Tuesday, March 26, 2024

Why we don't actually know whether retail theft is a big problem

A store employee wearing a red vest and a black long-sleeved shirt handles a jug of laundry detergent at a locked case with other jugs of Downy detergent on shelves. At the top of the photo, a keychain hangs from the lock used to secure the shelf when it's not open.
Many retailers have locked up goods in response to a supposed rise in retail theft.
  • Retailers from Walmart to Walgreens have called out theft at their stores over the last few years.
  • But a new report suggests we don't know whether organized retail crime is a big problem or not.
  • States and cities are passing new laws on theft without knowing the scale of the issue, the report's authors say.

We've all been in a store like Walmart or Target and noticed products like body wash locked away behind protective windows or security guards lingering at the doors and checkouts.

The reason, retailers have increasingly said, is theft. Last September, Target even closed several stores, blaming retail crime. The National Retail Federation said last April that "organized retail crime" — groups of people stealing merchandise, usually for resale — accounted for billions in goods that went missing from stores in 2021.

But answering the question of how big a problem it actually is is actually really hard, according to a recent report compiled by two researchers for the Brookings Institution.

Firstly, knowing which losses can be attributed to casual theft versus organized crime at a given store — much less nationally — is essentially impossible.

It's partly a definition problem. "Organized retail crime," "retail theft," and similar terms don't correspond with categories that local police departments use to categorize crimes, Hanna Love, a fellow at Brookings, told Business Insider.

That means many claims from retailers about those crimes rising relies on data that includes related but different offenses, such as shoplifting.

It's unclear what makes organized retail crime "different than, say, other instances of shoplifting" from a data perspective, Love said. "We just don't actually have the data to understand the problem."

Retail executives often talk about "shrink" on earnings calls, a term for product losses that is frequently interpreted as a shorthand for theft by visitors to the store. But shrink includes a lot more than that, from employees stealing from store shelves to fresh food that arrives at the store spoiled.

Twenty-four cities have kept good data over the past five years on shoplifting, the Brookings report found. Those numbers can include the sort of organized efforts that retailers have been talking about as well as individuals who are caught stealing. But even that data seems to counter the narrative about theft: In 17 of the cities, shoplifting actually fell between 2018 and 2023.

There's plenty of evidence that retailers were overstating the threat even before the Brookings report.

A few years ago, for example, Walgreens closed some stores in San Francisco and brought more security guards into its stores in order to combat what it said were coordinated efforts to steal merchandise. Then, last year, Walgreens CFO James Kehoe said that the chain "cried too much" about theft and would probably draw down the extra security it had brought in.

Analysts at William Blair cast doubt on Target's stated reason for closing stores last fall, saying in a research note that a number of the shuttered locations were small-format stores, many of which appear to have been underperforming after the retailer touted their potential several years ago.

And in December, the National Retail Federation retracted its claim that organized retail crime accounted for roughly half of the $94.5 billion in goods that went missing from stores in 2021, The New York Times reported. The NRF has said that it took back the estimate due to an error by an outside analyst who contributed to its report on organized retail crime.

But the panic over theft — despite not knowing whether it's as bad as retailers say it is — has already had a real effect, Love and Sebastian told BI. States and municipalities either have already altered the laws on punishing shoplifters or are considering changes, citing the perceived rise in organized retail crime.

About fourteen states passed new laws on retail theft in 2022 and 2023, Stateline reported in December. Many raised the punishment for stealing, such as an Indiana law that makes organized theft of at least $50,000 in goods a felony. Previously, it was a misdemeanor. All of the laws referenced rising rates of retail theft, according to the report.

The retail theft laws highlight how claims made by retailers can affect the law — even if there's no data to back it up, Sebastian told BI.

"I've just seen so many times where policy is following perception much more than reality," she said.

More stringent laws for shoplifting don't necessarily deter would-be thieves, the researchers said. But they could result in more arrests — and, potentially, more deaths, even if someone is just suspected of stealing.

Last year, for instance, police shot and killed a man outside a mall in Fairfax, Virginia, according to local TV station WJLA. His alleged crime? Stealing a pair of designer sunglasses from a shop there.

"There is an actual risk to human life as a result of this," Sebastian said.

Do you work at Walmart, Target, or another major retailer and have a story idea to share? Reach out to this reporter at abitter@businessinsider.com

Read the original article on Business Insider


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