With the biggest shopping days of the year around the corner, concern around shrink — and, in particular, consumer theft — is growing among retailers.
In November, California voters passed Proposition 36, which increases punishment for petty crimes including shoplifting. At Glossy’s November Beauty and Wellness Summit in Napa, many attendees pointed to shrink as an increasingly challenging problem at the retail level. In October, the National Retail Federation announced it would not publish its annual shrink report in 2024 and would instead release a report focused on retail theft and violence.
Shrink does not refer only to consumer theft; it encompasses inventory lost due to reasons other than sales, including shoplifting, internal theft and processing and logistical errors. According to the NRF’s 2022 shrink report, external theft is the largest shrink driver, at 36%, while internal theft and processing errors make up 29% and 27%, respectively.
“Many brands face shrinkage challenges in retail, particularly those with high-ticket price points. To address these issues, brands are boosting field support in high-risk stores and collaborating with retailers on solutions, such as reducing shelf stock when no vendor representative is present,” said Paula Floyd, founder and CEO of retail agency Headkount. “Having boots-on-the-ground support provides brands with valuable insights into high-risk markets, accurate inventory levels in real-time and opportunities to collaborate with store LP teams to develop effective solutions by door.”
According to a report from Coresight Research, retailers are more wary of violent theft in stores.
“Retailers are stressing that shoplifters and thieves have become more bold and aggressive,” said analyst Sujeet Naik, author of the Coresight report. “They are now targeting higher value items that can be easily sold in secondary markets like online marketplaces.”
Retailers have taken measures to protect higher-priced merchandise, like fragrance and luxury beauty. In 2023, Sephora implemented a new policy requiring consumers to ask employees for fragrance bottles to purchase. Ulta Beauty also said it would move fragrance into locked cabinets at 70% of its stores in 2023.
Some data has found that reports of increased shoplifting post-pandemic have been overblown, however. A 2023 report from the Council on Criminal Justice found that, outside of New York City, shoplifting rates remained below pre-pandemic levels in 2022. And the NRF has pointed to retailers using shrink, the actual figures of which are difficult to track, as a potential cover for underperforming stores.
Still, retailers are taking other measures in addition to locking up more merchandise on shelves. In June, Bloomberg reported that Target lowered the threshold for employees to intervene in the case of consumer theft from $100 worth of merchandise to $50. According to Naik, retailers are also implementing AI-powered surveillance technology to combat shoplifting.
Some, however, have criticized anti-shoplifting measures. The ACLU has criticized California’s Prop 36 as likely to increase incarceration and recidivism rates rather than reduce crime. A 2023 report from investment bank William Blair called the focus on shrink an “opportunity to draw attention away from margin headwinds in the form of higher promotions and weaker inventory management.”
