Retail theft is a growing and expensive problem | David Moon

David Moon
·2 min read
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The economic value of social order and peace is significant, and it seems we are seeing the reverse of that some areas of the U.S. In a recent press release, retail giant Target said that merchandise theft will likely rob shareholders of $500 million of earnings this year – bringing the two-year theft total to $2 billion. Walmart lost $3 billion to thieves in 2022. Total U.S. retail theft last year is estimated at more than $100 billion.

This is not an old problem that has suddenly become a convenient excuse for big businesses to demonstrate some long-held animus toward some of its customers. The National Retail Federation reports a 26.5% increase in organized retail crime in 2022. As Target’s CEO noted, “we’re not alone in seeing a trend that has gotten progressively worse over the last 12 to 18 months.” Walgreens, Walmart, Nike, Starbucks and Whole Foods are just a few national retailers who have joined Target in closing certain crime-ridden stores.

Anyone who argues that these huge retailers can afford to absorb a few billion dollars in theft doesn’t understand the collective societal value of those businesses. Several years ago, Merrill Lynch economists calculated that Walmart was responsible for reducing increases in the consumer price index by almost a third. Other studies calculate that the average American household saves $3,800 annually due to the “Walmart effect.”

Simi Valley police detectives investigating organized retail theft at Home Depot stores around Southern California recovered more than $340,000 worth of goods in Orange County on Feb. 22, 2022. The National Retail Foundation reports a 26.5% increase in organized retail crime in 2022.
Simi Valley police detectives investigating organized retail theft at Home Depot stores around Southern California recovered more than $340,000 worth of goods in Orange County on Feb. 22, 2022. The National Retail Foundation reports a 26.5% increase in organized retail crime in 2022.

Not only must retailers increase their prices to absorb the cost of stolen inventory, but they must also replace the items, placing additional pressures on manufacturing and distribution systems still stressed from the COVID-19 pandemic.

As I self-scanned some items at a local home improvement store, I asked the register monitor how often she caught people “forgetting” to pay for something. She said about five people per self-scan register per shift.

My personal guess is that the sudden change from the status quo was not caused by a “defund the police” movement or a sudden lack of economic or social opportunities for people who turned to crime in response to a lack of community after-school activities. Society works when there is some generally agreed-upon order – and practically all social norms (including the suspension of arrests for retail theft in some cities) were suspended or fully upended in March 2020. After declining an average of 2% annually from 2016 to 2019, the U.S. homicide rate jumped 29% in 2020 – despite being essentially flat in January and February that year.

I don’t know how to stop or even slow this problem, but expecting retail store employees to act as the police is certainly not the solution. But neither is New York City’s recently announced plan to install in-store kiosks designed to connect would-be thieves with social service programs.

David Moon, president of Moon Capital Management, may be reached at david@mooncap.com.

This article originally appeared on Knoxville News Sentinel: David Moon: Retail theft is a growing and expensive problem