More Retailers Cite Theft As Drag On Profits, Blame Organized Crime
National retailers continue to sound the alarm that theft is rising, but in a way that closing stores would fail to address.
Organized retail crime, or ORC, rose an average of 26% in 2021, according to a survey by the National Retail Federation, representing a growing share of inventory shrink, the retail industry's term for theft, Forbes reports.
At Target, the shrink has already shaved $400M from the company's gross margin in 2022 compared to last year, Chief Financial Officer Michael Fiddelke said on the company's third-quarter earnings call last month. Fiddelke said he expects that to hit $600M by the end of the year.
But whereas other retailers like Walmart, Walgreens and Starbucks have cited rising theft and safety issues as reasons for closing stores this year, Target's inventory shrink isn't limited to any geographic areas, Target Executive Vice President and Chief Operating Officer John Mulligan said on the call.
"I'd say it started probably in some localized geographies originally, but we see those circles expanding and expanding and the impact continuing to grow," Mulligan said. "This is a nationwide problem that we need to address nationwide with other retailers. This is primarily driven by organized crime. And so there is a role for us to work as a retail group with law enforcement, with the government, to help find solutions."
Nationwide, crime grew in prevalence as a political issue despite overall crime numbers continuing a decades-long decline, The Marshall Project found in a November research report. Though violent crime has increased over the course of the pandemic, property crime hasn't, the study found.
But ORC growing in proportion to individual shoplifting could indeed be happening without making an impact on crime reports, considering the number of retail thefts that do not get reported, KGW-TV of Portland, Oregon, reported in October.
Some retail leaders have called on the federal government to take a more active role in addressing ORC. And many retailers, Target included, have implemented remediation measures, such as locking more items in cases, despite the practice being known to cause declines in sales, Forbes reports.
The rise in ORC calls into question the rationale that retailers have used to justify closing certain stores.
Starbucks cited crime as the reason for closing urban stores in cities like Philadelphia and its birthplace of Seattle. Organizers for national union Starbucks Workers United have accused the company of using that narrative as cover for retaliating against stores that unionized.