Retailers rally around increase in shrink

With each quarter close and fiscal year-end reporting, we hear an increasingly familiar refrain from the retail sector. It goes something like this – shrink due to theft has gotten out of control. It has crushed profitability and prompted negative revisions to forecasts. The cost to stores will be recouped at higher costs for paying customers.

More alarmingly, along with the increase in theft has come a sharp uptick in violence. According to the National Retail Federation, shrink is a $100 billion problem. Since the pandemic, retailers have also seen a sharp uptick (90% increase) in violence. To protect customers, employees and future operations, nearly half of the retailers in the NRF’s study are investing in loss prevention technology. 

Technology is an important part of the solution, to be sure. Catching criminals on camera and keeping tabs on merchandise helps address theft but doesn’t begin to touch the potentially greater threat of violence. No one wants to shop at a store where they feel their safety is at risk. And losing paying customers is the last thing retailers need now.   

Elevated problem requiring an elevated solution

What worked in the past is insufficient for the challenges of today. It’s incumbent upon retail leaders to think broadly about resources to address shrink. Police are a critical resource when we think about resolving this complex and mounting problem.

In addition to technologies, retailers need manpower. They need an authoritative security presence on-premise. Who better than police officers, proven to be highly effective when it comes to stopping criminals in their tracks?

Uniformed officers have the authority to make a bad actor think twice. Criminals know that an officer can call in the full force of the law quickly and criminal charges will follow. 

One international telecom retailer installed officers at problem stores and observed several instances where a subject arrived on site with a firearm, saw the officer and turned around. Shrink fell 76% after installing officers at targeted locations. That translated into a 376% return on their investment in officers.

A proactive approach to manpower solution is crucial

All too often, retailers station police on site after an incident has occurred, only to discover the damage is done. At that point, it is infinitely harder to regain the trust of employees than it would have been to proactively invest in maintaining it. Beyond the broad business impacts, from a more practical standpoint.

  • It’s not easy to get officers or other security resources in place on a dime, should the business face threats. The larger the organization, the more extensive the red tape. 
  • You pay a premium when calling security forces into action last minute, once the issue is already unfolding. 
  • You benefit from having a regular roster of officers for security who are familiar with your operations, facilities, customers, and culture, which impacts how best to respond to situations.

All of this – adding manpower to technology and doing so in a proactive way – is important for responding to the issue and preventing crime at retail sites. But to stop organized retail crime rings will require getting to the root of the matter and there is encouraging work in progress toward that end. 

Nine states have passed new laws cracking down on organized retail theft and imposing harsher penalties. On the federal level, if signed into law, the Combating Organized Retail Crime Act of 2023 would allow the Department of Homeland Security to establish an investigative division focused solely on organized retail crime. It proposes stiffer penalties for theft offenses and calls for a change in the threshold prosecutors must meet before bringing federal theft cases.  

The increased attention being developed to theft, and the combined effort of federal, state and local law enforcement, is coming together and we hope that future quarterly and year-end reports will include positive results and a brighter outlook for the retail sector.