As incidents of retail crime continue to escalate throughout the country, retailers have seen a dramatic jump in financial losses associated with theft.
When taken as a percentage of total retail sales in 2022, shrink accounted for $112.1 billion in losses, up from $93.9 billion in 2021, according to the 2023 National Retail Security Survey released today by the National Retail Federation (NRF).
According to the survey, the average shrink rate in fiscal year 2022 increased to 1.6 percent, up from 1.4 percent the previous year. On par with previous years, internal and external theft accounted for nearly two-thirds (65 percent) of retailers’ shrink.
Retailers reported that organized retail crime (ORC) remains a significant concern due to heightened levels of violence. More than two-thirds (67 percent) of respondents said they were seeing even more violence and aggression from ORC perpetrators compared with a year ago.
But even though retailers continue to enhance their loss prevention and asset protection measures, sometimes more drastic action must be taken. Retailers reported being forced to close a specific store location (28 percent), reduce operating hours (45 percent) or reduce or alter in-store product selection (30 percent) as a direct result of retail crime.
And as violence has increased, more retailers have opted to enforce a “hands off” approach in the apprehension of shoplifters. More survey respondents said that no employees are authorized to stop or apprehend shoplifters (41 percent), compared with 38 percent last year.
“Retailers are seeing unprecedented levels of theft coupled with rampant crime in their stores, and the situation is only becoming more dire,” David Johnston, VP for asset protection and retail operations at NRF, said in a statement. “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.”
When asked about resource allocation to address today’s risks, NRF’s survey found that 34 percent have increased internal payroll to support their risks, while 46 percent have increased the use of third-party security personnel. Over half (53 percent) have increased their technology and software solution budgets in the past year. With violence being one of the most concerning risks, 54 percent have increased or are increasing employee workplace violence training.
Retailers are also banking on policy reform in efforts to combat ORC. Initiatives such as raising the felony theft threshold – the amount that must be stolen in order to be considered a felony – or removing or eliminating cash bail may have unintended consequences for retail theft. Nearly three-quarters (72 percent) of respondents reported they have seen an increase in the average value per incident in localities that raised their minimum felony thresholds, while another 67 percent reported an increase in repeat offenders in areas associated with initiatives to reduce or eliminate cash bail. Nearly all (93 percent) are in support of federal ORC legislation.
This latest data comes as more retailers continue to speak out about the issue as theft continues to eat away at their bottom lines. Last month, Dick’s Sporting Goods CEO Lauren Hobart told analysts on the company’s latest earnings call that higher inventory shrink impacted its margins in the second quarter.
“Organized retail crime and theft in general [is] an increasingly serious issue impacting many retailers,” Hobart said on last month’s earnings call. “Based on the results from our most recent physical inventory cycle, the impact of theft on our shrink was meaningful to both our Q2 results and our go-forward expectations for the balance of the year.”
Target CEO Brian Cornell also told analysts on the company’s most recent earnings call last month that the retailer continued to face an “unacceptable amount” of theft and organized retail crime. “Shrink in the second quarter remained consistent with our expectations, but well above the sustainable level where we expect to operate over time,” Cornell said. “And unfortunately, safety incidents associated with theft are moving in the wrong direction.”
