As food retailers continue to grapple with challenges that impact the bottom line, a study conducted by Coresight Research found that theft and fraud remain top concerns for food retailers.
The study, “Retail Shrink and ORC: Theft and Fraud Remain Top Challenges for Food Retailers” is part of a Coresight Research series on retail shrink and organized retail crime. It dives into developments on shrink from the United Kingdom and the U.S., as well as recent earnings commentary from major retailers in Canada and the U.S., according to the firm.
Coresight Research said that, according to the Food Industry Association, 85% of food retailers report theft or fraud (shrink) as the top threat that negatively impacted their businesses last year. Consumers have also noticed an uptick in theft. Coresight Research found that 27% of consumers report they have personally witnessed shoplifting as of May 2024, compared with just 18% in July 2023.
However, extra security measures could lead to shoppers taking their business to another store, the report says.
Coresight Research discoveries
The Coresight Research study indicated that a significant portion of U.S. shoppers are deterred by aggressive security measures, such as locked items, which can push them toward alternative shopping locations or channels — with 23% saying they would shop at another store and 25% saying they would just shop online if a retailer put in security measures like locking up products or moving them into cases.The report says that retail shrink through theft continues to be a persistent and intensifying headwind for retailers globally. Shoplifting and organized crime negatively impact retail margins and, as such, have become a growing focus for the sector.
U.S. results from the study:
- On July 17, it was reported that grocer Giant Food has enhanced security protocols at some of its stores in Montgomery County, Md., due to increased shoplifting. A company spokesperson informed local media group MoCo360 that the company has introduced new policies at select stores facing high shrink levels to combat the unprecedented product theft, which has become unsustainable for the business.
- On June 27, Bloomberg reported that Target is lowering the threshold for how much shoplifters can steal before employees are permitted to intervene, with the company adopting a stricter stance to curb store theft. Store associates can now seek to halt theft incidents involving items totaling at least $50, down from the previous limit of $100. The new policy is expected to be rolled out and enforced this summer, according to the report.
- According to the Food Industry Association's annual research report, “The Food Retailing Industry Speaks 2024” (published June 27), asset protection was the top challenge facing the food industry in 2023, with 85% of food retailers citing theft and fraud as a factor that negatively impacted their businesses that year.
The Coresight Research view on shrink
Recent surveys and conversations with retailers, the report states, indicate that overall shrink is increasing, as are concerns about ORC.There are several economic and social causes behind the increase in shrink and rise in ORC, including legislators' hindering law enforcement and the availability of technologies such as end-to-end encryption on chat apps that make it more difficult to catch criminals. Retailers can benefit from many technologies as well, which can help them predict likely criminal behavior, potentially mitigate it, recover quickly and assist law enforcement, according to the report.
While locking often stolen items in Plexiglas cages can reduce theft, it also takes a toll on the customer experience, leading customers to shop elsewhere or to go online, the report says, adding that associate safety is paramount, both out of concern for associates' well-being but also for its effect on customer sentiment.
Implications from the report
The recent announcements on proposed antitheft legislation indicate a strengthening desire among lawmakers to address and crack down on retail theft and ORC. With the growing recognition of the severity of the issue also comes the realization that it demands a hardline approach through legislative reform, dedicated resources and collaborative law enforcement efforts, the report says.While implementing security measures is crucial, Coresigh Research said, retailers must balance the need for increased security against the detrimental impacts of certain actions on the consumer experience. Coresight Research's survey from May 2024 indicated that a significant portion of U.S. shoppers are deterred by aggressive security measures such as locked items, which can push them toward alternative shopping locations or channels.
Retailers need to ensure the security of their merchandise without compromising the ease and enjoyment of shopping.