BIG BOX RETAILERS BELIEVE THEY ARE VICTIMS OF CRIME
“The country has a retail theft problem,” Home Depot CFO Richard McPhail said on a call with CNBC on Tuesday after its earnings. “We’re confident in our ability to mitigate and blunt that pressure, but that pressure certainly exists out there.” Home Depot’s vice president of asset protection had told CNBC in March crime is increasing at double-digit rates.
According to the article, Target said organized retail crime will reach $500 million more in stolen and lost merchandise this year compared with a year ago. On its earnings call, Target CEO Brian Cornell said retail theft is “a worsening trend that emerged last year.” Retailers are convinced the crime trend is rising. Complicting matters, the trend is not simply a shoplifting issue reflecting tougher economic times for Americans. The trends show an increasin in the work of organized retail crime networks.
ORGANIZED RETAIL CRIME
The National Retail Federation says Organized Retail Crime is the main reason for retail “shrink.” This is defined as a mismatch between actual inventory and what is on the books — which reached $94.5 billion in 2021, an increase of almost $4 billion year over year.
Its president Matt Shay told CNBC on Thursday that the issue isn’t going away. “Conversations we’ve had with members over the last several years indicate it is getting to be a really acute and serious problem,” and as far as the annual numbers, remains “growing.” While theft is “manifesting itself in stores with acts of violence,” Shay stressed that in-store, individual crime is not the biggest scope of the problem. It’s not people shoplifting an individual item for personal use.
These days, shoplifting is a big part of organized crime. Target chief financial officer Michael Fiddelke had said after its earnings in November 2022 that shoplifting jumped about 50% year over and year, resulting in over $400 million in losses in the fiscal year, and Walmart’s CEO Doug McMillon issued another warning about the rising threat on CNBC in December.
“This is very sophisticated local, state, national and transnational organizations, organized not just to steal at the store level, but throughout the entire supply chain … on the docks, on trucks, off ships, through containers, on the railways. This is a really persistent problem and it’s across the supply chain,” ~Matt Shay, President of National Retail Federation.
MOVING UP THE SUPPLY CHAIN: CARGO THEFT
That matches CargoNet data recently provided to CNBC by insurance company Travelers, which has a special investigations group and works with law enforcement to recover stolen goods. It found food and beverage coming into port or in a warehouse is No. 1 on the list of products being targeted by freight thieves who are increasing their criminal activity across the national supply chain, with household goods and electronics still high on the list of cargo thieves.
Physical theft is still the No. 1 method used by thieves in the supply chain, but they are getting more sophisticated, creating fictitious pickups through use of identity theft — pretending to be trucking companies, including infiltrating online freight management systems and freight brokerage phone lines.
“A lot of times, they will get away with it,” Scott Cornell, transportation lead and crime and theft specialist at insurance provider Travelers, recently told CNBC. It has tracked a 600% increase in this form of cargo crime.
Cargo theft is occurring at multiple points in an item’s journey, with the NRF finding that theft “en route from distribution centers to stores” was the top target, at 47.4%; followed by cargo theft at stores, at 42.1%, and cargo “en route from manufacturers to distribution centers,” at 35.1%.
COMBATTING ORGANIZED RETAIL CRIME ACT
The National Retail Federation is lobbying for the Combatting Organized Retail Crime Act, which would create a function within the Department of Homeland Security (DHS) to elevate the theft issue to a national issue. It would also allow the DHS to coordinate with law enforcement across the country, provide resources, and report to Congress.