Target closes 9 stores because of shoplifting

In a move that underscores the growing threat of retail crime, Target has announced the closure of nine stores in four states, citing concerns about theft and organized retail crime impacting the safety of employees and customers.

The closures, scheduled for Oct. 21, are driven by poor business performance at these locations and Target’s commitment to providing a safe working and shopping environment—something these stores can no longer guarantee.

The affected stores include one located in the Harlem neighborhood of New York City, two in Seattle, three in the San Francisco/Oakland area, and three in Portland, Oregon.

Target isn’t the only retailer being inflicted with a surge in crime. Businesses and industry associations are all sounding the alarm on this disturbing trend and its financial impact on retailers.

Retailers are voicing concerns

Retailers such as Dick's Sporting Goods, Walgreens, and Walmart have all reported significant losses due to theft, which has impacted their earnings.

Dick's Sporting Goods reported a 23% drop in profits during its most recent quarter, largely attributing this decline to theft-related issues.

Target has estimated that retail theft will reduce its profitability by a substantial $500 million this year, marking a concerning trend that emerged in the previous year.

“The problem affects all of us, limiting product availability, creating a less convenient shopping experience, and putting our team and guests in harm’s way,” said Target’s CEO Brian Cornell on the company’s fiscal first-quarter earnings call.

According to a recent report by the National Retail Federation (NRF), retail crime led to losses amounting to a staggering $112.1 billion in 2022.

Organized retail crime, characterized by gangs of thieves descending on stores to pilfer products for resale online, has become increasingly audacious and is a significant contributor to these losses.

“Retailers are seeing unprecedented levels of theft coupled with rampant crime in their stores, and the situation is only becoming more dire,” said NRF executive David Johnston.

“Far beyond the financial impact of these crimes, the violence and concerns over safety continue to be the priority for all retailers, regardless of size or category.”

The complex challenge of shoplifting

There is debate about whether shoplifting is genuinely systemic or if it serves as a scapegoat for other industry challenges, but retailers are undeniably struggling to cope with the rising tide of crime, including theft and violence within their stores.

It's common on social media platforms to see videos of masked thieves ransacking stores. There’s growing criticism that a lack of enforcement measures is exacerbating the issue.

Retailers point to theft as a significant factor in declining profits, making it a pressing concern. But when analyzing the numbers, it becomes apparent that retailers lack a foolproof method to gauge how shoplifting affects their bottom line.

In the retail world, large-scale theft falls under the category of "shrink," which encompasses any inventory loss not attributable to sales.

Shrink can result from various factors, including theft, fraud, damage, poor inventory management, or process control issues. It is not solely driven by external theft but also encompasses internal theft by employees and vendor fraud.

A National Retail Federation survey indicates that 29% of shrink is caused by internal theft, while process or control failures account for another 27%. External theft, the primary focus of concern, contributes to 36% of shrink.

In addition to theft, retailers are grappling with supply chain disruptions, increased labor and transportation costs, and other expenses that erode profitability.

In particular, traditional retailers are feeling the pinch from online retail giant Amazon, whose robust growth continues to reshape the industry landscape.

Holiday season uncertainty

As retailers employ various strategies to combat theft, including store closures, it remains to be seen how these efforts will influence the shopping landscape in the lead-up to Christmas.

The Deloitte 2023 Retail Holiday Report indicates that 52% of retailers anticipate a decrease in profit margins during this year's Christmas season compared to the previous year.

Additionally, 71% of them expect an increase in the use of discounts.

“With volumes down and costs up, retailers should be wary of overstocked positions in 2023. Forty-three per cent of retailers believe it's unlikely that consumers will pay full price these holidays—a warning for those that want to maintain profit margins,” the report said.