Organized crime troubles negotiators, and stimulates debate
America’s biggest retailers say organized retail crime has grown into a multibillion-dollar problem, but the effectiveness of their strategies to address it and the validity of the data in general have been called into question.
In recent years, companies such as Home Depot, Lowe’s, Walmart, Best Buy, Walgreens and CVS have sounded the alarm about organized gangs of thieves ransacking their stores and reselling the items on online marketplaces.
They have poured money into anti-theft strategies, such as plastic sleeves, metal detectors, motion sensors and AI-powered cameras, and have warned that if the problem doesn’t improve, consumers could end up paying the price.
“Theft is a problem. It’s higher than it’s been historically,” Walmart CEO Doug McMillon told CNBC in December. “If it is not corrected over time, prices will go up and/or stores will close.”
However, the problem is not as clear as retailers and trade groups have made it seem.
Studies by the National Retail Federation show that retail shrinkage will cost retailers $94.5 billion in 2021, up from $90.8 billion in 2020, but the data is largely qualitative and cannot be fact-checked because it is collected from an anonymized set of retailers .
Additionally, the $94.5 billion in losses refers to shrink totals, meaning the difference between the inventory a company records on its balance sheet and what it can actually sell. This difference accounts for items that were stolen, but also includes inventory that was damaged, lost, or stolen by employees.
External retail crime accounts for just 37% of those losses, or about $35 billion, the NRF data shows.
At least one major retailer recently admitted that it may have overblown the issue.
“Maybe we cried too much last year,” Walgreens CFO James Kehoe said on an investor call in January when asked about the shrink. “We’re stabilized,” he added, saying the company is “quite happy with where we are.”
Still, law enforcement agencies and retailers insist organized retail crime remains a problem and said they stand behind their data.
“I can tell you that in our world, we know crime is increasing. We see it every day in our stores,” Scott Glenn, Home Depot’s vice president of asset protection, told CNBC. “Our internal information shows us that it is on a year-on-year basis, growing at double-digit rates.”
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