You're watching CCTV footage of
shoplifters from the inside of one of several retailers across the country. And if you've shopped recently in your
local Home Depot, Walmart or CVS, there's a chance your shopping
experience was met with the rippling effects of this exact issue: locked
plexiglass panes, motion-sensing monitors and security cameras placed
everywhere. Retailers and retail trade associations
are characterizing retail crime as an epidemic. "Theft is an issue. It's higher than
what has historically been. If that's not corrected over time,
prices will be higher. In 2021, retail shrink, which refers to
inventory losses due to theft, unknown loss and administrative error,
accounted for $94.5 billion, as compared to $90.8 billion in 2020. But beneath the surface, there is
another side to the story: the available data is unreliable, a prominent concern
of criminal justice advocates. "On balance, I think it's likely that
all of these crime trends from, you know, sort of petty theft and organized
shoplifting rings all the way up to various categories of violent crime
have, on balance, been blown out of proportion by people with an agenda
either to get more eyes on their content or to get more funding for institutions
that they prefer, like police." Critics worry that the story is not so
straightforward. Regarding theft in its stores, the CFO
of Walgreens himself said in a call with investors in January 2023, "You know, maybe we cried too much last
year when we were hitting numbers that were 3.5% of sales." The revelation has some onlookers
casting doubt on the true magnitude of the issue. Despite disputes over data,
the crisis has given rise to legislation like the INFORM Consumers Act. CNBC spoke to retailers, trade
associations, asset protection professionals and criminal justice
advocates to dive deeper into the much more complicated, murky issue behind
those clear, locked plexiglass panes. "Theft rings that scout, plan, and
execute high-value heists. Three people were arrested; all are
charged with robbery. Our investigators seized more than $3.8
million worth of stolen goods." The National Retail Federation and
Retail Industry Leaders Association, two of the leading groups in the retail
space, have all pointed to retail crime as a growing issue. Just listen to two executives from
these organizations talk about it. "It's become a significant problem from
both the habitual offenders who are stealing every day, have 50 to 70
encounters with law enforcement or retail security personnel. And then the organized retail crime
rings are very sophisticated." "Retail theft is not just impacting the
retailers themselves. It has a trickle-down effect that will
impact the consumers, whether that's store closures, increased pricing." The definition of ORC varies by
jurisdiction, but the Department of Homeland Security defines it as, "The
association of two or more persons engaged in illegally obtaining items of
value from retail establishments, through theft and or fraud, as part of
a criminal enterprise." The NRF estimates that in 2021, ORC cost
retailers an average of $700,000 per $1 billion in sold goods. "I've been doing this for 32 years, and
I can honestly tell you we've not seen anything to this degree in the past. We saw a large uptick probably about
ten years ago, and then again five years ago, and then really during the
pandemic, we saw a massive increase." "And it's also important to note that
these numbers are Covid numbers. So they're outliers when you're looking
at data." Crime investigators' concerns run even
deeper than theft. "Homeland security investigations, the
FBI, they're finding more and more evidence that organized retail crime is
linked to other significant criminal activity to include human trafficking,
child exploitation, drug and weapons trafficking. We're talking about
something much bigger than that." On the side of retailers, billions of
dollars have been poured into asset protection and loss prevention — or AP
and LP for short — in the last several years. "We have a team of investigators that
work the organized retail crime problem. It's fair to say that we're investing
millions of dollars across the chain into different types of solutions." Home Depot's stores have seen a dramatic
transformation over the years. Along with hiring 150,000 employees
between 2020 and 2022 to support its stronger efforts, anti-theft measures
have become more technologically-sophisticated. Everything from locked metal barriers to
motion-sensing monitors and locking smart carts. One of Home Depot's more
advanced developments in LP tech is RFID tags. Lowe's recently launched Project
Unlock, a similar technology to Home Depot's RFID tags. Basically not activating the product. The product will not function until
it's been purchased at the point of sale. We think this is something that
can really help curtail ORC, not just for Lowe's, but really across the
industry. So that's the difference between a lot
of the other solutions that we've tested in the past. They weren't
cost-effective, so it was expensive technology. And, you know, that's got
to be absorbed somewhere. CVS and Walgreens have both implemented
stronger measures in their stores. Aisles of plexiglass panes, cameras at
self-checkout, and security guards monitoring activity in-store. While the advances in AP and LP have
been beneficial in stopping bad actors, it does come at the expense of the
consumer shopping experience. "These kind of anti-theft programs that
