Do Retailers Alone Have Any Chance of Solving This Crisis?
8/24/23 – – It’s not a typical quarterly earnings season for retail companies. Listen in on investor conference calls and you won’t hear much about changing hemlines, back-to-school shopping or hot products for fall. Instead, exasperated executives are focusing on in-store theft, a burgeoning threat to their business they call “shrinkage.”
Shrinkage, which includes merchandise stolen by shoppers (out the front door) and employees (out the back door), has been a fact of retail life forever. But the National Retail Federation (NRF) estimates that it is now a $100 billion problem for the industry. And because of the emergence across the country of organized retail crime, shoplifting has taken an ugly turn, threatening the bottom line as well as the safety of store employees and customers.
We’ve all seen the frightening videos of mobs rampaging through stores grabbing handbags from shelves and jewelry from display cases. Terrified customers get out of the way and before security personnel can react, the thieves are gone (out the front door) carrying merchandise to be sold to fences who sell the stolen items online for tens of thousands of dollars.
According to NRF Vice President for Research Development and Industry Analysis Mark Mathews, “These highly sophisticated criminal rings jeopardize employee and customer safety and disrupt store operations. Retailers are bolstering security efforts to counteract these increasingly dangerous and aggressive criminal activities.”
Dick’s Sporting Goods, Target and Macy’s cited shrinkage as a negative factor in their earnings results.
- Dick’s Sporting Goods President Lauren Hobart told investors, “The impact of theft on our shrink was meaningful to both our Q2 results and our go-forward expectations for the balance of the year. We are doing everything we can to address the problem and keep our stores, teammates and athletes safe.”
- Target Chair and CEO Brian Cornell reported a 120-percent jump in shoplifting incidents involving violence, explaining, “Our team continues to face an unacceptable amount of retail theft and organized retail crime.”
- And Macy’s CEO Jeff Gennette commented in an interview on CNBC, “You’ve got elements that are coming into stores and they’re doing it in bulk, so you’re getting these big clots of shortages happening in certain areas of the country, and you’re seeing that really across most of retail. Those goods are being fenced on marketplaces so the digital component of this has really opened up a revenue stream for a lot of these elements.”
(How ironic that the internet and e-commerce sites, having taken such a bite out of brick and mortar retailing, are also facilitating the fencing of merchandise stolen from the physical stores still left standing!)
The retail industry has come up with an acronym to describe what’s being stolen: CRAVED. The most vulnerable items are Concealable, Removable, Available, Valuable, Enjoyable and Disposable. The top five metropolitan areas targeted by organized retail crime rings are Los Angeles, San Francisco/Oakland, New York, Houston and Miami.
Retailers are struggling to find answers to this dangerous and expensive crisis. Many are taking common-sense measures like moving certain items away from store entrances. Others, like Walgreens, are closing stores in high-crime areas. But when it comes to confronting the thieves, things aren’t that simple.
Earlier this year, Lululemon’s CEO Calvin McDonald was in the news defending his company’s firing of two employees who didn’t stick to procedural policies when three masked men brazenly robbed their Lululemon store in the Atlanta area’s Peachtree City mall. Jennifer Ferguson and Rachel Rogers — who had the temerity to say “stop, thief” and call the police — failed to follow the company’s policy prohibiting store workers from confronting thieves in any way.
McDonald told CNBC: “We have a zero-tolerance policy that we train our educators (i.e. employees) on around engaging during a theft. Why? Because we put the safety of our team, of our guests, front and center. It’s only merchandise.”
Walmart CEO Doug McMillon waded cautiously into political territory on his Q2 investor call, suggesting that more could be done by police and prosecutors: “We do think that in some jurisdictions here in the U.S., there needs to be action taken to help protect people from crime, including theft.”
I’m with McMillon and I understand McDonald’s dilemma. Retailers can’t solve this alone. There is no real solution absent a commitment by communities and the people they put in office to take public safety seriously. Unchecked retail theft hurts businesses, kills jobs, and endangers lives. Passing off shoplifting of handbags and jewelry as a victimless petty crime invites escalating crime, which ultimately hurts marginalized people most — the people who can’t move to find another job or a better place to live.
So, maybe retail CEOs on their earnings calls are sending a subtle but important message to Wall Street. Their brewing crisis is a warning to investment banks and funds that embrace social positions that go too far in devaluing traditional approaches to law, order and public safety. Maybe they’re appealing to investors’ self-interest to adjust their social activism.
Let’s hope they get the message.
UPDATE: 9/27/23 – – Target Corporation announced yesterday that on October 21 it will close nine stores in the New York City, Seattle, San Francisco-Oakland, and Portland markets due to “underperformance.” Target cited violence, theft, and organized retail crime problems at these stores as factors in the closings. A 9/26 Wall Street Journal article on the closings added context:
“Organized retail crime, habitual theft, and violence are significant challenges for retailers of all sizes,” the Retail Industry Leaders Association said in a statement. The trade group added that Target’s announcement reflects “the substantial problems that exist in communities across the U.S.”
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