Opinion: Not just inflation: Shoplifting and soft-on-crime policies in the U.S. push prices up, too

The National Retail Federation estimates it accounted for US94.5 billion in losses last year, up sharply from the previous year.Glenn Lowson/Tausi Insider

Gus Carlson is a U.S.-based columnist for Tausi Insider

Walk into most any drugstore in a U.S. city to buy a tube of toothpaste, a stick of deodorant or a bottle of Aspirin and you may be surprised: They are locked up in cases, like diamond necklaces or Rolex watches, and accessible only by key-bearing employees – if you can find any to help you.

The reason? Theft, often accompanied by violence and aggression in urban locations, has quickly become the biggest plague on U.S. retailers. The National Retail Federation estimates it accounted for US$94.5-billion in losses last year, up sharply from the previous year, and nearly half its members are spending more on loss-prevention technology than ever before.

Big retailers are sounding the alarm, warning that the issue is so acute, they can no longer account for it in the normal cost of doing business, even with heavy spending on anti-theft tech. Consumers, particularly urban ones, will suffer – prices will rise. It’s not just inflation that is making everything more expensive.

The anti-theft measures and the stock on the shelves that get stolen do not come free to the retailer. They pay for it, and more often than not, that cost ends up being passed on to the consumer.

And then it can get even worse. There could be shortages of goods and in many cities, stores will close.

And as long as progressive city and state governments underspend on law enforcement and remain overly lenient on crime, the situation will worsen. The more thieves believe their chances of getting away with a crime with little consequence, the more likely they are to try.

Target’s chief financial officer, Michael Fiddelke, told investors last month that shoplifting increased 50 per cent year-over-year and shrinkage, retail lingo for goods lost to theft or fraud, totalled US$400-million so far this year. That number is expected to hit US$600-million by year-end, he said.

Rite Aid’s chief retail officer, Andre Persaud, said in September that sharp year-over-year increases in shrinkage in the company’s New York City drugstores represented “unexpected headwinds,” and the company is “looking at literally putting everything behind showcases” there.

This week Walmart Inc. chief executive officer, Doug McMillon, said theft was at historic highs and shrinkage would likely lead to higher prices and store closings.

The dire warnings are the latest in a nationwide trend of store closings due to theft and the increasingly dangerous circumstances surrounding it. The Gap, Marshalls, Walgreens, Starbucks and other big brands have all closed city stores in the last year because of theft and safety concerns. CVS said it had seen a 300-per-cent increase in theft since the pandemic started.

“Violence is an increasingly important concern among retailers,” the retail federation said in a recent security study, adding that eight in 10 stores reported increases in violence and aggression related to theft incidents.

To be clear, this crime wave is not old-fashioned shoplifting. The problem now is organized theft rings, often armed and menacing, who steal goods in bulk and then quickly resell them on online platforms like eBay and Amazon.

And while most goods stolen are sundry items like health and beauty products, thieves will take anything of value they can carry and conceal.

Many still try to blame the problem on the pandemic, though that argument doesn’t explain anything.

It is not coincidental that the biggest problems are occurring in states and cities with the most progressive politics, where defund the police movements gained traction and lawmakers softened the rules around criminal behaviour.

In Massachusetts, for example, a 2018 law raised the threshold for felony larceny to $1,200, from $250. Not surprisingly, shoplifting arrests have since fallen 65 per cent.

Similar changes have been made to laws in New York and California, hotbeds of theft and the focus of retailers’ concerns.

“I think local law enforcement being staffed and being a good partner is part of that equation,” Walmart’s Mr. McMillon told CNBC about the serious problems in the company’s New York City stores. “If that’s not corrected over time, prices will be higher and/or stores will close.”

Surprisingly, one of the first steps to a solution occurred in San Francisco. In June, voters there ousted their reformist district attorney, Chesa Boudin, after rising crime rates proved that even the laid-back have their limits.

Shoppers in other U.S. cities should take note. And remember the next time they can’t get the products they want or find their neighbourhood drugstores closed, don’t blame the retailers.

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