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Shoplifting is becoming a serious problem for retailers

Department store

Increases in theft throughout stores in America could contribute to rises in prices and even store closures Walmart’s CEO has warned.

Shrink, a term used to described loss of stock, is estimated in 2021 to be equivalent to 1.4% of revenue in the retail sector. This has reduced the competitive advantage of in-person stores compared to e-commerce businesses. The National Retail Federation provided this figure, which is equivalent to $94.5 billion across the sector, and attributed these losses in a large part to increases in theft.

There is a range of factors leading to shrink, many of which were exacerbated by the Covid-19 pandemic in 2021. In the years leading up to the pandemic shrink rose by roughly 7% jumping to annual increases of around 50% in the years following. With theft cited as a key factor for this increase in shrink, there is a number of reasons for the increase in shoplifting. One of these is reduced numbers of staff leading to challenges preventing theft. Delays at different stages of supply chains also meant cargo was more vulnerable to theft whilst en route. Plus, because of the deficit of some goods during the pandemic, it was easier to find buyers for stolen goods.

Issues with shrink have led to a competitive disadvantage to e-commerce competitors, many of which saw significant growth throughout the pandemic. As shoplifting mitigation steps disrupt the customer experience, many customers are turning towards e-commerce platforms for a more streamlined shopping experience. R5 Capital’s equity analyst Scott Mushkin noted the disruptive impact of many theft reduction methods on the consumer experience.

Retailers have been forced to take a significant number of these steps to address issues with shrink. Centering on addressing theft, ink tags can dissuade thieves from stealing items. These release ink onto stolen products making them unusable. Facial recognition technology and bolstered surveillance are also common steps. For consumer electronics items and tools, other measures are often taken. Firmware built into some power tools can mean that these products can only be used once activated by a cashier. Whilst these steps are not failsafe, they can mitigate shoplifting.

Major retailers have outlined the importance of taking these steps. Target have cited losses of $400 million arising from shrink throughout the first three fiscal quarters of 2022. James Kehoe the CFO of Walgreens Boots Alliance attributed shrink to losses of over 3.5% in revenue. These figures have been reflected in many major organizations throughout the retail sector. Urgent mitigation steps are being taken to avoid losing further ground to e-commerce competitors.

Department store

Increases in theft throughout stores in America could contribute to rises in prices and even store closures Walmart’s CEO has warned.

Shrink, a term used to described loss of stock, is estimated in 2021 to be equivalent to 1.4% of revenue in the retail sector. This has reduced the competitive advantage of in-person stores compared to e-commerce businesses. The National Retail Federation provided this figure, which is equivalent to $94.5 billion across the sector, and attributed these losses in a large part to increases in theft.

There is a range of factors leading to shrink, many of which were exacerbated by the Covid-19 pandemic in 2021. In the years leading up to the pandemic shrink rose by roughly 7% jumping to annual increases of around 50% in the years following. With theft cited as a key factor for this increase in shrink, there is a number of reasons for the increase in shoplifting. One of these is reduced numbers of staff leading to challenges preventing theft. Delays at different stages of supply chains also meant cargo was more vulnerable to theft whilst en route. Plus, because of the deficit of some goods during the pandemic, it was easier to find buyers for stolen goods.

Issues with shrink have led to a competitive disadvantage to e-commerce competitors, many of which saw significant growth throughout the pandemic. As shoplifting mitigation steps disrupt the customer experience, many customers are turning towards e-commerce platforms for a more streamlined shopping experience. R5 Capital’s equity analyst Scott Mushkin noted the disruptive impact of many theft reduction methods on the consumer experience.

Retailers have been forced to take a significant number of these steps to address issues with shrink. Centering on addressing theft, ink tags can dissuade thieves from stealing items. These release ink onto stolen products making them unusable. Facial recognition technology and bolstered surveillance are also common steps. For consumer electronics items and tools, other measures are often taken. Firmware built into some power tools can mean that these products can only be used once activated by a cashier. Whilst these steps are not failsafe, they can mitigate shoplifting.

Major retailers have outlined the importance of taking these steps. Target have cited losses of $400 million arising from shrink throughout the first three fiscal quarters of 2022. James Kehoe the CFO of Walgreens Boots Alliance attributed shrink to losses of over 3.5% in revenue. These figures have been reflected in many major organizations throughout the retail sector. Urgent mitigation steps are being taken to avoid losing further ground to e-commerce competitors.

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