Instead, the most commonly cited figure comes from an annual National Retail Federation survey that asks retailers to assess “shrink,” a much broader measure. Overall, the latest survey attributes about 36% of shrink to shoplifting and organized theft, 29% to theft by employees and 27% to mistakes in tracking, accounting or other errors.
The survey makes eye-popping estimates: Retailers lost $112 billion to shrink in 2022, the most recent figure. Using the given breakdown, this could mean stores lost over $40 billion that year to outside theft.
But the picture is not that clear. For one thing, the dollar value of shrink is calculated based on a percentage of retailers’ sales, and in 2022, shoppers went on a record buying spree.
The survey shows the scale of shrink has barely changed in the past decade. In 2022, retailers, on average, said shrink affected 1.6% of sales — the same as in 2020 and 2019. In other years, the average hovered around 1.4%, which at one point was reported as the lowest rate in two decades.
When the next survey is released in the coming months, it may show shrink was a substantially bigger problem last year, at around 2% of sales, according to a report by the investment bank William Blair.
Still, the analysts surmised that retailers also likely used crime as a cover for closures of underperforming locations and lackluster financial results, making up for shoppers’ tightening budgets, for example, or a glut of unpopular products.
“While theft is likely elevated,” the report said, “companies are also likely using the opportunity to draw attention away from margin headwinds,” meaning other factors that eroded their profits, such as deeper discounts or poor management of inventory.
What happened at Walgreens and Target
Walgreens and Target illustrate how opaque and complicated the question of theft can be.
In late 2021, Walgreens shut down five stores in San Francisco, citing skyrocketing organized retail crime. One of the stores appeared in a viral video of a thief loading up a trash bag while being filmed by several people, including a security guard. Later, a San Francisco Chronicle data analysis found that one of the closing stores had reported only seven shoplifting incidents that year, fewer than in 2018.
Then, in January 2023, Walgreens’ finance chief shocked the industry by saying, “Maybe we cried too much last year” over thefts. He said shrink had declined. The chain would scale back anti-theft spending and rely more on law enforcement than “largely ineffective” security companies.