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Retailers are starting off the year with more questions than answers about theft and merchandise loss.<\/p>\n
Crime in general remains a top concern, according to a report the National Retail Federation released last month, a survey of loss prevention and security executives at 164 mid-size to large retailers. Such executives at more than 82 of those companies agreed that certain issues, all related to crime, were more of a concern than they had been a year before, including: organized retail crime, shoplifting, return fraud, repeat offenses and theft related to the in-store pickup or return of merchandise that had been ordered online.\u00a0<\/p>\n
But the impact on retailers has been tough to measure, and it\u2019s unclear how reliable this report is. In 2023, the NRF retracted a key claim about how much merchandise shrink is due to organized retail crime, following Retail Dive\u2019s 2023 discovery of a major flaw in the group\u2019s estimation of crime\u2019s impact on shrink. Then, in 2024, the group ceased publication of the annual shrink report that had guided the industry for more than 30 years.<\/p>\n
As with its shrink reports, the NRF\u2019s crime research is based on surveys of a limited number of executives, based on their impressions rather than hard numbers like reports to law enforcement. The executives reported a 26% increase in shoplifting from 2022 to 2023, and \u201ca 93% increase in the average number of shoplifting incidents per year in 2023 versus 2019 and a 90% increase in dollar loss due to shoplifting during that same time period.\u201d<\/p>\n
The National Incident-Based Reporting System, or NIBRS,\u00a0also shows shoplifting rates up 93% from 2019 to 2023, a finding that NRF calls a coincidence. However, the law enforcement agency has another more established database (the Summary Reporting System) that shows the nationwide shoplifting rate for those two years as about even. However, NIBRS\u2019 spike is not entirely due to actual crime rates, but, rather, reflects the ongoing addition of new sources of crime statistics. This makes the Summary more accurate for now, Ernesto Lopez, senior research specialist at the Council on Criminal Justice, told Retail Dive last year.\u00a0<\/p>\n
In its most recent update, released last week, CCJ found that the average reported shoplifting rate was up 14% in 2024 and 1% in the last five years; this likely reflects some amount of underreporting by retailers to law enforcement, per that report.<\/p>\n
The industry\u2019s concerns are not all about shrink. Most alarming in the NRF\u2019s survey was how many retailers reported an escalation of violence. More than 70% of those surveyed said shoplifters are exhibiting more violence and aggression compared to a year ago, with more than 90% saying that\u2019s true compared to 2019.\u00a0<\/p>\n
But shrink itself may be less of a concern. The NRF\u2019s shift in research strategy came just as some retailers began to report that their merchandise losses were improving, in some cases after they tweaked operations.<\/p>\n
Yet that marks another difficult area to measure. It\u2019s not really clear just how much merchandise is lost to crime. Some loss prevention experts believe that retailers need a better sense of how much of their inventory is actually going missing, for any reason.<\/p>\n
Those employing the retail inventory method, a legacy accounting practice that leverages price to determine ending inventory value, may not have as good a grip on their levels as they believe. Retailers with a major shrink problem may want to consider switching to a cost method of accounting, experts say.<\/p>\n
While theft remains a major source of shrink, it may not loom as large as some retailers believe, given that other sources have been consistently underappreciated for years, according to Brand Elverston, founder and principal of Elverston Consulting and a loss prevention expert. If loss prevention strategies are failing to stem shrink, it may be because they are too narrowly focused, he said.<\/p>\n\nMost retailers need a more holistic approach than they have, with better coordination between their store operations and loss prevention teams, according to Johnny Custer, senior director of retail risk solutions at Think LP.<\/p>\n
\u201cThere are some very progressive retailers where the relationship between operations and LP is seamless, and loss prevention is a specialized extension of the operations team,\u201d Custer said by video conference. \u201cThat’s ultimately where we all need to be, but they are few and far between. Then we’re not just \u2018loss prevention,\u2019 we’re asset protection, we’re asset and profit protection. We’re profit-optimization specialists.\u201d<\/p>\n
