Major retailers including Target, Walmart, Whole Foods, Walgreens, and CVS have all recently decided to close locations across major US cities, raising concerns about the future of retail in some of the most distinguished business districts in the country.
A key factor: losses from retail theft totaled $112 billion in 2022, according to the National Retail Federation (NRF) – a 19% increase from 2021. And roughly 69% of U.S. retailers don’t have organized retail crime prevention departments.
They’re losing HOW much to shrinkage?
The status quo had been that companies weren’t required to report losses due to theft. And so, they didn’t.
But now, with bottom lines bleeding and shareholders to appease during earnings calls, some major retailers are being more forthright with such figures and are struggling to contain their shrinkage losses to 9-digit sums.
In May, Target announced that organized retail crime was intensifying, and projected $500 million more in lost and stolen merchandise in 2023 than the jaw-dropping $400 million misappropriated in 2022, as noted by CNBC.
Not unrelated, the company announced it will be closing nine Target stores across New York City, Seattle, Portland, and the San Francisco Bay Area.
Similarly, Walmart – whose behemoth global network of stores loses an estimated $3 billion annually to shrinkage – has made plans this year to shutter 22 locations across America.
Soaring inflation is serving to further exacerbate these losses, as the value of most consumer goods continues to rise.
Ignoring the problem will not fix it
Retailers would do well to address their challenges head-on, as data from the NRF’s 2022 National Retail Security Survey revealed that 69% of retailers in the U.S don’t currently have organized retail crime prevention departments.
Testing the hypothesis that self-service kiosks lead to more theft, Walmart removed self-checkout lanes from three stores in New Mexico, reported Business Insider.
“Self-checkout is a huge source of loss,” Brian Brinkman told The Food Institute. As chief product officer at Agilence – a loss prevention analytics provider – Brinkman added:
“What we’re seeing with our customers is that many are starting to wind back self-checkout and are seeing sales increase by as much as 30%.”
Data analytics, when used in tandem with traditional security measures, can offer robust solutions for retailers trying to fortify their theft prevention departments. Brinkmann insisted on the need to connect multiple data sources, from inventory to POS and camera systems, to provide a comprehensive loss prevention strategy. Machine learning is also beginning to play a pivotal role in proactively identifying patterns and alerting stakeholders.
The enemy within
While flash mob smash and grabs draw more media attention, internal theft is also a significant source of shrink loss. According to NRF data, 29% of shrinkage is the result of pilfering at the hands of retailers’ own employees.
In a clear sign of desperate times begetting desperate measures, Rite Aid’s chief revenue officer reported during a recent earnings call that the chain was looking at “literally putting everything behind showcases.”