Who Pays for the Burgeoning Retail Theft Problem?

Jun 5, 2023 | Macro Insights, No Bull Economics

Organized Retail Crime Epidemic

While the industry calls it shrinkage instead of theft, it is no longer possible to keep camouflaging this disturbing trend. We are talking about a problem approaching $100B/year in 2021 according to the 2022 National Retail Security Survey.

Commentary

  • Major retailers are calling out their problems with theft as highlighted in our Walmart & Dollar Tree posts.
  • According to the National Retail Federation’s 2022 National Retail Security Survey, retail theft amounted to an estimated $94.5B during 2021 (1.4% of sales), up +4% y/y.
  • The survey revealed that the primary cause of loss was driven by external theft, including theft attributed to ORC (organized retail crime). Notably, retailers reported a +26.5% y/y increase in ORC incidents during 2021. Further, 80% of retailers surveyed reported that the violence & aggression associated with ORC incidents increased in the past year.
  • Retailers additionally reported that in-store, e-commerce & omnichannel fraud are all on the rise along with guest-on-associate violence. Challenges with labor shortages, employee retention & hiring (as well as issues related to masking & maintaining covid precautions) contributed to the risks of violence & hostility.
  • Notably, 52% of respondents are boosting their budgets for loss prevention & associated tech, with solutions ranging from AI video analytics at POS/self-checkout, self-service locking cases, autonomous security robots & license plate recognition. In addition, almost 33% of retailers surveyed have established a dedicated ORC team which is driving increases in apprehensions, prosecutions & civil demands.
  • According to the NRF, retailers desire stronger ORC legislation (especially at the federal level), as well as better enforcement of existing laws. They also favor increased penalties for theft, and a reduction in felony thresholds as 70.8% of survey respondents reported increases in ORC in areas where felony thresholds have increased.

Source: NRF | National Retail Security Survey 2022

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