These issues don\u2019t erase the fact that retailers have to do something about crime and shrink. Here\u2019s how retailers have taken on these challenges and what to watch for in 2025.<\/p>\n
Locked-up merchandise<\/h3>\n
Stores in many locations have been keeping certain items behind lock and key in order to thwart thieves, with a majority of shoppers reporting that they encounter locked-up merchandise on a regular basis. But this in turn has managed to also thwart customers: Numerator estimates that there\u2019s a better than one in four chance that a customer will leave rather than wait for assistance with a locked case.<\/p>\n
This may be leading at least some retailers to revisit this tactic. This week, for example, CVS Health said it is testing the ability to unlock merchandise via its new app.<\/p>\n
And Walgreens CEO Tim Wentworth earlier this month told analysts that he had met with the company\u2019s head of asset protection \u201cto look at some of the creative things that we are looking at both as a company and as an industry as it relates to the customer experience on shrink.\u201d<\/p>\n
\u201cWhen you lock things up, for example, you don’t sell as many of them,\u201d he said. \u201cWe’ve kind of proven that pretty conclusively. But we’re excited about the fact that we have revamped our team.\u201d<\/p>\n\nSelf-checkout<\/h3>\n
At some locations, theft via self-checkout is higher than organized retail crime, with research from the University of Leicester estimating in recent years that self-checkout in the U.S. accounts for one-fifth to nearly one-quarter of all unknown store losses.<\/p>\n
The technology was seen by many as a way to save on labor costs. But some retailers have discovered that self-checkout works better for both the retailer and its customers if those areas are adequately staffed. To combat shrink, several retailers have now scaled back or even yanked the kiosks from their stores.<\/p>\n
Target and others have begun leveraging the self-service option for limited quantities, for example. And last month, Dollar General said merchandise loss was down significantly, just a few months after removing self-checkout from most of its stores. The discounter said that it expects year-on-year declines in shrink, and a related benefit to margins, to continue throughout 2025.<\/p>\n
Cargo theft<\/h3>\n
Cargo theft \u2014 merchandise stolen from some point in the supply chain \u2014 may get more attention in 2025.<\/p>\n
According to the FBI\u00a0these crimes can involve fraudsters tricking shippers, including diverting cargo from its legitimate destination; cyber theft like phishing emails that enable fraudulent pickups; and altering a bill of lading in order to pilfer from a truck.<\/p>\n
Some experts already see cargo theft as an underappreciated reason for lost merchandise, and it reached unprecedented levels in 2024. Nearly 45% of the loss prevention executives surveyed by the NRF said that cargo theft had become \u201cmore of a concern\u201d in the last year.<\/p>\n
Indeed, as of mid-December, reported cargo theft had surpassed 2023 \u201cby several hundred incidents,\u201d according to CargoNet, which found a 36% rise in Texas and a 21% rise in California.<\/p>\n
Public policy<\/h3>\n
Retail industry groups see beefing up law enforcement as key to fighting retail crime, and have pushed for stiffer penalties against shoplifting and other theft, plus greater prosecutorial powers at the state and federal levels.\u00a0<\/p>\n
In California, voters in November approved a measure, Proposition 36, that goes further than a law signed by the governor last summer. The new rules will recategorize lower-level thefts as a felony for people with prior convictions and allow for more extensive prison sentences.\u00a0<\/p>\n
Nationally, without the improved data that some members of Congress had called for, the Combating Organized Retail Crime Act of 2023 went nowhere last year. The bill must now be reintroduced into the new Congress in order to get a vote.<\/p>\n
That doesn\u2019t mean the fight is over, however. The NRF says that it \u201ccontinues to advocate for national legislation to bring federal resources and support to local, state and tribal efforts to curtail ORC,\u201d with almost all of the loss prevention and security executives surveyed agreeing that \u201cfederal legislation is needed to effectively combat organized retail crime.\u201d<\/p>\n
That may get a boost from the White House, according to a Tuesday research note from Chris Bottiglieri, equity research analyst at BNP Paribas Exane.<\/p>\n
\u201cWe suspect the Trump administration may take a more hard-line stance on retail theft (and crime more broadly), which may serve as a catalyst for further relief on shrink,\u201d Bottiglieri said.<\/p>\n<\/p><\/div>\n
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