Retail theft — commonly referred to as retail shrink — accounted for losses of $94.5 billion in merchandise for retailers in 2021, according to the National Retail Federation. Since then, companies like Target are forecasting upwards of $500 million in theft-related losses. Marty Andrews, VF Corporation (VFC) Vice President of Loss Prevention, joins Yahoo Finance Live to discuss the impact of retail theft on companies as part of the weekly series "Retail Evolution: The New Era."
"We need to educate folks on what organized retail crime actually is, and these are groups going into stores, stealing massive amounts of quantities of merchandise in various stores, day in and day out," Andrews says, defining the difference between simple shoplifting and organized retail theft. "That thought process of 'these are big organizations and they're insured and it's not a big deal,' we need to change that narrative."
Andrews pushes the need for law enforcement's involvement, citing viral incidents of retail crime sprees that have seen upwards of $100,000 in losses in a single day, targeting not just retail locations but distribution warehouses as well.
"We want to keep people safe, first and foremost," Andrews states. "And we have to continually coach on de-escalation and making sure that we're not putting our people in harm's way."
[MUSIC PLAYING] - The National Retail Federation known in your hood as the NRF warned in its latest report that the annual merchandise shortage or shrink had risen to $94.5 billion back in 2021.
37% of that coming from external theft.
During last quarter's results, over a dozen retailers pointed to theft as a key reason behind slashing their profit outlook.
And Target was front and center predicting $500 million in expected losses from organized retail crime in 2023.
For more on this, we're joined by Marty Andrews, VF Corp vice president of loss prevention.
Marty, great to have you here with us, especially on this topic here and considering the role.
How should consumers think about and investors think about, more notably here, the impact that shrink or loss have on some of the companies and how much this has grown over the years?
MARTY ANDREWS: Yeah, so we've seen a significant uptick in organized retail crime, and it's certainly impacting the profits of organizations.
So I think the big thing that the consumers out there need to understand is the difference between organized retail crime and shoplifting.
Shoplifting is oftentimes minimized as someone goes in and takes a pack of gum or a candy bar.
So we need to educate folks on what organized retail crime actually is.
And these are individuals and groups going into stores stealing massive amounts of quantities of merchandise in various stores day in and day out.
So that thought process of these are big organizations and they're insured and it's not a big deal, we need to change that narrative.
- So Marty, I want to ask you about, there was a viral video recently of a huge, and to your point, organized crime event it appeared for Nordstrom was targeted.
About $100,000 of merchandise was stolen at an LA Nordstrom.
There have been questions about, what is the solution to this growing problem when it comes to shrink, which again, to your point is more than just shoplifting?
What are the solutions that you're hearing on the table?
MARTY ANDREWS: Well, that's the big thing that we're trying to battle, right?
How do we do this?
And I think one of the big things is we're decriminalized some of the activities.
So there has to be a punishment for these crimes otherwise, people are going to continue to do them if it's a misdemeanor to go in and do these types of behaviors.
So we have to get that.
We have to get law enforcement's support in these.
And of course, there's limited law enforcement resources nowadays.
So some of the things that I'm involved with and that are being done out there, as you mentioned, the RILA, NRF, they're great organizations that are bringing retailers together.
We're actually working closely with district attorneys.
And retailers are working collaboratively to these.
We can't work in a silo, many of these individuals are going to multiple retail locations.
So if we can work together and show that this isn't someone coming in and shoplifting one time, they're shoplifting multiple times, multiple times in a day, going to different states, we're getting more traction on those cases.
So it's an education process for everyone involved.
But it's going to take time, and it's going to take resources and definitely collaboration.
- I mean, are we just heading towards even more of the plexiglass wave to have an associate come over and get a product off the shelf for you if we don't see a massive change in the amount of retail theft that's taking place?
MARTY ANDREWS: Well, we're seeing some retailers out there doing that and of course, that impacts that consumer interaction.
That's why people are going to retail stores, they want to be around the merchandise, they want to touch it, they want to have those interactions.
So it's a fine line of how do you get that great consumer experience, but how do you protect your product?
So there's a balancing act there.
Of course, you're working with different partners within the organization to figure out where you want to draw the line and how you want to run your organization.
- And to your point about where you want to draw the line, how does staffing account for deal with these issues?
Because you have some retailers who are like, they beef up security but some say, don't even get involved when you have something like this occurring.
How can staffing play out in terms of helping to address this issue?
MARTY ANDREWS: So staffing is important, security is important but you have to figure out, again, where you're going to draw the line in those areas.
So we want to keep people safe.
First and foremost, I think every retailer out there would say that.
So it is a different environment in a retail store these days, and we have to continually coach on de-escalation and making sure that we're not putting our people in harm's way.
So if we can educate folks that we need to stand back, we need to be safe, and then we can work that on the back end from a loss prevention standpoint where we grabbed the video and work with law enforcement and build those cases and seek prosecution.
- Do you see this changing the type of inventory that is sold in stores versus perhaps a skew that might be forced to go online only if a retailer is assuming that there could be a higher risk or assessing a higher risk towards a certain product being stolen?
MARTY ANDREWS: I haven't heard of anything specifically regards to that.
I think we're all sitting around a table and discussing what measures we're going to take.
I don't think anything is off the table.
You have to discuss it all and take a look at everything and make those best choices to run your business.
- And is there the potential for this to get worse before it gets better when you think about thieves becoming more brazen, targeting-- I've seen some data targeting warehouses and distribution center before it even gets to the retailer.
Is there the potential for that, Marty?
MARTY ANDREWS: Absolutely.
Things are happening in transit before it even makes its way to the retail store.
So the threat really starts from the point that it leaves the warehouse all the way till it gets to the retail store.
So definitely many issues along the way that have to be assessed and continuing to look for different measures and different technologies.
There's a lot of good technology providers out there that are working on this issue as well with us side by side.
- Marty, it was interesting how you were kind of beginning to quantify how it changes the customer experience.
Have we been able to really quantify the difference or the shift in a company's net promoter score even because of a change in that in-person shopping experience as a result of the changes now that have had to take place in order to curb the amount of theft?
MARTY ANDREWS: Yeah, and I think that the incident that you were talking about earlier that happened over the weekend, I saw an interview with a consumer that was talking about not feeling safe going to that environment.
So that's a scary place for us as retailers.
We have to work with the malls, we have to work with law enforcement to bring that safety and that comfort back that I can go to the mall and I can be safe and I can have a good consumer experience.
- It's a tough situation across the board.
We will have to leave it there for now.
Thank you so much, Marty Andrews VF Corporation vice president of loss prevention.
Thank you, Marty.
