The Rise of Organized Retail Crime – How Criminals are Destroying Retail
Theft and organized retail crime is the biggest topic and area of concern in the retail industry with companies like walmart, target, home depot, and nordstrom all recently sounding the alarm about large increases in theft that they are seeing in their businesses. Except these companies aren’t talking about crime directly: to put it in their words, the problem they are facing is increasing shrinkage.
Shrinkage is a corporate term for the loss of inventory due to things like theft, fraud, and damaged goods. Dick’s sporting goods recently reported its quarterly earnings and its stock tanked nearly 25% after it disclosed that its profits were decreasing due to an increase in theft related shrinkage. Target alone is expecting to lose $500 million dollars due to shrink with most of that hit coming from theft. And corporate retail as a whole is worried that theft related shrinkage is just plain out of control. The National Retail Federation estimates that nearly $100 billion dollars a year is now being lost due to shrinkage with a large part of this being made up of organized retail crime.
You might be wondering what exactly organized retail crime is? Unlike shoplifting where an individual steals merchandise for their personal use, organized retail crime is the large-scale theft of merchandise from stores with the end goal of reselling the stolen goods for financial gain. In these criminal operations there are typically a large number of people who will steal inventory from retail stores and funnel these stolen goods to other criminals in the organization who aim to convert the stolen items into cash. The stolen goods that are targeted vary widely and enxompess everything from electronics to baby formula – the one thing that all the stolen goods have in common is that they are highly in demand and easy to convert into cash without drawing too much attention. Shocking footage of organized retail crime often shows flash mob style robberies where large groups of people enter a store and blatantly grab tons of merchandise and leave.
While these organized retail theft operations aren’t new, they are becoming increasingly widespread due to the rise of e-commerce and online auction sites making it much easier to convert stolen merchandise into cash anonymously. Another major factor contributing to the increase in organized retail theft is lax penalties and a lack of prosecution for these crimes. In many areas where organized retail crime is especially rampant, there are high felony thresholds that allow thieves to steal more while only facing a misdemeanor charge if caught. This allows criminals to blatantly steal from stores without risk of significant jail time. And this lower risk of criminal charges has led to a rise in organized retail theft operations with much of this crime coming from repeat offenders.
Data provided by the U.S. Chamber of Commerce shows that California alone accounted for approximately 12.5% or one eighth of total U.S. theft in 2021. In particularly bad hot spots for Organized Retail Crime like downtown San Francisco, many retail brands are now choosing to close their stores with brands like Nordstrom, Old Navy, Whole Foods, and Office Depot pulling out of the city.
Skeptics looking to downplay theft as the primary cause of these businesses leaving tend to point out that these businesses were already facing lower revenue and challenges due to decreased foot traffic in malls. But this explanation doesn’t examine the root cause of why malls in locations like downtown San Francisco are attracting less people. A large part of the reason is that no one wants to shop in a place that’s unsafe. If a place is experiencing widespread crime, people are going to start avoiding that place. So not only are businesses experiencing millions of dollars in direct losses from stolen goods, but they are also experiencing hidden costs due to the fact that crime is scaring away paying customers. The economics of operating in these locations just don’t make sense.
Retailers are trying to combat this rise in theft as much as they can and are taking different tactics. Retail companies are re-evaluating their locations and are increasingly closing stores in crime hot spots. For stores that remain open, companies are now increasingly locking up items that are popular targets for thieves and are also moving other products to behind checkouts. And some stores are outright removing items completely that are being frequently stolen.
While some commentators and supposed experts have tried to downplay the threat of organized retail crime, a top Department of Homeland Security official insisted the problem is very real and is a significant threat. The agency is concerned that Organized Retail Theft is also becoming increasingly connected and perpetuated by gangs, drug trafficking organizations, and terrorist financing networks.
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