A More Insidious Type of Crime is Pushing Some Stores to Close

The decision by retail giant Target to close nine of its stores in major cities due to persistent large-scale theft has raised concerns about the escalating problem of store crime. Industry experts are highlighting that even a slight increase in crime can have far-reaching effects that lead retailers to shut their outlets.

Burt Flickinger, a retail expert and managing director of retail consultancy Strategic Resource Group, emphasized that this move by Target underscores the severity of store crimes, which are reaching unprecedented levels. Large-scale theft, particularly organized retail crime (ORC), is plaguing retailers, with criminals targeting high-value merchandise like electronics, cosmetics, and clothing. These stolen products often end up on secondary marketplaces, compounding the losses for retailers.

Cities such as Los Angeles, Chicago, and New York have experienced a surge in dangerous smash-and-grab attacks over the past year, posing serious threats to both large retail chains and small businesses.

The problem of store crime adds to other challenges faced by retailers, including reduced consumer spending and excess inventory. Stolen items can have a disproportionate impact on store profitability, particularly considering the narrow profit margins common in the industry.

Several major retail chains, including Dick’s Sporting Goods, Five Below, Dollar General, and TJX Companies, have recently raised concerns about the rising tide of theft in their stores. Nordstrom and Whole Foods have even cited crime as a reason for exiting certain locations.

According to Zak Stambor, a senior retail and e-commerce analyst with Insider Intelligence, the widespread acknowledgement of store theft’s seriousness suggests a troubling trend. Target, for instance, projected losses of $500 million in a year due to rising theft.

The root causes of store crime are multifaceted, stemming from both opportunity and need, making it challenging to gauge the extent of the problem. The National Retail Federation estimates that total annual shrink, which includes losses due to theft and other factors, cost retailers $112.1 billion in 2022, up from $93.9 billion in 2021.

Retailers are exploring various measures to enhance store safety, such as locking up products or altering store layouts. However, these measures can deter shoppers and potentially harm sales. For instance, Walgreens recently introduced a prototype store with minimal product visibility to address theft concerns, but it may inadvertently affect customer experience.

As retailers grapple with the multifaceted challenges of crime, economic conditions, and safety, the impact of store closures extends beyond the bottom line, potentially contributing to urban blight and other societal issues.