Retailers Fight Back: Target Closes Stores Due to Crime Surge

Organized Retail Crime: A Growing Threat to Retailers

In recent years, retailers have been grappling with the increasing problem of organized retail crime (ORC), which has reached a new and dangerous level. This type of store theft involves organized groups targeting retailers that carry high-value merchandise and stealing large quantities of products to be resold in secondary marketplaces or even back into the legitimate supply chain. The rise in ORC has led to significant financial losses for retailers, prompting some to close stores.

The Impact on Retailers

Target‘s recent decision to close nine stores in major cities due to persistent large-scale theft is a clear indication of the magnitude of this issue. Retail experts warn that even a small increase in crime can have cascading effects that lead to store closures. With razor-thin profit margins, stolen items can have a profound impact on store profitability.

Furthermore, the rise in store crime is not the only challenge retailers are facing. A pullback in consumer spending and excess inventory are also contributing factors that make it difficult for retailers to lift their store sales and make informed decisions about which stores to shut down.

The Nature of Organized Retail Crime

Organized retail crime involves sophisticated operations that target higher-value merchandise such as electronics, sporting goods, cosmetics, clothing, handbags, and shoes. These criminal groups steal large quantities of products and then resell them in secondary marketplaces online, such as eBay, OfferUp, and Facebook Marketplace. In some instances, stolen items find their way back into the legitimate supply chain.

Dangerous smash-and-grab attacks have also become increasingly common in shopping malls and high-end stores in cities like Los Angeles, Chicago, and New York. Perpetrators use tools like sledgehammers to break into stores and make off with thousands of dollars’ worth of merchandise. This trend is not limited to large retailers; small businesses are equally vulnerable, as evidenced by the recent looting of retail wine and liquor stores in Philadelphia.

The Financial Burden on Retailers

The financial impact of organized retail crime is significant. The total annual shrink, which refers to merchandise that goes missing due to theft, fraud, damage, or other reasons, was estimated to cost retailers $112.1 billion in 2022, a significant increase from $93.9 billion in 2021. The average shrink rate also rose from 1.4% in 2021 to 1.6% in 2022, according to the National Retail Federation.

Retailers like Target, which did not provide data on theft at the specific stores that are closing, are facing repeated incidents of large-scale theft, which can prove costly. The loss of $300 to $330 worth of merchandise typically results in only $0.00 to $3 being recovered. With slim profit margins, retailers must sell significant amounts of additional merchandise to offset these losses. Over time, stores may underperform, leading retailers to either seek compensation from other stores in their fleet or choose to close the affected store.

The Broader Implications

The closure of stores due to crime not only affects individual retailers but also has broader implications for the communities they serve. The closure of anchor stores in malls can lead to reduced foot traffic, causing other retailers to pull out as well. This domino effect can result in abandoned buildings, blight, and increased crime in the area. The impact of store closures creates a ripple effect of concern.

Solutions and Future Considerations

Retailers are actively seeking solutions to mitigate the impact of organized retail crime. Some measures include locking up products in cases, altering store layouts, and utilizing technology to track reported retail crime and store closures. However, these measures, while aimed at improving safety, may also deter customers and hinder sales growth.

It is crucial for retailers to strike a balance between ensuring store safety and providing a seamless shopping experience for customers. Locking up products or making them less accessible may drive away potential customers who perceive the store as unwelcoming. Retailers should also consider investing in technology and security measures that effectively deter crime without compromising the shopping experience.

Collaboration between retailers, law enforcement agencies, and local communities is essential in addressing organized retail crime. Sharing information and strategies can help identify patterns, track criminal activities, and support targeted law enforcement efforts.

Overall, the rise in organized retail crime poses significant challenges for retailers, affecting their profitability, store operations, and the communities they serve. Addressing this issue requires a multifaceted approach that combines proactive measures to deter crime with collaboration among stakeholders. By prioritizing store safety and fostering an environment conducive to customer satisfaction, retailers can mitigate the impacts of organized retail crime and thrive in an increasingly challenging retail landscape.

Keywords: Security, retailers, crime surge, store closures