Shrink is getting too big to overlook with nationwide reports of shoplifting and huge profit losses for retailers.
There have been reports of smaller pilfering events all the way to organized retail crime (ORC) with mobs coming into stores in a mad dash to grab what they can and run out as quickly as possible—a lot of incidents have even been recorded by awe-struck customers and then picked up by local and national news.
“The National Retail Federation (NRF) estimates total annual shrink reached $94.5 billion in 2021, up from $90.8 billion from 2020. Nearly half was attributed to large-scale theft of products. The group said retailers on average saw a 26.5% increase in this type of theft over the previous year,” according to CNN Business.
CNN Business mentions the struggling economy as a potential reason for the rise, “A community might be struggling with heavy job losses and people can’t easily find another job. Now they can’t afford basic necessities,” said Read Hayes, criminologist at the University of Florida and director of the Loss Prevention Research Council, which has members including retailers such as Walmart, Target, Home Depot and Gap.
While smaller mom-and-pop stores have felt the effects of the surge in theft too, some big-box stores, like Dick’s Sporting Goods and Target, are expecting their figures to reflect the rising theft. Brian Cornell, CEO of Target, noted in a May earnings report that shrink was expected to reduce profits by more than $500 million this year as compared to last, according to Newsweek.
“Second-quarter earnings were dented by higher inventory shrink, organized retail crime and theft in general, an increasingly serious issue impacting many retailers,” Dick’s CEO Lauren Hobart said on an earnings call. Dick’s CFO added that “the number of incidents and the organized retail crime impact came in significantly higher than we anticipated.”
Dick’s noted a 23% drop in profit—despite sales that rose 3.6% in the same period—in last week’s earnings report, according to CNN.
A substantial dip in Dollar Tree’s gross profit margin last quarter from 32.7% to 29.8% year over year was also attributed to theft by CEO Richard Dreiling and CFO Jeffrey Davis, according to CBS News.
Dreiling explained a plan for the last half of the year to address the shrink problem, "We are now taking a very defensive approach to shrink. ... We have several new shrink formats that we'll introduce in the back half of the year, and it goes everything from moving certain SKUs to behind the check stand. It has to do with some cases being locked up. And even to the point where we have some stores that can't keep a certain SKU on the shelf just discontinuing the item. So we have a lot of things in the works," as reported by CBS.
Walgreen’s has also taken to chaining up some inventory or only keeping certain items on the floor while the rest is kept in the back for employees to retrieve when a customer checks out, according to thestreet.com.