Retailers Face Over $112 Billion Losses to Organized Crime in 2022 – Impact and 2023 Outlook

Essential Insights

• The average shrink rate among retailers surged to 1.6% in 2022, up from 1.4% the previous year, resulting in losses surpassing $112 billion.
• Major urban centers including Los Angeles, San Francisco, Oakland, Houston, New York, and Seattle are hotspots for organized retail crime, as identified by the National Retail Federation.
• Dick’s Sporting Goods reported profit declines linked to retail crime, while Target anticipates an additional $500 million in losses compared to 2021.

Retail crime is increasingly undermining profitability, with some retailers opting to close stores or revise operational strategies in response.

According to the National Retail Federation's 2022 survey, retail theft and related losses climbed sharply, with the average shrink rate rising to 1.6%, translating into over $112 billion lost. This marks a significant increase from the $93.9 billion recorded in 2021.

Warnings from retailers during 2023 earnings calls suggest that this troubling trend is accelerating.

Growing Alarm Over Retail Crime

The NRF surveyed 177 retail brands generating more than $1.6 trillion in sales, revealing heightened concern over retail crime as both a security and financial challenge.

Organized retail crime (ORC) remains a critical issue, compounded by escalating violence. Over two-thirds of respondents reported increased violent behavior and aggression linked to ORC compared to the previous year.

David Johnston, NRF Vice President for Asset Protection and Retail Operations, remarked, "Retailers are confronting unprecedented theft levels alongside rampant in-store crime, with conditions worsening."

Urban Areas Bear the Brunt

Cities such as Los Angeles, San Francisco, Oakland, Houston, New York, and Seattle were identified as the most affected by organized retail crime in 2022.

Walmart CFO John David Rainey highlighted disparities in shrink rates, noting some stores maintain low losses while others, often in cities with lax prosecution, experience significantly higher theft.

He explained, "In locations where theft below a certain threshold goes unpunished, offenders exploit this gap, leading to a diminished shopping experience."

Despite investments in security, retailers have had to close 28% of stores in affected areas, reduce operating hours by 45%, and limit product offerings by 30% due to crime.

Mounting Financial Impact in 2023

The financial toll continues to weigh heavily on retailers' bottom lines.

Lauren Hobart, President and CEO of Dick's Sporting Goods, stated, "Theft significantly impacted our Q2 results and shapes our outlook for the remainder of the year."

Target CEO Brian Cornell disclosed that organized retail crime is expected to cost the company an additional $500 million in 2023 compared to last year, prompting closures of nine stores in New York, Seattle, San Francisco, and Portland citing safety concerns for customers and staff.

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