they started, a lot of customers have been complaining about how that's kind
of cut down on that customer experience, and it's bringing them to competitors,
where you can buy your toothpaste online, get it shipped to you within
two days, and you don't have to kind of go through this frustrating process of
going to a crowded store, waiting for an associate." "It's not a good shopping experience,
right? I don't even like going into a retailer
and having to wait for somebody to unlock product to get it so I can go
buy it. So we've tried to stay away from that
as much as we could, but in some areas we just were losing so much, it was not
profitable at all for that category, and we actually didn't even have product on
the shelf to sell to our customers." As investments in AP and LP continue,
retailers are forced to grapple with newfound customer inconvenience as
physical and technological barriers evolve. So billions of dollars are being lost,
cutting into retailers' bottom line. Media coverage around the issue ran
rampant in 2021. And while advocates of the issue have
painted an alarming picture, the other side — criminologists, civil rights
organizations and criminal justice educators — are warning that the story
is not so straightforward. For starters, shrink does not solely
account for instances of crime. It includes inventory that's lost,
damaged or stolen by employees and even vendor and administrative error. "Some retailers are going to be going
shelf-by-shelf and actually counting items that they have, checking it
against the items that they sold, and the difference is the shrink number. But what happened to those items is
unclear. It's not like when you're walking out
of Target with detergent, you're saying, "Hey, I'm stealing this detergent. Nobody actually knows if that detergent
was stolen, if it was damaged or if an employee stole it." "At every step of the way, we have the
potential, not only for inaccurate reporting, but also for motivated
reporting, where various actors in the system may have reasons why they would
choose to make the numbers look bigger or smaller than they are. And so it's I think it's fairly clear
that we just don't have precise figures when it comes to all kinds of criminal
justice statistics, including here, retail loss through-through theft." By some numbers and categories, the
asserted rise of retail crime does ring true. Organized retail crime has risen. Busts have turned out in the millions,
which largely account for the $94.5 billion number retailers and trade
associations point towards. "It's important to note that organized
retail crime is absolutely a concern and that there's a lot of misconceptions
about it. These smash-and-grab robberies are not
actually the biggest part of this. It's big transnational crime
organizations that are getting involved with organized retail crime, because
it's way less risk for way higher reward." While ORC has increased on a surface
level, the data gets confusing when you really get down to it. The definitions for organized retail
crime, and the categorizations that fall under it, vary in different
jurisdictions. In some states, organized crime can
just mean a conspiracy between two people to steal from a store. For this reason, doubt circulates
around whether all of those instances were truly part of ORC rings. While retail crime in real numbers has
increased, the shrinkage rate has remained largely the same over the past
few years. The first logical place to look is the
data, but as we've seen so far, that is a complicated can of worms. Skeptics on the rise of retail crime
alike have pointed out the main issue: the methodology is inconsistent, making
the interpretation of any and all data available, doubtful. "The idea that there's, you know,
somewhere there's this kind of central database of of relevant figures all the
way down to a question as challenging as, you know, how many times, you know,
are stores victimized by-by shoplifting or by organized shoplifting rings? We just don't have that data." Let's dig deeper. If we look at the trade association
numbers, they cite increases across the board through surveys. The NRF, for example, conducts yearly
surveys, but they do not disclose who exactly participates in them. This data is qualitative, not
quantitative. It asks the opinion of LP and AP
leaders whether or not they have observed rises in different categories. And that's an issue because perceived
increases are not the same as quantitatively-proven increases. "They're seeing a huge uptick in shrink,
and then they're kind of looking at what's going on in the rest of the
criminal justice environment, some kind of criminal justice reform laws that
have taken place in big cities like New York, and they're also seeing media
reports about big smash-and-grab robberies. And they're kind of saying,
'Well, since we have a big increase in shrink, it's most likely crime-related
rather than something else.' You know, did employees drop ten more jars of
pickles this year than they did last year? You know, what in the environment
has changed that would lead to more pickles being dropped on the floor, for
example? And the one common denominator that they
can find is a shift in criminal justice, uptick in crime overall and a shift in
how- in criminal justice reforms." Even looking more broadly at data from
the FBI — data, which in all fairness, is only a partial picture, with only
60% of agencies reporting — there have been decreases in crime as a whole, in
some cases even historic lows. When asked about how data is gathered,
