A massive rise in retail theft is contributing to “shrinkage” at brick-and-mortar retailers, contributing to the growth of online sales.
“The National Retail Federation estimates that shrink—an industry term for loss in inventory—amounted to roughly 1.4% of retail revenue in 2021, or roughly $94.5 billion. Most of that shrink is caused by theft, the Wall Street Journal reports.
The Globe reported on California’s retail theft last May:
The escalation of organized “smash-and-grab” robberies in cities around the country has been costly. CNN reported in January that retailers across America say shoplifting is now 2% to 3% of their total sales, forcing the retailers to install new security systems, video cameras and security staff.
A 2021 survey of retailers found 65% acknowledged an increase in violence, while 37% said Organized Retail Crime gangs were much more aggressive than in the past.
With every legislative solution killed by California’s Democratic supermajority, retailers and Chambers of Commerce formed Californians Against Retail and Residential Theft (CARRT), and launched a campaign to raise lawmakers’ and the public’s knowledge of the growing theft problem in the state. CARRT is a broad-based coalition of business associations, local groups, and victim organizations advocating for California officials to act now to undo the damage done by Proposition 47.
Not the Bee also addresses this shrinkage: the Covid lockdowns.
“Whoever had the bright idea to shut down the entire U.S. economy, confine people to their homes indefinitely, foment open-ended hysteria about a respiratory virus, and drive inflation to sky-high record rates — congratulations, your strategy is bearing fruit,” Not the Bee reported.
“Brick-and-mortar retail’s indisputable edge over e-commerce is that consumers can get what they want immediately, and can touch and feel the product before buying it. Rising theft — and stores’ measures to prevent it — could dull that edge,” WSJ said.
The National Retail Federation report also found that the vast majority (89.7%) of respondents report that their Loss Prevention department is evaluated according to inventory shrink levels – in other words, shrink reduction is part of their goals, objectives or performance measures. Just 10.3% reported that they were not.
“Retailers surveyed by the NRF said Covid-19 has worsened the risk of crime, partly because labor shortages have made it difficult to fully staff stores,” WSJ said. “Moreover, supply-chain shortages made certain products more susceptible to theft because they fetched high value in secondary markets.”
“Can you imagine a more predictable outcome from the pandemic policies we enacted to fight COVID-19?” Not the Bee asks. “We threw our entire way of life — our economy, our organizations, our social structures, our education — into a complete and total tailspin.”
“Shrink can have a substantial impact on already thin retail margins. Target said that the rise in shrink, including theft, reduced its gross profit by more than $400 million in the first three quarters of its fiscal year, compared with a year prior. For the full fiscal year, it estimates that its gross profit will take a $600 million hit.”
“Although shrink is a perennial problem in retail, it really took off when the pandemic hit. In the five years leading up to 2019, retail shrink grew at a compound annual growth rate of roughly 7%, according to data from the NRF,” WSJ said. “In 2020, it jumped 47%, and rose another 4% on top of that huge jump in 2021. Some retailers, including Ulta Beauty and Target, have said that shrink has gotten worse again this year. ‘When times get tough, shrink goes up,’ Ulta Beauty Chief Financial Officer Scott Settersten said on the company’s earnings call on Dec. 1. ‘We’ve seen that in retail over a long period of time.'”
And who will pay for these increasing retail costs? “Retailers will ultimately pay for shrink risk in some form or another—either on the top line if they want to keep stores completely accessible or on the bottom line if they spend heavily on labor and mitigation measures,” WSJ said. “Finding the right balance will be key to preserving brick-and-mortar businesses.”
And if you wonder why toothpaste, shaving cream and laundry detergent is under lock and key at many stores, it is a theft mitigation measure, according to retailers.
California’s nonpartisan Public Policy Institute of California released a report that found a direct correlation between Proposition 47 and a marked increase in larceny thefts across California, despite many media reports attempting to refute the correlation, the Globe reported. As for any legislative support from the California Legislature, don’t hold your breath:
The California Assembly Public Safety Committee heard and killed Assembly Bill 1599 by Assemblyman Kevin Kiley (R-Granite Bay) in March, which sought to repeal Proposition 47, and “make crime illegal again.”
“Retail theft losses may be the straw that breaks the camel’s back,” said Julian Canete, President and CEO of the California Hispanic Chambers of Commerce. “Something needs to be done before mom and pop stores are stolen from our communities.”
Here is the Retail Security Survey.
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