to another area to shop.
The thefts may also affect community services. For instance, if stores are forced to close in a community, that city might collect less in tax revenue and thus have less funding to put toward community programs and assistance.
“When stores close down and when merchandise isn’t available for sale, it has a great impact on the community services,” Johnston said.
He said the trend of growing retail theft was picking up before COVID-19, although as consumers became more familiar with the online marketplace during the pandemic, it provided a key avenue for thieves to steal and sell merchandise anonymously.
A driver of the uptick could be people stealing because of financial needs or committing retail theft in order to finance drug addiction, according to Johnston. That has also provided an opportunity for the organized retail crime groups to lure those facing such challenges into becoming “boosters” who enter stores to steal for them.
But another reason why retail theft might be on the rise has to do with the prosecution of such crimes. Some areas have deprioritized enforcement of certain crimes in order to have law enforcement focus on more serious crimes, potentially meaning fewer consequences of shoplifting, Johnston said.
“So, it’s kind of a perfect storm,” Johnston said. “It’s not just one thing that’s gone and gotten us here to where we are today. It’s a number of things.”
Congress has made some efforts to rein in retail theft. Lawmakers passed the bipartisan INFORM Consumers Act, and it went into effect in June.
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The INFORM Act requires online marketplaces such as eBay or Facebook Marketplace to verify and validate seller information for sellers who reach a certain threshold for income and goods sold within a given period of time. Online marketplaces that fail to comply can be hit with major fines. The idea is to prevent third-party vendors from selling stolen goods over the internet by requiring the collection of identifying information.
“The goal of the INFORM Consumers Act is to add more transparency to online transactions and to deter criminals from acquiring stolen, counterfeit, or unsafe items and selling them through those marketplaces,” the Federal Trade Commission said.