RILA struggled to answer. "How is data gathered? How do you go about measuring retail
crime? From a retailer perspective, the way
that they're organized- calculating organized retail crime and the impact
that it has is, is there- when they- this is this is a tough one, Jade. This is a tough one for me." Retailers Home Depot and Lowe's, on the
other hand, were adamant the data was sound. "I can tell you that in our world, we
know that crime is increasing. We see it every day in our stores. Our internal information shows us that
that's on a year-over-year basis, growing at double digit rates." "And we document every single incident
that is observed at any point in our stores. We can quantify very
specifically what our losses are that are attributed to specifically
organized retail crime." Some doubt has circulated even among
retailers themselves, calling back to Walgreens CFO James Kehoe's statement
in January 2023. On a national level, the story repeats
itself: annual government surveys from the Bureau of Justice Statistics show
no recent increase in the U.S. violent crime rate. In fact, there have been historic lows. If we want to get more specific,
violent crime has risen, which is an observed trend for retailers, but only
marginally. But since violent crime is more
dramatic and is most commonly seen in media coverage, the perception is
skewed. It's easier to believe the problem is
much more dramatic than it actually is when you're looking at the worst case
scenarios. "Law enforcement officials in this
country are massively under investigating and under-reporting
certain types of crime, largely crime committed by wealthier people,
corporate officials. et cetera. And significantly
over-reporting in the media, certain other kinds of crime, like retail theft
and shoplifting." Now, if we zoom the lens out even
further here, this issue with magnifying the nuanced reality of crime is a messy
subject in a larger political context. It's another instance in a
controversial ongoing trend: Americans tend to believe there is more crime
than there is in actuality. In 20 of 24 Gallup surveys conducted
since 1993, at least 60% of U.S. adults have said there is more crime
nationally than there was the year before, despite the generally downward
trend in national and violent property crime rates during most of that period. "I think all of us have probably- most
of us have been to stores where we see, you know, that they lock the doors and
only let certain people in, or they put certain products behind plexiglass." In 2022, the perception that local crime
has increased is at a record high. So for criminologists and other
advocates, their concerns are very real. The combination of retailers, law
enforcement and media hysteria emphasizing the issue is working, at
least as far as garnering attention goes. The law has responded
accordingly, which is its own tangled web of implications. "...the scourge of retail theft?" "A national problem. You're seeing the videos over and over
again of individuals walking in stores all over the country, taking what they
want and walking out." So far, we've established that
interpreting the data is a mixed bag. And you might be wondering, "Why does
this matter, then?" The more the retail industry lobbies, and the more the
media illustrates a problem, the more the government deems it to be an
outright issue. It's estimated that nearly $15 billion
in federal and state tax revenue is lost to ORC. Since products are sold illicitly, the
applicable taxes from that transaction in a normal retail setting are not
properly collected. And why does that matter to you? The average American family will pay
more than $500 annually in additional costs due to ORC's effects. More than that, corporate cops and law
enforcement will be granted more freedom to pursue the issue. And this is where the concern for
individual privacy becomes more real. "Increasingly, it's easy for a retailer
to get information about what we're doing in terms of shopping in a
brick-and-mortar store and online. And so, it's not always easy to know,
as a customer, how much information you're turning over to the people that
you do business with. And neither is it easy to know how much
of that information they may be turning over to law enforcement in an effort to
combat shoplifting, theft and other crimes that may or may not be real." The response by legislative officials
and by law enforcement in the last several years has been deeply involved. Homeland Security Investigations
launched Operation Boiling Point, a unit specially designed to combat organized
theft groups, or OTGs, in October 2022. The INFORM Consumers Act was passed in
December 2022, which would require online marketplaces to verify the
legitimacy of high-volume third party sellers on their sites. The Combating Retail Crime Act was
passed in October 2022. On the side of criminal justice
advocates, they worry that some of the legislation surrounding this issue is
insinuating a damaging perception: increasing penalties for theft and
arresting and prosecuting more people is the answer. They point to research that
indicates higher rates of incarceration does not immediately equal reductions
in crime. While this issue of retail crime runs
its course, the level of credence among retailers, trade associations,
lawmakers and customers is a delicate one. "It's not to say that it isn't an issue,
but you also have to be skeptical about everyone's motivations for lobbying
around this issue."
