The lobby group overestimated how much shoplifting hurt retailers

A national trade group representing retailers mistakenly attributed half of all losses in the industry two years ago to organized shoplifting, raising questions about how much shoplifting weighs on retail chains’ financial results.

In a report on what it calls “organized retail crime,” the National Retail Federation (NRF) initially said that theft results in $45 billion in annual losses for retailers, about 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 group’s report 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 goods, known in the retail industry as “shrink,” can be attributed to crime was “a false conclusion,” the NRF said in a statement to CBS MoneyWatch. That was based on a statement Dugan made in Senate testimony in 2021, the group added. It has since amended the report to make clear that Dugan was citing 2016 Statistics represents total retail sales – not the proportion attributable to organized theft.

Shrink also includes losses related to merchandise not scanned properly, seller fraud, and fraudulent product returns. Organized retail crime refers to rings of criminals who act together to steal a variety of items from stores that can be sold.

Although the economic losses due to retail crime in 2021 were overstated, the NRF said that retail crime poses a significant threat to stores.

“We stand behind the widely recognized fact that organized retail crime is a serious problem that affects 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 in collecting 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 continue to experience daily incidents of theft, partner in large-scale investigations and report recoveries of millions of dollars in stolen retail goods.”

Retailers including Target have due to the recent store closures about increasing retail crime.

In an October note to investors, analysts at investment bank William Blair suggested that some retailers are exaggerating the impact of theft to hide their poor business performance.

“While theft is likely elevated, companies are also likely to use 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 that some recent permanent store closures enacted under the cover of shrink relate to the underperformance of these locations.”

Retail analyst Neil Saunders said the problem is hard to quantify, especially when retailers are bare with numbers.

“Crime is a problem — I don’t think it should be denied,” he told CBS MoneyWatch. “The problem is there’s a lot of talk about it as a problem, but very little quantification of how much of a problem it is.”

A recent one 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, incidents in the other cities fell 7% in that period.

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