Retail theft hurts businesses and communities economically.
Mayhem on Main Street: The Economic Impact of Retail Theft
A nationwide retail theft epidemic has wreaked havoc on businesses across the United States, resulting in a staggering cost of nearly $100 billion in 2021. The consequences of this epidemic are far-reaching, with retailers being forced to raise prices or close their doors, insurers refusing to provide assistance, and smaller mom and pop stores being left behind. In this series, the Washington Examiner delves into the causes behind the scourge of shoplifting, the involvement of cartels, the impact on stores big and small, and the complicity of lax prosecutors. In part three, we will focus on the economic implications of retail theft. To catch up on parts one and two, click here and here.
The Devastating Economic Consequences
Retail theft has become a pervasive issue that carries significant economic implications for both retailers and the communities they serve. The growing instances of theft have resulted in nearly $100 billion in losses for retailers in 2021 alone, highlighting the harsh reality of these crimes. Videos circulating on social media depict brazen thieves, both individuals and organized groups, boldly entering stores, stealing merchandise, and making a swift getaway with little resistance. This phenomenon has intensified in recent years, particularly following the onset of the pandemic, causing significant harm to retailers and prompting urgent calls for action from lawmakers and law enforcement.
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The crime wave of retail theft has impacted retailers of all types, from everyday stores to luxury establishments. While some may argue that individual thefts have minimal economic consequences, the cumulative numbers are staggering. The retail industry refers to the loss of product inventory due to theft as “retail shrink.” According to a comprehensive study conducted by the National Retail Federation, the world’s largest retail trade association, retail shrink amounted to a staggering $94.5 billion in losses in 2021.
To put this into perspective, these losses are nearly equivalent to the entire annual budget of the state of Florida and surpass the annual expenditures of some major countries. It is also comparable to the total revenue generated by retail giant Target in 2022.
Furthermore, the problem of retail theft has been on the rise in recent years. The nearly $100 billion in losses suffered by retailers in 2021 represents an increase from an estimated $90.8 billion the previous year. Retailers surveyed as part of the study reported an average 26.5% increase in incidents of organized retail crime in 2021 compared to 2020.
“It is growing. We’re witnessing numerous open and brazen acts of shoplifting. While shoplifting and professional shoplifting are not new, in the past, they were often seen as invisible crimes,” said David Johnston, the National Retail Federation’s vice president of asset protection and retail operations, in an interview with the Washington Examiner.
Johnston emphasized that retail theft occurs across the board, affecting products of all types and price points. The thefts range from opportunistic shoplifting to smash-and-grab incidents to highly organized retail crime operations involving transnational gangs.
However, beyond the sheer numbers, the nature of these crimes has become increasingly aggressive, posing a significant concern for businesses striving to ensure the safety of their customers and employees.
According to a survey of retailers, 80% reported an increase in violence and aggression associated with organized retail crime in 2021 compared to the previous year. This finding is supported by viral videos capturing brazen and aggressive thefts in recent years.
“Now we’re starting to see these large, open, brazen acts of shoplifting, which are causing more violence and threatening the safety and security of the consumer as well as the employee,” Johnston explained.
Small Businesses Helpless Over Spike in Retail Thefts, Say They Feel Abandoned by Lawmakers
Retail theft not only affects major retailers but also has ripple effects on local communities, particularly those grappling with poverty. Some stores that are severely impacted by retail theft have been forced to shut down, which can have detrimental consequences. For example, if a grocery store closes, it can contribute to food insecurity in impoverished communities.
“It absolutely does impact everyone,” Johnston emphasized, countering the notion that retail theft is a victimless crime.
Moreover, retail theft can have economic repercussions for neighborhoods. Stores may choose to alter their hours or reduce inventory, leading businesses to relocate outside the community and causing residents to travel elsewhere for their shopping needs.
These thefts can also affect community services. If stores close down, a city may experience a decrease in tax revenue, resulting in reduced funding for community programs and assistance.
“When stores close down and merchandise isn’t available for sale, it has a significant impact on community services,” Johnston stated.
Johnston noted that the trend of increasing retail theft was already underway before the COVID-19 pandemic. However, as consumers became more accustomed to online shopping during the pandemic, it provided thieves with a convenient avenue to steal and anonymously sell merchandise.
One driving factor behind the rise in retail theft could be individuals stealing out of financial necessity or to fund drug addiction. This has also created an opportunity for organized retail crime groups to recruit those facing such challenges as “boosters” who steal from stores on their behalf.
Another contributing factor to the surge in retail theft is the prosecution of these crimes. In some areas, law enforcement has deprioritized the enforcement of certain offenses in order to focus on more serious crimes, potentially resulting in fewer consequences for shoplifting.
“So, it’s kind of a perfect storm,” Johnston explained. “It’s not just one thing that has led us to where we are today. It’s a combination of factors.”
Congress has taken steps to address retail theft by passing the bipartisan INFORM Consumers Act, which went into effect in June.
Click here to read more from the Washington Examiner
The INFORM Act mandates that online marketplaces, such as eBay or Facebook Marketplace, verify and validate seller information for sellers who reach a certain income and sales threshold within a specific period. Failure to comply with this requirement can result in significant fines for online marketplaces. The aim is to prevent the sale of stolen goods on these platforms by collecting identifying information.
“The goal of the INFORM Consumers Act is to add more transparency to online transactions and deter criminals from acquiring stolen, counterfeit, or unsafe items and selling them through those marketplaces,” stated the Federal Trade Commission.
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