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Shops' inventory loss or theft remained relatively stable throughout 2022

Escalating in-store violence: an issue causing worry among retailers, with its broader consequences going beyond just shrinkage, according to experts.

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Retail outlets increasingly worried about in-store violence, with experts pointing out that such...
Retail outlets increasingly worried about in-store violence, with experts pointing out that such escalation incurs financial losses beyond just shrinkage.

Shops' inventory loss or theft remained relatively stable throughout 2022

Taking Stock: A Look at Rising Retail Shrinkage

Shrinkage - a term described by the National Retail Federation as inventory losses due to theft, operational errors, and systemic issues - increased to 1.6% in 2022 from 1.4% in 2021, according to the retail industry's annual security survey. Based on revised estimates for total retail sales from the U.S. Department of Commerce, this amounts to a whopping $112.1 billion in losses, up from $93.9 billion in 2021. Retail sales in 2022 totaled $4.9 trillion, a rise from $4.6 trillion the previous year, as per the NRF.

Criminals, mistakes, and systemic failures together account for nearly two-thirds of shrinkage, the NRF reported. In 2022, approximately 36% of losses were due to external theft, including organized retail crime. Employee theft and internal control failures accounted for 29% and 27%, respectively. The remaining percentage was attributed to unknown factors and 'others.'

Retail Theft: A Nested Problem

數 char* Precise numbers on shrinkage and theft are notoriously elusive. The National Retail Federation (NRF) offers valuable insights, albeit with notable caveats, according to Trevor Wagener, director of the research center and chief economist at the Computer & Communications Industry Association.

"The NRF provides the most comprehensive data we have in the industry," Wagener remarked. "However, there are significant data limitations associated with the calculations and conclusions derived from their research."

The Tangled Web of Influencing Factors:
  1. Economic and Pandemic Influences: Due to the NRF's approach of multiplying its findings on average retail shrink with annual retail sales, the hike in shrinkage could be attributed to inflation and patterns related to the ongoing pandemic recovery. However, related costs, such as cleanup or repair after theft or vandalism, are not included in these calculations.
  2. Security Investments and Stressors: Additional expenses associated with enhanced security measures and anxiety regarding maintaining store safety are not contributing factors in the NRF's calculations. In 2022, for example, disputes over Pride displays led to confrontations with store employees and damage to merchandise. This year, Target announced plans to close nine stores due to safety concerns.
  3. Aggressive and Violent Shoplifting: In 2022, respondents noted that shoplifters were more aggressive and violent compared to the previous year. reports on violent incidents increased by an average of 35%, per the report. concerning about the threat of mass violence or shootings increased to nearly two-thirds.
Questions Surrounding Data Quality:

The NRF based its 2022 calculations on survey answers from 177 retail brands. Despite this almost tripling last year's sample size, it still represents a relatively small portion, opening the door for individual responses to skew the data.

The NRF's data is widely referenced, but academic opinions on its accuracy vary. S&P Global Ratings recently placed retail theft among the top risks facing the sector. However, analysts led by Diya Iyer suggested that some retail companies may be overstating the impact of theft, contending that operational inefficiencies could be the culprit.

Tracking crime statistics across different jurisdictions also presents statistical hurdles, as noted by the Federal Bureau of Investigation itself.

In the words of Wagener, "Accurate information is essential to develop effective strategies to combat retail theft. While data collection has improved, there is still a need for a comprehensive and consistent approach to accurately gauge the extent of the issue."

  1. The government may need to intervene in addressing the undeniable increase in retail shrinkage, causing trillion-dollar losses to the retail industry.
  2. Inflation and the ongoing pandemic recovery could be influencing factors behind the rise in retail shrinkage, as suggested by the Computer & Communications Industry Association's research chief.
  3. AI and advanced research could help in creating more efficient retail security systems, potentially reducing retail shrinkage significantly.
  4. Organized retail crime, employee theft, and internal control failures are causing substantial losses to businesses, as confirmed by the National Retail Federation's annual security survey.
  5. The finance industry may need to consider the impact of rising retail shrinkage on loans and investments in the retail sector.
  6. Violent and aggressive shoplifting has become a growing concern for retailers, with reports of incidents increasing by an average of 35% in 2022.
  7. Researchers and policymakers argue that some retail companies may be overemphasizing the role of theft in retail losses, suggesting operational inefficiencies as another likely cause for the shrinkage.
  8. A consistent and comprehensive approach to data collection, involving a larger sample size and collaboration across multiple jurisdictions, is crucial to accurately gauge the extent and causes of retail theft, according to the research center director at the Computer & Communications Industry Association.

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