"Shrink," or retail theft, is a billion-dollar problem for the retail industry.
And unlike the popular culture image of a teen shoplifter looking for a rush, the real culprit is often organized crime groups, which systematically steal and fence goods from retailers at scale.
But sometimes the criminals get caught.
Home Depot (HD) spent several years tracking and busting one such ring with the help of law enforcement. At the core of that criminal syndicate was a man named Robert Dell, who operated a drug recovery program out of a church in St. Petersburg, Fla.
He also allegedly stole $1.4 million of goods.
According to the Florida attorney general, Dell used his position as a pastor and counselor to coerce people to steal for him, often hitting stores five or six times per day.
Dell would then fence the goods on eBay under the account "anointedliquidator," where he had 100% positive feedback and a 35,000-item history.
Dell and other associates were finally busted in August, and while this may seem like a breakthrough, it’s just one syndicate.
"These cases are pretty typical in both the scale and breadth," Scott Glenn, Home Depot's vice president of loss prevention, told Yahoo Finance. And while the problem is getting more and more attention — Florida's attorney general is one of many AGs and local district attorneys tackling shrink — these cases are often linked to more unseemly crimes like money laundering and even human trafficking.
The $1.4 million scheme Dell and his accomplices carried out is only a drop in the bucket. Retailers suffered more than $112 billion in losses due to shrink last year alone, according to the National Retail Federation, putting the bust at just 0.00125% of the year's total.
New research out on Monday from CoreSight Research shows that consumers are becoming increasingly concerned. It's not just the annoyance of having to ask for a sales associate to unlock a case: 73% of consumers surveyed are worried that retailers will hike prices to cover the cost of increasing theft, and more than half of consumers are worried about store closures in their community due to organized retail crime.
CoreSight’s research also shows that it’s not just about retailers' bottom lines, as the impact can extend to their ability to hire or retain employees or even draw customers to stores.
To that end, Target (TGT) is closing nine stores across four states by Saturday, Oct. 21, citing concerns about the safety of staff and consumers as retail crime increases.
Before taking this draconian step, Target says it invested in strategies like beefing up security, using third-party guard services, and more theft deterrent tools. But it wasn’t enough for the nation’s second-biggest retailer.
CoreResearch says membership-based retailers such as Costco (COST) and BJ’s Wholesale Club (BJ) stand to benefit until the problem is solved because you need a membership to walk through the door, which may be a deterrent in and of itself.
Besides efforts by attorneys general and retailers, Congress passed the Inform Consumers Act to combat selling stolen goods, something Home Depot's Glenn said was a step in the right direction.
But it's not enough for retailers like Home Depot, which will likely provide an update this November as it releases quarterly results.
"We really need a much more coordinated and systemic effort at the federal level to take this problem seriously and really understand how much it impacts not only the financials of retailers and consumers but also the safety of the associates in our stores and the customers and the shopping public at large," Glenn said.
