The National Retail Federation has backed off an estimate it published in a widely cited report in April claiming organized retail crime (ORC) was responsible for nearly half of the $95B in retail shrink in the US in 2021.
The NRF has retracted the claim, editing out the sentence from its report, which the lobbying group produced in collaboration with private security firm K2 Integrity.
NRF said in a statement that the claim that ORC was responsible for almost half of all inventory losses was based on two-year-old congressional testimony from an advocacy group known as the Coalition of Law Enforcement and Retail.
In 2021, the coalition's president testified that ORC accounted for $45B in annual losses for retailers. In the NRF report, this statement was conflated with an NRF retail security survey from 2021, creating "an inference" that the $45B estimate was based on NRF data, an NRF spokesperson said in the statement.
NRF publicly lobbied Congress in October "to advocate for legislative solutions to address organized retail crime," with CEO Matthew Shay rallying in front of the US Capitol standing behind a podium with a sign that said "Fighting Retail Crime."
The backpedaling began after RetailDive published an analysis late last month highlighting the "imprecise" data that NRF and other groups have put out about ORC.
Viral videos of brazen "pop-up" mobs of shoplifters looting stores in several major urban centers, including San Francisco and Philadelphia, have fed the meme that out-of-control shoplifting is combining with more sophisticated organized retail crime methods to siphon billions of dollars of retail inventory from major chains.
The crisis theme has been amplified by several large retail chains, most prominently Target, that have cited shrink and safety concerns as a reason for closing urban outlets. Walmart recently announced it was putting a modified police precinct in one of its stores in Atlanta.
According to a report last week in the New York Times, the hype about shrink from retail theft is far outpacing the reality. According to police data, shoplifting incidents have fallen 7% in most major cities since 2019, the report said.
While larger-scale organized retail crime, where groups of thieves purloin goods throughout the supply chain for resale on the black market, is a real phenomenon, it's actually only a fraction of overall shrink. Trevor Wagener, chief economist at the Computer & Communications Industry Association, told the Times that organized groups were likely responsible for about 5% of shrink from 2016 to 2020.
In October, an expert who has spent the past 30 years specializing in retail asset protection, including 23 years at Walmart's HQ in Bentonville, AR, said that people are conflating the growth of retail shrink with the high-profile in-store shoplifting episodes dominating the headlines.
According to Brand Elverston, now an industry consultant, huge opportunities for shrink occur in the supply chain and from accounting errors.
In a webinar, Elverston said retail shrink totals are based on an annual reconciliation of what a retailer's financial ledgers say matched against the physical count: the gap is shrink.
"That's just an annual reconciliation, which publicly held retailers are required to do," Elverston said, in an online discussion on retail shrink hosted by BTIG. "At that point, they don't have any idea whether it's theft, an administrative problem or it disappeared in the supply chain."
"The mischaracterization of shrink that we're seeing all over social media is that it's all theft, and all of it happens within the four walls of a store," he added. "That's naïve at best."
According to Elverston, the opportunities for shrink begin when a huge retailer sends a large purchase order to a supplier.
He then ticked off a litany of potential problems: the container is missing because it never got shipped. Discrepancies in invoices, as in duplicate invoices being issued for the same order. Goods that disappeared or were damaged in the supply chain. Here's our favorite: when the goods get to the store, nobody is bothering to count anything.
"If you're a major retailer, nobody is item-counting anything coming in the back door except maybe the milk delivery, the Coca-Cola delivery or the beer delivery," Elverston said.
"Your major general merchandise grocery trucks that back up to the door of your Walmart, and there are five a day, nobody's item-counting anything, so there's an assumed accuracy that everything that is being billed for is accurate," he said.
Regarding in-store theft, Elverston said the widespread adoption of self-checkout and the corresponding reduction in cashiers and floor staff at retail stores have created opportunities for theft.
Omnichannel sales also create shrink opportunities, he added, giving the example of someone who places an online order and then texts a buddy, an order-filler at a major retailer, with the order number and asks the pal to add a few items to the cart.
Elverston said in-store theft needs to be addressed by bringing more staff back to retail stores, including reinstating cashiers, as well as adopting new technologies to police the problem in self-checkout operations.
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