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$800K Nike Theft Part of Retail’s $94.5 Billion Shrink Struggle

Thieves in Memphis last week ran off with an $800,000 haul of Nike clothes and shoes after breaking into 20 trailers by the athletic giant’s rail-adjacent distribution center, Fox13 Memphis reported, citing a local police report.

And while the Sept. 6 robbery targeted one of the weaker links in the retail supply chain, the brazen crime illustrates the mounting problem merchants face as they struggle to secure their goods and protect their bottom line.

Retail shrink keeps racking up the bill for merchants across the U.S., accounting for $94.5 billion in losses last year, according to the 2022 National Retail Security Survey released Wednesday by the National Retail Federation (NRF). The total is up 4.1 percent from shrink totaling $90.8 billion in 2020, the survey said.

Shrink refers to the gap between what retailers should have on the books and the reality of how much product they have in hand. Some of the most common culprits behind shrink include employee theft and shoplifting, in addition to administrative errors, vendor fraud, and product damage.

Organized retail crime (ORC), however, is driving much of the shrink increase, with retailers reporting a 26.5 percent increase in ORC on average. Overall, 52.9 percent of merchants surveyed say ORC on the whole as increased, with none saying the problem is getting better. To make matters worse, 81.2 percent reported worsening ORC violence and aggression versus the prior year. More than one-third (35.2 percent) of retailers even said the aggressive behavior occurred “much more” in 2022.

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“The factors contributing to retail shrink have multiplied in recent years, and ORC is a burgeoning threat within the retail industry,” said Mark Mathews, vice president for research development and industry analysis, National Retail Federation. “These highly sophisticated criminal rings jeopardize employee and customer safety and disrupt store operations. Retailers are bolstering security efforts to counteract these increasingly dangerous and aggressive criminal activities.”

The reported ORC increase is weighted heavily toward the 31.5 percent of retailers that had an ORC team already in place, suggesting that forming a team dedicated to deterring these incidents will detect more of them. On average, respondents with an ORC team reported more than three times the increase in ORC occurrences compared with those without.

The 63 participating retailers attributed the greatest portion of shrink (37 percent) to external theft, including ORC, followed by employee/internal theft (28.5 percent) and process/control failures (25.7 percent).

When assessing individual risks and threats, 77.6 percent of retailers say they are most concerned about deterring customer-on-associate violence, while 74.1 percent are prioritizing external thefts such as ORC. Another 70.7 percent are doing more to focus on ORC-related incidents.

The rise in ORC has given way to legislation proposed at a state and federal level such as the various iterations of the INFORM Consumers Act, which would require online marketplaces to collect and verify basic business information from sellers before they are permitted to sell online.

The federal INFORM Act bill has yet to be voted on in Congress, but retailers overwhelmingly approve of nationwide ORC legislation, with 86.8 percent in support and just 5.7 percent against the idea. More data seems to recommend that legislators will have to rethink their public policy in combatting retail crime, with 70.8 percent of retailers reporting an increase in ORC where felony thresholds have increased.

The windows of the Hublot and Lacoste stores in Union Square, San Francisco, seen here on Nov. 25, 2021, were boarded up after masked people stole goods from several high-end retailers in the storied shopping area.
The windows of the Hublot and Lacoste stores in Union Square, San Francisco, seen here on Nov. 25, 2021, were boarded up after masked people stole goods from several high-end retailers in the storied shopping area. Samuel Rigelhaupt/Sipa USA/Sipa via AP Images

“Reducing instances of violent crime, particularly those affiliated with ORC, is a key priority among retailers because it directly and immediately impacts employees in numerous capacities,” said Cory Lowe, senior research scientist for the Loss Prevention Research Council, which helped NRF conduct the Appriss Retail-sponsored 2022 Retail Security Survey. “In many cases, it is difficult to measure the full extent of these crimes without being investigated internally and in coordination with law enforcement.”        

Oregon retailers see ‘significant’ store theft surge

Retailers in one state appear to share similar experiences as their nationwide counterparts when it comes to ORC. The Organized Retail Crime Association of Oregon (ORCAOR) recently released survey results indicating that 64 percent of merchants believe ORC is having the biggest impact of all thefts, compared to only 16 percent who cited petty shoplifting as the biggest problem.

ORCAOR’s survey calculated results from 45 retail respondents, with 84 percent coming from a national or big box retailer and 14 percent from a retailer exclusive to Oregon or the Pacific Northwest.

In the past 18 months, 35 of the respondents (78 percent) reported a significant spike in store thefts, while six (13 percent) noted a slight increase. Written responses attributed the uptick to boosters who think they won’t get caught or face any consequences, lesser sentences, lack of police support and prosecution, the increase in homelessness and the opioid epidemic.

An alarming 80 percent said they don’t feel they have adequate police support, while 95 percent are unhappy with how local government handles property crimes.

ORCAOR is pushing for legislative changes to tighten penalties for repeat theft. The organization is also interested in establishing a state-level task force to tackle retail crime, similar to the one recently established by Washington State Attorney General Bob Ferguson.

Forty-one percent of the ORCAOR survey respondents noted that shoplifting arrests have gone up alongside the increase in criminal activity. But another 36 percent say their company policy prohibits them from apprehending suspects.

Retail theft remains troublesome in transit

The NRF survey also went beyond the retail store, assessing some of the cargo theft challenges that the Covid-19 pandemic worsened. The greatest percentage of participating retailers experienced cargo theft while shipments were en route from distribution centers to stores (47.4 percent). This was followed by cargo theft at stores (42.1 percent) and theft on shipments that were in transit from manufacturers to distribution centers (35.1 percent).

Cargo theft also occurs equally at distribution centers and other third-party facilities, according to 31.6 percent of retailers. And 29.8 percent of retailers say they’ve had cargo stolen when shipped from one store to another.

Respondents were also asked to rank the specific points in the supply chain where they experienced cargo theft in order from most problematic to least problematic.

“En route from distribution centers to stores” was identified as the most problematic by the greatest percentage of respondents, at 47.4 percent. In fact, 68.5 percent ranked this element of the supply chain as the first- or second-most problematic element in terms of cargo theft. Similarly, 53.9 percent ranked theft at distribution centers in their top two most problematic stages of the supply chain.

Tech budgets rise but overall adoption lags

Retailers are prioritizing new resources to safeguard their customers, employees and operations, with nearly half (44.5 percent) indicating loss prevention as an area of investment. More than half (60.3 percent) are increasing their technology budget and 52.4 percent are pumping funds into capital and equipment.

Despite many firms investing in technologies across the store and supply chain, mass adoption remains elusive. RFID systems are currently being implemented or expected to be deployed at 38.6 percent of retailers, the most of any loss prevention and shrink-fighting tech.

Fewer than one-third (29.8 percent) are turning to AI-based point-of-sale (POS)/self-checkout (SCO) video analytics, while 19.3 percent are looking into license plate recognition—both of which could better identify perpetrators in robberies, particularly the “smash-and-grab” episodes that typically involve multiple suspects and vehicles at a time.

Another 17.5 percent of sellers is either considering or implementing self-service locking cases or lockers. Other technologies include: AI-based perimeter surveillance (14 percent), advanced weapon detection (12.3 percent) and facial recognition (12.3 percent).