Organized crime plagues retailers and stimulates discussion

America’s largest retailers say organized retail crime has become a multi-billion dollar problem, but the effectiveness of their strategies to solve it and the validity of the data in general have been questioned.

In recent years, companies such as Home Depot, Lowe’s, Walmart, Best Buy, Walgreens and CVS have sounded the alarm about organized gangs of thieves looting their stores and reselling the goods on online marketplaces.

They have poured money into theft prevention strategies such as plastic suitcases, metal detectors, motion-sensitive monitors and cameras with AI technology, and have warned that if the problem does not improve, consumers could pay the price.

“Theft is a problem. It’s higher than what it’s been in the past,” Walmart CEO Doug McMillon told CNBC in December. “If that isn’t corrected over time, prices will be higher and/or stores will close.”

However, the problem is not as clear-cut as retailers and trade groups make it out to be.

National Retail Federation studies show retail shrink cost retailers $94.5 billion in 2021, up from $90.8 billion in 2020, but the data is largely qualitative and cannot be fact-checked, because they are collected from an anonymized group of retailers.

In addition, the $94.5 billion in losses refers to total shrinkage, meaning the difference between the inventory a company records on its balance sheet and what it can actually sell. That difference accounts for items that have been stolen, but also includes inventory that has been damaged, lost, or stolen by employees.

Outside retail crime accounts for just 37% of those losses, or about $35 billion, the NRF data shows.

At least one major retailer recently admitted that the problem may be exaggerated.

“Maybe we cried too much last year,” said Walgreens Chief Financial Officer James Kehoe in January during an investor call when asked about shrinkage. “We’ve stabilized,” he added, saying the company is “quite happy with where we are.”

Still, law enforcement and retailers insist organized retail crime remains a problem and say they stand behind their data.

“I can tell you that in our world, we know that crime is on the rise. We see it every day in our stores,” Scott Glenn, Home Depot’s vice president of asset protection, told CNBC. “Our internal information shows us that’s year-over-year and growing at double digits.”

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