Retailers would have you believe that they are powerless to stop the shoplifting epidemic, contributing to $112.1 billion in losses last year alone from what the industry broadly labels “shrink” – a catchall term that also includes returns and damaged goods. The solution, they claim, is harsher penalties for shoplifters. While that may help, retailers can’t ignore their own responsibilities.
Although images of mass lootings like that in Philadelphia this week have grabbed the headlines, the reality is that the vast majority of shoplifting is done on a far smaller scale. But that doesn’t make the issue any less of a problem for retailers. Target Corp. just said it plans to close nine stores in New York, Seattle, Portland and northern California due to concern for worker safety amid a rise in theft. Retailers have called on states to lower the threshold for what is considered felony retail theft, eliminate cash bail in those instances and create specialized task forces to investigate such crimes. A bill with similar aims was introduced in Congress.
But in their search for more severe laws, retailers have neglected the most important asset in combating shrink and often the true victims – their workers. Retailers have increasingly taken a “hands off” approach to in-store theft, prohibiting workers from confronting shoplifters. In many ways, this is understandable. Retailers just want to reduce their liability in case someone gets seriously injured – or worse. Although actual rates of theft are about the same as before the pandemic, the level of violence has increased, according to the National Retail Federation’s National Retail Security Survey published this week.
The problem with such policies is that they can leave employees feeling demoralized, which can lead to performance issues. Some retailers have gone so far as to fire workers who attempted to stop people who were stealing. But workers want to be part of the solution. After years of escalating customer abuse and violence, unionized workers are negotiating for the right to self-defense at work. This after retail workers experienced almost twice the rate of nonfatal workplace violence compared with the general private sector workforce between 2015 and 2019, according to the most recent federal analysis of workplace violence. And yet, retailers don’t seem to be willing to spend the money for sufficient security or institute polices that might make shoplifters think twice. The National Retail Federation survey found that only 58% of retailers reported security personnel are allowed to confront and detain a shoplifter.
Consider Dollar General Corp., which has struggled to contain shrink over the last year amid ongoing complaints about workplace conditions. Its stores are cheap to build and run in part because they’re thinly staffed relative to competitors. While that’s great for profit margins and the stock price, which more than doubled between the start of 2019 and the end of 2022, it enabled a whole set of other issues. What’s to discourage a shoplifter from stealing when there is only one employee on duty and no security guard? In fact, about 23% of workplace deaths in 2021 occurred when someone was alone at work, according to the Bureau of Labor Statistics.
Now, that low-cost business model has caught up with the dollar store titan. In August, Dollar General lowered its full year net sales and same store sales forecast in part because of an “approximately $100 million of additional shrink headwind.” Turns out, even investors are worried about how understaffed stores are, according to a recent Bloomberg BusinessWeek report. The retailer recently announced a $150 million investment in additional labor hours, but there are some doubts that it won’t be enough. Dollar General Chief Executive Officer Jeffrey Owen told investors in an August earnings call that the amount is sufficient, and the company is more focused on stabilizing its supply chain.
Sure, hiring additional security personnel and investing in deterrent systems such as emergency alert and anti-theft technologies can be expensive, but apparently so is doing nothing. Home-improvement goods company Lowe’s Inc. is one of the few retailers that does not expect shrink to affect margins this year. CEO Marvin Ellison said at an investor conference last week that the company has invested in such technologies, including those that disable stolen power tools if they leave the store illegally, and has increased staffing during high traffic hours – moves that he credits for fending off any meaningful risk to margins from theft.
As for harsher laws and punishments for retail theft, there’s no guarantee those will work. Plenty of research has found that strategy to be ineffective. And while $112.1 billion in shrink is a big number, it amounted to an average rate of 1.6% last year, up from 1.4% in 2021 and in line with rates in 2020 and 2019. Lets face it: the pandemic era and its trillions of dollars of fiscal stimulus was very good to retailers, with the S&P Retail Select Industry Index more than doubling between March 2020 and the end of 2022 as profits soared. It’s not too much to ask of retailers take some of that money and reinvest in the safety and security of its stores.
Leticia Miranda is a Bloomberg Opinion columnist covering consumer goods and the retail industry. She was previously a business reporter at NBC News and a retail reporter at BuzzFeed News.
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