Organized crime plagues retailers and sparks debate
America’s largest retailers say organized retail crime has become a multi-billion dollar problem, but the effectiveness of their strategies to address it and the validity of the data as a whole are in question.
In recent years, companies such as Home deposit, Lowe’s, walmart, best buy, Walgreens And SVC have sounded the alarm over organized gangs of thieves who ransack their stores and resell the goods in online marketplaces.
They poured money into theft prevention strategies, such as plastic enclosures, metal detectors, motion-detecting monitors and AI-powered cameras, and warned that if the problem does not does not improve, consumers may end up paying the price.
“Theft is a problem. It’s higher than it has been historically,” Walmart CEO Doug McMillon told CNBC in December. “If this is not corrected over time, prices will be higher and/or stores will close.”
However, the problem is not as clear cut as retailers and trade groups have made it seem.
Studies from the National Retail Federation show that shrinkage cost retailers $94.5 billion in 2021, compared to $90.8 billion in 2020, but the data is largely qualitative and cannot be verified because they come from an anonymous set of retailers.
Additionally, the $94.5 billion in losses refers to the overall shrinkage, which is the difference between the inventory a company has on its balance sheet and what it can actually sell. This difference takes into account items that were stolen from shoplifting, but also includes inventory that was damaged, lost or stolen by employees.
External retail crime accounts for just 37% of those losses, or about $35 billion, according to NRF data.
At least one major retailer recently admitted it may have overstated the issue.
“Maybe we cried too much last year,” Walgreens chief financial officer James Kehoe said on a January investor call when asked about the shrinkage. “We’ve stabilized,” he added, saying the company was “pretty happy with where we are.”
Still, law enforcement and retailers insist organized retail crime remains a problem and said they stand by their data.
“I can tell you that in our world, we know crime is on the rise. We see it every day in our stores,” Scott Glenn, vice president of asset protection at The Home Depot, told CNBC. “Our internal information shows us that it is on an annual basis, with double-digit growth.
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