Lobbying group overstated how much "organized" shoplifting hurt retailers
A national trade group representing retailers incorrectly attributed half of all industry losses two years ago to organized shoplifting, raising questions about how much merchandise thefts are weighing on retail chains' financial results.
In a report on what it calls "organized retail crime," the National Retail Federation (NRF) initially said theft results in $45 billion in annual losses for retailers, roughly half of the industry's total of $94.5 billion in missing merchandise in 2021. But the lobbying group has since retracted the figure, saying the report from the group relied on an inaccurate figure from Ben Dugan, president of the National Coalition of Law Enforcement and Retail.
The statement that half of all missing merchandise, known in the retail industry as "shrink," was attributable to crime was "a mistaken inference," the NRF said in a statement to CBS MoneyWatch. It was based on a statement Dugan made in 2021 Senate testimony, the group added. It has since amended the report to make clear that Dugan was citing 2016 statistics representing total retail shrink — not the share attributable to organized theft.
Shrink also encompasses losses related to merchandise that isn't scanned properly, vendor fraud and fraudulent product returns. Organized retail crime refers to rings of criminals acting together to steal a range of goods from stores that can be sold.
Although the financial losses blamed on retail crime in 2021 were overstated, the NRF said retail crime poses a significant threat to stores.
"We stand behind the widely understood fact that organized retail crime is a serious problem impacting retailers of all sizes and communities across our nation," the NRF said in a statement. "At the same time, we recognize the challenges the retail industry and law enforcement have with gathering and analyzing an accurate and agreed-upon set of data to measure the number of incidents in communities across the country. The reality is retailers and law enforcement agencies continue to experience daily incidents of theft, partner in large-scale investigations and report recoveries of stolen retail goods into the millions of dollars."
Retailers including Target have blamed recent store closures on surging retail crime.
In an October note to investors, analysts with investment bank William Blair suggested that some retailers are exaggerating the impact of theft to disguise their poor business performance.
"While theft is likely elevated, companies are also likely using the opportunity to draw attention away from margin headwinds in the form of higher promotions and weaker inventory management in recent quarters," they wrote. "We also believe some more recent permanent store closures enacted under the cover of shrink relate to underperformance of these locations."
Retail analyst Neil Saunders said the problem is hard to quantify, particularly when retailers are cagey with numbers.
"Crime is an issue — I don't think that should be denied," he told CBS MoneyWatch. "The problem is there's a lot of talk about it as an issue, but very little quantification of how much an issue it is."
A recent analysis from the nonpartisan Council on Criminal Justice found that reports of shoplifting in two dozen cities rose 16% between 2019 and the first half of 2023. When theft data from New York City was excluded, however, the number of incidents across the other cities fell 7% over that period.