Last year, retail crime hit the headlines with an unprecedented surge of ‘flash rob’ events that left many concerned. The sheer audacity of it all, from the Home Depot in Lakewood, California where a group of eight made off with $400 worth of tools, to the Best Buy near Minneapolis where 30 people swarmed in and grabbed electronics. But, in this era of social media, these events were just the tip of the iceberg, generating riveting TV coverage that quickly spread like wildfire across the nation.
As we gear up for another holiday season, it’s imperative that we examine retail crime trends and patterns to develop effective strategies that can combat the menace. But, before we do that, let’s look at the impact of the pandemic and the evolving violence patterns. Are there any new profiles emerging? How will inflation and a potential recession impact retail crime? If retail crime is out of control, what do we do about it? These are just some of the questions we must address.
According to the Retail Industry Leaders Association (RILA) study conducted in November 2021, the situation is quite dire. For instance, nearly $69 billion worth of products were stolen from retailers in 2019, pre-COVID. US retail crime resulted in $125.7 billion in lost economic activity, 658,375 fewer jobs, and almost $39.3 billion in wages and benefits paid to workers. This situation has also cost federal and state governments nearly $15 billion in personal and business tax revenues, not including the lost sales taxes.
Moreover, nearly 67 percent of asset protection managers at leading retailers surveyed reported a moderate to considerable increase in organized retail crime. In addition, 80 percent of them believe that it will only get worse in the future. Academic research suggests that most retail thefts represent crimes of opportunity, meaning that people steal when it’s easy to do so. Other factors that contribute to this include poor economic conditions and dissatisfaction among workers. However, professional criminals have identified the availability of anonymous online marketplaces as a way to easily fence goods, and prosecutorial changes as significant factors contributing to the growth in organized retail crime.
Interestingly, the growth in online marketplaces is highly correlated (61 percent) to the number of reported shoplifting events each year. Also, the retail categories most susceptible to shoplifting activities are the same ones that are most sought after through online marketplaces.
The National Retail Federation (NRF) reveals that ORC costs retailers an average of $720,000 for every $1 billion in sales as of 2020, up from $450,000 five years earlier.
Moreover, the 2021 NRF Retail Security Survey highlights some of the findings in the RILA study. For example, about 69 percent of retailers said they had seen an increase in ORC activity over the past year. They cited reasons such as COVID-19, policing, changes to sentencing guidelines, and the growth of online marketplaces for the increase in ORC activity.
Retailers also report that these gangs are becoming more aggressive and violent than in previous years. Sixty-five percent of respondents noted the increase in violence, while 37 percent said ORC gangs were much more aggressive than in the past. For comparison, in 2019, only 57 percent said ORC gangs were more aggressive, while 31 percent said they were much more aggressive.
The latest retail theft survey from Hayes International revealed that in 2021, retailers moved away from apprehensions and focused more on recoveries. Shoplifting apprehensions were down just over 16 percent, while overall shoplifting recoveries were up 31 percent. Furthermore, per incident case values were substantially higher in 2021.
Interestingly, the amount of theft by an unchecked dishonest employee will increase by 58 percent every month, on average. Technology is being increasingly used to combat theft, and there has been a dramatic shift in investment in people resources between 2020 and 2021.
Retailers now face new risks and threats that have become a priority, such as mall/store violence/shooting incidents (82 percent), cyber-related incidents (76 percent), internal theft (53 percent), gift card fraud (47 percent), and return fraud (43 percent). These new services that expanded during the pandemic also carry risks. In terms of fraud, retailers reported the most significant increase in fraud from multichannel sales like BOPIS, with 39 percent indicating it as a concern in 2021 compared to 19 percent in 2020.
In-store sales fraud dropped from 49 percent to 28 percent from 2020 to 2021, while online-only sales fraud remained steady at 26 percent. Shockingly, retail crime is not isolated to large chains, as 54 percent of small business owners reported an increase in shoplifting in 2021.
Violence is increasingly becoming a factor in retail crime, as evidenced by the 2021 RILA study. Nearly 86 percent of respondents said that an organized retail criminal has verbally threatened an associate with bodily harm. Almost 76 percent reported that an organized retail criminal has physically assaulted an associate, while nearly 76 percent surveyed said that a criminal has threatened the use of a weapon against an associate. Over 40 percent of APMs said that an organized retail criminal has used a weapon to harm an associate.
2021 was another violent retail year in US retail, with incidents up 9 percent and fatalities up 14 percent from the previous year. Of the 595 fatalities in 2021, 18 percent were suspects, 53 percent were customers, 26 percent were store associates, and 3 percent were LE/LP/Security. Alarming, both customer and associate deaths were up 24 percent in 2021 when compared to 2020.
Fifty percent of the retail fatalities were inside the store or mall, while 45 percent were in parking lots, and 5 percent died off-premises. The negative impact of this violence is reflected in employee surveys, where 80 percent of workers experienced or witnessed hostile behavior from customers when staff tried enforcing COVID-19 safety measures. Thirty-nine percent of workers were leaving or had already left their jobs because of concerns with “hostility and harassment from customers.” The survey was conducted between October 2020 and May 2021.
To conclude, safety is a critical ingredient in a successful retail deployment model, and the alternatives can be costly on multiple levels. For example, Starbucks recently announced that it would close 16 US stores, mostly on the West Coast, by the end of July because of safety concerns.