CRYING WOLF

US retail group retracts claim that half of $94.5bn inventory loss was from theft

Edward Helmore
Thu, 7 December 2023 

Photograph: AndreyPopov/Getty Images

The powerful National Retail Federation (NRF) lobbying group has retracted a claim that “organized retail crime” accounted for “nearly half” of the shopping industry’s $94.5bn losses due to theft or “shrink” in 2021.

Related: Teens need malls. Malls need crowds. Why are they pushing kids away?

The industry group had said the impact of organized retail crime, which it previously claimed had increased by 26.5%, had become increasingly violent. Retail giants like Target, Walmart and Walgreens said it was threatening their businesses.

The NRF said the figure was based on a congressional testimony from Ben Dugan, the former president of an advocacy group, the Coalition of Law Enforcement and Retail, and that an analyst from K2 Integrity, a risk consultancy that co-authored the report, inferred the “nearly half” claim.

The inclusion of the claim in the NRF’s report was “taken directly from Ben’s testimony” and “was an inference made by the K2 analyst linking the results of the NRF survey from 2021 and Ben Dugan’s statement made that same year”, NRF spokesperson Danielle Inman told Reuters.

In an updated report on organized retail crime, the body still maintained that organized crime is “a high-priority concern for the retail industry for decades, having a harmful economic impact on retail companies and endangering store employees and customers”.

The study added: “These concerns have grown in recent years, as criminal groups have become more brazen and violent in their tactics and have utilized new channels to resell stolen goods.”

A K2 database of 132 organized retail crime groups dating between 2014 and 2022 found that luxury goods, often well protected, are only targeted 11% of the time.

Instead, organized retail crime tends to target everyday goods available from big retail outlets and favor clothing, health and beauty products, infant products, accessories, housewares, home improvement products, eyewear and office supplies.

Homeland Security Investigations, the primary federal agency that tackles organized retail theft, defines organized retail crime as “the association of two or more persons engaged in illegally obtaining items of value from retail establishments, through theft and/or fraud, as part of a criminal enterprise”.

Retailers concede that the causes of “shrink” – as retail theft is known – are notoriously difficult to track and include employee theft, shoplifting, administrative or cashier error, damage and vendor fraud.

Still, organized or unorganized theft has remained a preoccupation of retailers and politicians, particularly on the right, where city and suburban crime is a potent political topic.

In December last year, the Walmart CEO Doug McMillon told told CNBC that if theft did not slow down, the company would close stores across the country. “Theft is an issue,” he said. “It is higher than what it has historically been” and “if that’s not corrected over time, prices will be higher, and/or stores will close”.

The New York City mayor, Eric Adams, told retailers last month that they must require shoppers to enter stores without face masks and launched a task force to support a plan to reduce retail theft outlined in a retail theft report.

“New York City’s retailers are the heart and soul of our city, and retail theft hurts everyone, from our mom-and-pop shops to large department stores – and especially consumers,” the mayor said. The New York attorney general, Letitia James, added that “retail theft continues to harm New Yorkers, threaten businesses and threaten the safety of our communities”.

But larger retailers are now conceding that they too may have exaggerated the issue of “shrinkage”. During a January earnings call, Walgreens’ then chief financial officer, James Kehoe, said the company had seen “lower levels of shrink” in the second half of 2022. The loss of inventory attributed to theft, fraud and damage was over 3%. Kehoe said the shrink rate is down to roughly 2.5% this year.