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Fact Check Team: The rising challenge of retail shrinkage

A shopper checks out an item in a Target store in Pittsburgh on Monday, Jan. 23, 2023. (AP Photo/Gene J. Puskar)
A shopper checks out an item in a Target store in Pittsburgh on Monday, Jan. 23, 2023. (AP Photo/Gene J. Puskar)
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Retail shrinkage is an accounting term that encompasses the loss of inventory due to various factors, including fraud, external theft, employee theft, and administrative errors.

For over 30 years, the National Retail Federation’s National Retail Security Survey has served as the benchmark report on retail shrinkage. According to the most recent survey, retail shrinkage became a $100 billion issue in 2021. External theft, such as shoplifting, accounted for 37% of the total, while employee theft accounted for 28.5%.

The survey revealed that retailers reported a concerning 26.5% increase in organized retail crime (ORC) on average, with 88% attributing the growth to pandemic-related factors like labor shortages and COVID precautions.

Aside from these factors, other contributors to the rise in shoplifting include the increasing sophistication of shoplifters, the increased presence of organized crime rings, and the ease of reselling stolen items facilitated by the increase in online shopping.

To combat these challenges, retailers have adopted various strategies. For example, locking up everyday items like detergent and toothpaste has become a common practice to deter shoplifters. Additionally, retailers are investing in additional security measures, implementing new technologies – such as artificial intelligence for inventory management – and reevaluating self-checkout systems, which are often exploited for petty theft.

As a result, there have been calls to increase the legal penalties for shoplifting.

The National Retail Federation’s survey found 70.8% of retailers said penalties should be more punitive because theft had increased in areas where the felony thresholds are higher.

However, research indicates that punishment alone may not be the most effective deterrent, as criminals may be unaware of the sanctions in place in their respective states. In a 2016 report, the Department of Justice stated the “certainty” of being caught is a more effective deterrent.

Both state and federal legislative actions have been taken to address the issue. Last year, Congress passed the INFORM Act in the Fiscal Year (FY) 2023 omnibus appropriations bill. This law , which came into effect on June 27th, requires online marketplaces to verify high-volume third-party sellers. A press release from one of the co-leads of the bill Senator Bill Cassidy, R-La., emphasized the law would help “deter the online sale of counterfeit goods by anonymous sellers and prevent organized retail crime rings from stealing items from stores to resell those items in bulk online.”

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The National Retail Federation has advocated to make “organized retail theft” a new, distinct category of crime. This kind of law would target the people orchestrating larger crime rings and at least 34 states have enacted ORC laws to target those orchestrating larger-scale crime rings, according to the federation.

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