Sunday, October 02, 2022

What all that stealing says about America


Organized crime is behind spate of retail thefts: Coalition of Law Enforcement and Retail president

Andy Serwer with Dylan Croll
Sat, October 1, 2022 

I recently went to my neighborhood drug store in New York City to buy some Tylenol and saw it was locked up on a plastic shelf—as was much of the store’s stock.

We’re used to seeing expensive jewelry secured behind glass or a few items behind convenience store counters, but lately the amount of seemingly ordinary items—soap, ice cream, detergent—locked up in stores—CVS, Best Buy, Home Depot, etc—is increasing. If you don't see this where you live yet, you might soon. Or you might visit parts of America where it has become commonplace.

Is stealing from stores really increasing, and if so, by how much? Turns out hard data is tough to come by, but nationally, the problem might not be as bad as it seems. According to the 2022 National Retail Federation’s Retail Security Survey, the average "shrink rate" — otherwise known as inventory loss — last year was 1.4%, or roughly $94.5 billion out of $6.6 trillion in total retail sales. That's roughly the same percentage as the last five years, the report found.

In the greater scheme of things, skeptics say that's no big deal.

Maybe those shocking organized theft videos or the railroad bandits of LA make the problem feel overblown. But I don’t think it’s that simple. First of all, a significant portion of retail crime goes unreported. Another point is that these are broad-brush numbers. While in some localities shoplifting rates are flat, in others, i.e., New York, San Francisco, they may be soaring.


'Organized retail crime has definitely been ticking up'


Who’s doing the stealing? “Three categories,” says Lisa LeBruno, senior executive vice president of the Retail Industry Leaders Association. “There’s the opportunistic shoplifter, the persistent habitual offender and then organized retail crime gangs or ORC,” she says.

What’s getting stolen? “CRAVED,” says Mark Mathews, vice president of research development and industry analysis at the National Retail Federation. “Which stands for items that are concealable, removable, available, valuable, enjoyable, and disposable.”

Companies used to be tight-lipped about thieving as it scares off Wall Street, customers and employees. Not so much anymore.

“Organized retail crime has definitely been ticking up over the last few years,” says Mike Combs, director of asset protection, organized retail crime and central Investigations team at The Home Depot. “During the pandemic, many would have thought it may have gotten better, but it actually got worse. It certainly affects the bottom line.”

Best Buy CEO Corie Barry said on an earnings call last November that the pressure from retail theft was showing up in the company's financials, the Wall Street Journal reported.

Then there’s this from Rite Aid’s CFO this week, as reported by Fox Business: "I think the headline here is the environment that we operate in, particularly in New York City, is not conducive to reducing shrink…” Rite Aid reported a tough quarter on Thursday and its stock plummeted 28% that day. The company said that store closures, driven in part by excessive theft, were a factor.

And below is from a Target store in San Francisco per Yahoo Finance’s Brian Sozzi.


Locked up Tide

“We take a multi-layered approach to combating organized retail crime,” Brian Harper-Tibaldo, senior manager of crisis communications for Target, told Yahoo Finance. “This includes in-store technology, training for store leaders and security team members, and partnerships with local, state and federal law enforcement agencies as well as retail trade associations.”

Why are people stealing these days? That’s a tough one. To some degree it’s a reflection of our times. Simply put, America’s social contract is straining. Until recently we’ve been able to lay out goods—often in mammoth, big box stores with only a handful of employees. When our social contract is strong—i.e people are getting a fair shake—it’s a model that works. Now it seems more people are stealing instead. (BTW, our stressed social contract may be capping how far we can push this people-light, technology-heavy model. Last month Wegman’s ended its scan-and-go shopping app. Why? Shrinkage of course.)

I think wealth inequality has everything to do with all this. Think back to the so-called Public Enemies era in the 1930s, when bank robbers ran rampant across the land. That also coincided with the Great Depression. Less money in the hands of poor people and more stealing. Seems like cause and effect to me.

Also exacerbating the situation are some additional factors: The opioid crisis, a dearth of employees and now inflation. More stealing may make matters worse.

“This is a problem for all of us, because it raises prices for all of us,” says Mark Mathews, of the National Retail Federation. “This is an industry with very low margins, often below 2%. So, when you're losing goods, the cost of that gets passed onto the customer.”

And locking up goods has its own downside for retailers as it can reduce impulse buying. If you have to wave down an employee to unlock the door, you might be less inclined to grab that Häagen-Dazs.

Does anyone benefit here? Online marketplaces benefit as consumers switch to e-commerce because shopping in stores with locked merchandise is too much of a hassle.



Who else benefits? Companies such as Indyme, InVue, RTC and Vira Insight, which produce among other things, those systems with clear plastic shelving, locks and buttons to summon employees. Also makers of turnstiles, security cameras, mirrors and security guards. Business is brisk here.

Yes, there are places in America where you can leave $5 at an honor-system farm stand for a dozen eggs, but in other places you need to get a store clerk to unlock a $5 tube of Crest. Like so many things in America these days, our social contract doesn’t seem well distributed.

This article was featured in a Saturday edition of the Morning Brief on Saturday, Oct. 1. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Follow Andy Serwer, editor-in-chief of Yahoo Finance, on Twitter: @serwer



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