Target expects to lose $500 million more to ‘organized retail crime’ in 2023 than it did last year

by mcardinal

Matt Bush, FISM News

Retail behemoth Target revealed on Wednesday that organized retail theft will cost the company $500 million more in 2023 than it did in 2022.

“Left unchecked, organized retail crime degrades the communities we call home. As we work to address this problem, the safety of our guests and our team members will always be our primary concern. Beyond safety concerns, worsening shrink rates are putting significant pressure on our financial results,” said Target Chairman and CEO Brian Cornell on a call concerning Q1 earnings.

In 2022, Target lost $700 million from an issue the company refers to as “inventory shrinkage.” According to its estimates, that total will increase to $1.2 billion this year.

Investopedia defines inventory shrinkage in this way: “Shrinkage is the loss of inventory that can be attributed to factors such as employee theft, shoplifting, administrative error, vendor fraud, damage, and cashier error. Shrinkage is the difference between recorded inventory on a company’s balance sheet and its actual inventory.”

Shrinkage has always been a concern for businesses that create or sell products, especially for retail stores. However, the type of shrinkage described by Cornell and other Target executives on the call is more concerning than simple inventory shrinkage.

According to the National Retail Federation, organized retail crime is “the large-scale theft of retail merchandise with the intent to resell the items for financial gain.” This is more than just shoplifting, though shoplifting is a part of the problem. With organized retail crime, the stakes are higher and violence is more common.

During the call, Cornell said that violent acts in Target stores and retailers across the country are increasing and that they have been forced to make “significant investments in strategies to prevent this from happening in our stores and protect our guests and our team.”

With inflation continuing to rise and online marketplaces remaining fairly anonymous, organized retail crime allows criminals to steal goods that they can then sell online at a lower-than-retail price. The risk of getting caught is very low and the reward can be very lucrative.

This increase in violence and theft has affected retailers around the country, especially those like Target who rely on their physical stores to differentiate themselves from their competition. 

“Stores are central to the Target story,” Cornell said. “Our stores are our most valuable asset. We’re so committed to protecting our stores.” 

There is growing speculation, however, that in areas of high crime it could be too costly to keep retail Target stores open. According to the Daily Wire, “Target was indeed forced to shutter four locations earlier this year, one in Philadelphia, one in Minneapolis and two in the Washington D.C. area, citing decreased foot traffic at the stores even as crime levels in both cities rise.”

Last year, in an interview with Business Insider, Walmart CEO Doug McMillon said, “Theft is an issue. It is higher than what it has historically been. If that’s not corrected over time, prices will be higher, and/or stores will close.”

As theft and organized retail crime continue to grow, those sentiments from the Walmart CEO will most likely trickle down to other retailers.