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09/20/2022

NRF: Retail Shrink Reaches Nearly $100B

According to the industry group, organized retail crime is a growing challenge for retailers and the industry at large. 
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WASHINGTON, D.C. — Organized retail crime (ORC), a critical component of shrink, is a growing challenge both for retailers and the industry at large, according to the National Retail Federation (NRF).

Retail shrink, when taken as a percentage of total retail sales in 2021, accounted for $94.5 billion in losses last year, up from $90.8 billion in 2020, according to NRF's 2022 National Retail Security Survey.

"The factors contributing to retail shrink have multiplied in recent years, and ORC is a burgeoning threat within the retail industry," said Mark Mathews, NRF vice president for research development and industry analysis. "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 top five cities/metropolitan areas affected by ORC in the past year were Los Angeles, San Francisco/Oakland, New York, Houston and Miami.

The majority of retailers report in-store, e-commerce and omnichannel fraud have risen. Violence is a growing area of concern and retailers are prioritizing addressing guest-on-associate violence, external theft and ORC, NRF stated.

According to the association, research shows that ORC groups commit retail crimes for their financial benefit, and specifically, target items that are concealable, removable, available, valuable, enjoyable and disposable, also known by the acronym CRAVED. Items that have more of these characteristics are more likely to be stolen.

The top categories targeted include apparel, health and beauty, electronics/appliances, accessories, food and beverage, footwear, home furnishings and housewares, home improvement, eyewear, office supplies, infant care and toys.   

Overall, the 2022 National Retail Security Survey found that the average shrink rate in 2021 was 1.44 percent, a slight decrease from the last two years but comparable to the five-year average of 1.5 percent. 

Retailers also reported a 26.5 percent increase in ORC, on average. The vast majority (81.2 percent) of respondents said that the violence and aggression associated with ORC increased in the past year.

The COVID-19 pandemic created more challenges for retailers. A large majority (87.3 percent) of respondents said the pandemic resulted in an increase in overall risk for their organization. Retailers specifically cited an increase in violence (89.3 percent), shoplifting (73.2 percent), ORC and employee theft (tied at 71.4 percent) as a result of the pandemic.

"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, Loss Prevention Research Council senior research scientist. "In many cases, it is difficult to measure the full extent of these crimes without being investigated internally and in coordination with law enforcement."

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 increasing their capital and equipment budget.

As part of these efforts, many are investing in various technologies, including RFID, computer vision at point of sale and license plate recognition.

According to NRF, as retailers implement additional measures to diminish and  prevent ORC-related incidents from occurring, policy reform is still needed. A majority of respondents (70.8 percent) reported an increase in ORC where felony thresholds have increased.

Retailers desire stronger ORC legislation, especially at the federal level, as well as better enforcement of existing laws, the association added.

To view the full report click here.

Washington, D.C.-based NRF is the world's largest retail trade association. Retail is the nation's largest private-sector employer, contributing $3.9 trillion to annual GDP and supporting one in four U.S. jobs.