For retailers, inventory shrinkage is an unavoidable reality. Whether it’s caused by products containing defects, items getting lost or misplaced during shipping or a variety of other scenarios, when merchandise isn’t available for purchase, it’s chalked up to shrinkage. Another shrinkage contributor is theft, and based on a newly released report, it’s a multi-billion dollar problem across the country.
In 2021, the most recent year in which data is available, shrink cost retailers a combined $94 billion, according to estimates from the National Retail Federation. That’s up from approximately $90 billion in 2020.
Retail shrinkage is an umbrella term that encompasses several potential causes, such as damaged goods and employee theft, among others. But the biggest contributor to shrink last year came from customers brazenly stealing goods.
Mark Mathews, vice president for research development and analysis at the National Retail Federation, said organized retail crime is quite rampant and seems to have coincided with the pandemic.
“The factors contributing to retail shrink have multiplied in recent years, and ORC is a burgeoning threat within the retail industry,” Mathews said in a press release. “These highly sophisticated criminal rings jeopardize employee and customer safety and disrupt store operations.”
Shoplifting soared 73% in 2021
Across just about every purchasing channel — in-store, online and mobile device — retail fraud grew in prevalence, the report found. Shoplifting, for example, rose 73% in 2021 compared to a year earlier and instances of violent crime surged more than 89% year over year.
Retail crime has been so rampant that in several cities — such as Los Angeles, Chicago and San Francisco — some stores have had to close several of their locations. As ABC News affiliate KGO-TV reported earlier this year, two Walgreens stores, located in the downtown portion of San Francisco, shut down last November due to heavy shoplifting and organized retail crime activity. Some people have attributed the spike in property crime in California to lawmakers decriminalizing retail theft up to $950. This means stealing merchandise valued below this figure is considered a misdemeanor in the Golden State, rather than its prior status as a felony. Prosecutors aren’t obligated to issue charges for misdemeanors. Los Angeles and San Francisco were Nos. 1 and 2, respectively, in organized crime activity in 2021.
Aside from the substantial financial threat shoplifting poses to retailers, it also risks employees’ physical safety. For this reason, store operators are shoring up their defensive posture. The report found nearly 45% of employers have increased their spending on loss prevention solutions and over 60% are spending more on technology, such as anti-theft equipment and other tech-enabled assets designed to curb retail crime.
Cory Lowe, senior research scientist for the Loss Prevention Research Council, said retailers must go to every length and spare no expense to ensure their workers are protected from harm.
But store operators also need help from local, state and federal official for things to improve. Retailers in the poll were nearly unanimous in their desire for better enforcement from police and stiffer penalties for those breaking the law.