Theft has been an ongoing problem for retailers. But lately, its severity has been making headlines.
Several prominent retailers including Nordstrom, Ulta Beauty, Dick’s Sporting Goods, Macy’s, Target, Dollar Tree, Home Depot and Walmart have recently noted the negative financial effect that increased levels of theft had on their second-quarter results, according to CoStar. Some also said their attempts to curtail stealing — such as moving high-theft merchandise away from entrances or just not stocking certain goods — will take time to make a difference. And several referenced more outbreaks of violence at brick-and-mortar locations.
“Recent surveys highlight a worrisome trend of escalating organized retail crime (ORC) incidents, manifesting in an average 26.5% increase in such occurrences at retail establishments. Eight out of ten shops have reported a surge in aggressiveness and violence linked to ORC incidents over the past year. These incidents have not only resulted in losses but also created an atmosphere of fear and insecurity,” Snehal Singh, Senior Research Analyst at Market Research Future (MRFR), says.
Theft’s Impact on the Retail Industry
The National Retail Federation’s (NRF) latest research on retail crime shows that shrink is nearly a $100 billion problem and growing. Another study cited from NRF and global risk advisory firm K2 Integrity found that organized retail crime groups are growing in both their scope and complexity, making them harder to stop.
“As an e-commerce expert with years of experience in the industry, I’ve witnessed the significant impact of theft on the retail sector,” Jeff Mains, CEO at Champion Leadership Group, says. “This issue becomes even more pertinent as we approach the holiday season, a time when sales peak. Theft, whether it’s shoplifting, organized retail crime, or online fraud, takes a toll on retailers’ bottom lines and erodes consumer trust.”
Dick’s Sporting Goods publicly attributed their disappointing financial performances to retail theft. According to Jeanel Alvarado, retail expert, founder and CEO at RETAILBOSS, the sports equipment and apparel retailer recently reported a 23% drop in profits. Despite an increase in quarterly net sales to $3.2 billion, the company’s earnings fell short. CEO Lauren Hobart cited “shrink” a significant factor for this.
6 Different Ways to Help Prevent Theft
While retail theft is a growing problem in the U.S., with significant impacts on the retail industry and the wider economy, there are strategies that retailers can employ to help prevent this issue. Multiple industry experts weighed in on some retail theft prevention methods that businesses can utilize:
- Train your employees. According to Linda Johansen-James, acclaimed retail expert, publisher and founder at International Retail Group, retailers should first and foremost view their employees as their frontline of security and customer engagement. All prospective employees should be vetted to reduce the risk of employee theft. Once thoroughly vetted, employees should be trained rigorously on the best ways to engage with guests and to look out for theft. They should be very familiar with the layout of the store. The frontline should also be keenly aware of the inventory and what is out on the floor, making sure to replace items that are sold.
- Install cameras in your store. Johansen-James also advises retailers to invest in cameras. Many businesses have been hesitant to do this because they think it’s too expensive. However, there are many inexpensive cameras on the market that can be monitored via a cellphone.
- Utilize technology. Mains suggests implementing multi-faceted approaches that combine technological solutions like advanced surveillance systems, RFID tagging, and AI-powered fraud detection to help significantly mitigate risks.
- Check receipts from self-checkout customers. Similarly to what stores such as Costco and BJ’s have implemented, Alvarado says checking receipts when customers use self-checkout is an effective method to deter and prevent theft.
- Collaborate with law enforcement. According to Mains, collaboration within the industry and law enforcement is pivotal in combating theft. Sharing data and insights on emerging trends and tactics used by thieves can aid in early detection and prevention.
- Optimize the design of your store. Johansen-James advises that an optimized store design is a great way for retailers to combat theft without investing in expensive and extensive security measures. Placing more expensive items towards the back of the store, behind the counter, or on higher shelves can help reduce loss. You can also strategically place mirrors around the store to provide an extra vantage point and get a better view in every corner.
Incorporating Smart Packaging
The global packaging sector has been such a significant factor in the retail industry. Obtaining the right packaging for your products can even help prevent against theft. According to Singh, the incorporation of technology-driven smart packaging solutions such as RFID tags, NFC tags, sensing labels and others can help streamline and facilitate product tracking across the supply chain.
“The benefits of using these smart tags provide crystal clear benefits, Singh says. “In fact, the standard initial investment in RFID tags in retail packaging pays off within twelve months of implementation. Not only this, even the National Retail Federation stated that when stores invest in RFID tags to concrete their inventory and supply chain management, the probability of retail theft reduces by 60-70%.”
The Combating Organized Retail Crime Act
The Combating Organized Retail Crime Act was introduced by U.S. Senators Catherine Cortez Masto (D-Nev.) and Chuck Grassley (R-Iowa) to provide law enforcement with resources to crack down on organized retail crime like flash mob robberies and cargo theft. This act will create new tools to tackle evolving trends and establish a new investigative unit within the Department of Homeland Security to better coordinate a whole-of-government and industry response to these illegal schemes.
“While this act does vary from state to state, leaving no uniform set of laws to address this widespread issue, the passing of this act will be a huge milestone in the retail industry! While legislation alone will not solve the complex and rising issue of retail theft, it is a step in the right direction — a sign of support for retailers small and large,” Johansen-James says.
The Holidays May Lead to an Increase in Theft
If shrink is such a big problem now, it is sure to become an even bigger issue once consumers start shopping for holiday gifts. Mains warns that the surge in foot traffic and online orders creates an environment ripe for exploitation by thieves. Inventory shrinkage and lost revenue due to theft can lead to supply chain disruptions, increased costs, and potential stock shortages during a crucial sales period.
The most important thing retailers can do to help prevent theft is to always be on guard. Never think your store is safe enough for someone not to steal from and be sure to properly train any new hires for the oncoming holiday rush. Follow our tips and have a safe holiday shopping experience.