Theft from stores is a good indication of customer mood – and dissatisfaction.
Wall Street is desperately trying to figure where consumer demand is going. Along with sentiment and sales, there’s one more indicator to keep an eye on: shoplifting.
This metric is rarely discussed. Recognizing that their consumers or, worse, their employees are stealing from them is unsettling for retail executives. However, theft has long been a source of concern for retailers, and a recent string of increasingly violent thefts across the United States has brought it to the forefront.
Despite the fact that these losses were caused by organized criminal gangs rather than small-scale pilfering, the two cannot be totally separated.
Shoplifting, large and small, tends to rise during times of crisis. As inflation makes things harder for more families, retail theft data will be a telling gauge for consumer distress.
Jack L. Hayes International, Inc., a Florida-based loss-prevention consultancy, has been surveying retailers on theft for 33 years. In 2020, the store groups reported a significant increase in the instances of theft for need. With U.S. food prices rising the most in 13 years in November, expectations are that this will become even more of a problem in 2022.
This comes against the backdrop of a rise in organized retail crime.
Target Corp., Best Buy Co Inc., and Walgreens Boots Alliance Inc. are among the members of the Retail Industry Leaders Association, which estimates that organized gangs stole $68.9 billion worth of products from retailers in 2019, accounting for 1.5% of overall retail sales. According to Jack L. Hayes, the average amount recovered from caught shoplifters has increased dramatically since 2016, as raiders have gotten more frequent. However, because only a small percentage of stolen goods is ever recovered from shoplifters, overall store losses are significantly higher.
Stolen items were commonly sold at flea markets or pawn shops in the past. The rise of online purchasing has made it simpler for gangs to resell goods without being discovered.
Stores are seeing the typical targets go missing — razor blades, infant formula, cosmetics and personal care products can be easily sold off again — but they’re also reporting more theft of larger-ticket items — from designer clothes and handbags to power tools.
Shoplifting is being taken more seriously by politicians, according to retailers. Last month, a letter signed by 20 CEOs urged Congress to approve legislation requiring online marketplaces to gather and verify the identities and financial details of third-party vendors, as well as requiring high-volume merchants to provide their contact information to consumers.
However, these safeguards may not be enough to deter theft.
When customers were under strain the last time — in the aftermath of the 2007 financial crisis, with widespread job losses and spiking food and fuel prices — stealing surged.
According to a research published by Joshua Bamfield, head of the UK’s Centre for Retail Research, “shrink” (stock that is lost because of systems errors, as well as theft by employees and customers) declined from 1.45% of sales in 2002 to 1.23% in 2006. However, it significantly increased from 2007 to 2011, reaching 1.39% of total sales by 2011.
A similar tendency was observed in the United States. In 2007 and 2008, as well as in 2003, when Americans were coping with the economic consequences of the dot-com bubble crash, Jack L. Hayes reported a rise in the average amount recovered from apprehended shoplifters.
While organized crime played a role, Bamfield reported that as early as 2009, retailers were witnessing an increase in “amateurs” stealing from their stores, often targeting ordinary items such as food (blocks of cheese, meat, frozen pizzas, coffee, and milk powder) and household products (knives, antiseptic cream, analgesics, contraceptives, vitamin pills, dietary supplements).
These items had always been subject to some theft — with criminals attempting to sell a leg of lamb in the pub or to a restaurant — but it became so severe that supermarkets had to put electronic tags on items such as joints of beef.
And it wasn’t just shops that criminals turned to as food prices spiked. Brits who grew their own fruit and vegetables, on plots known as allotments, had to introduce security patrols after a jump in thefts.
After a rollercoaster two years for many retailers, another step up in shoplifting will be a big worry for stores — and for Wall Street too. It would show that more consumers are struggling under the weight of inflation, and are turning to increasingly desperate measures to cope.
