Solutions for Hangry Shoplifting
IIt seems like everywhere you turn your buck doesn’t get as much bang as it used to. If you haven’t commented on the price of milk yet, you have probably heard someone else complain about it as U.S. inflation hit a high not seen for 40 years.
In June 2022, the U.S. Consumer Price Index peaked at 8.6 percent compared to June 2021. This was the largest 12-month increase in inflation since December 1981, according to the U.S. Bureau of Labor Statistics.
In a March 2022 article for the National Retail Federation (NRF), Jack Kleinhenz—chief economist for NRF—noted that while price increases are expected to slow down during 2022, there is a danger that consumers might expect inflation to continue.
The U.S. Federal Reserve (Fed) has moved to dampen inflation, with its most recent attempt resulting in the largest interest rate hike in the United States in almost 30 years. Even though it raised its interest rate by one-quarter of a percentage point in March and half a point in May, the Fed increased the rate again by three-quarters of a point in mid-June. The fear, of course, is that if these rate increases prove to be too aggressive, they might slow down the economy too much and trigger a recession.
And while consumers are seeing price increases everywhere—from fuel to groceries to rent and everything in between—retailers, especially those in food service industries, are feeling the impacts, too. In May 2022, the NRF estimated that prices for grocery and beverage stores increased 7.1 percent unadjusted from the previous year.
The recently inflated food prices are partly due to supply chain issues, which were either triggered or exacerbated by the COVID-19 pandemic. But another cause comes from the 2007 Renewable Fuel Standard (RFS), according to the NRF. A federal program produced by the 2005 Energy Policy Act, the RFS reduces greenhouse gas emissions by earmarking a percentage of certain food crops, like soybeans, for conversion into ethanol, biodiesel, and renewable diesel fuels instead of for food production. These biofuel mandates reduce the amount of crops that can be used for food products like vegetable oils.
Retailers have seen increases of the average loss from shoplifting and robberies alongside rising prices. In its 2021 National Retail Security Survey, published in August 2021, the NRF reported that about 64 percent of loss prevention professionals indicated that organized retail crime (ORC) has become more of a priority within the last five years.
While many ORC groups went after designer clothes (making up 22.2 percent of goods stolen by ORC gangs) or other high-dollar products, items available in grocery stores took up more than half of the list of the most-reported items stolen by these gangs.
Amount recovered from U.S. retail shoplifters when no apprehension was made in 2021.
This included laundry detergent (16.7 percent), razors (14.8 percent), pain relievers (13.0 percent), baby formula (11.1 percent), teeth whitening strips (11.1 percent) energy drinks (9.3 percent), deodorant (7.4 percent), and contraceptives (5.6 percent). Stolen items are later resold by ORC groups, often in online marketplaces.
“Those types of things that are easily transportable, have a stable shelf life—they are used as commodity goods for resale and by organized crime groups,” explains Christian Beckner, vice president of retail technology and cybersecurity for NRF.
From its survey, the NRF found that about 69 percent of all respondents reported an increase in ORC activity during the past year. “They cited reasons such as COVID-19, policing, changes to sentencing guidelines, and the growth of online marketplaces for the increase in ORC activity,” the NRF found.
Beyond ORC groups, COVID-19 has been linked to increased thefts in supermarkets and grocery stores. In 2020, people found themselves facing high unemployment rates and significant economic uncertainty. While some shoplifters may have snuck away with an avocado, a wedge of Manchego cheese, or other goods on impulse, the pandemic also increased theft at supermarkets for another more fundamental reason.
“Hunger is chronic, at levels not seen in decades,” The Washington Post reported in December 2020, estimating that about 54 million people in the United States would struggle with hunger that year. “The result is a growing subset of Americans who are stealing food to survive.”
In the United Kingdom, law enforcement is preparing for an increase in crime as the cost of living increases—anticipating that as more people go hungry, food thefts may become more common.
Andy Cooke, chief inspector of constabulary and chief inspector of fire and rescue services for the UK, advised law enforcement in May 2022 to use discretion when dealing with thieves or shoplifters who were stealing to keep from going hungry.
DIY Checkouts, DIY Fraud
Although it is not a new source of shrink, thefts—whether from hungry shoppers or ORC members—have reportedly increased around self-checkout (SCO) lanes.
SCO machines were first installed in 1992 and present an element of ease for some consumers while creating another avenue for fraud, enabling various methods to avoid paying higher prices for premium products.
Price switching—where a produce lookup code for a cheap item, like bananas, was entered instead of the code for the more expensive item actually on the scale—became so common by 2018 that the move is called “the banana trick,” according to The Atlantic.
By January 2021, price switching had become one of the most popular types of SCO fraud, according to Jack L. Hayes International, a loss prevention consulting service provider.
One way that stores are addressing the banana trick and other theft methods is with specialized training for staff. Store employees are taught by loss prevention specialists how to spot signs of SCO fraud, such as when a customer avoids bagging items and instead places scanned items back in his or her cart, according to William Alford, co-founder and CEO of Circle the Wagons Group Purchasing Organization, which provides independent retailers with not for resale commodities and services.
Well-trained grocery clerks can also use regular customer interactions to double-check for common fraud attempts. For example, while a grocery store attendant is helping with an error message on the SCO lane’s screen, he or she is also making sure that the customer’s rib eye wasn’t rung up using a banana’s price code. Plus, Alford notes, having an employee to assist with SCO lanes reintroduces a point of customer service and a chance to minimize friction for customers.
Other stores, including Target and Walmart, have implemented security cameras that monitor customers as they swipe items across the SCO scanner. While the cameras themselves cannot outright stop someone from stealing, they help loss prevention specialists identify thieves.
Along with cameras, Walmart also invested in other technology solutions to track instances of theft throughout its stores. In 2019, the retail giant confirmed to Business Insider that it used a surveillance program—which Walmart calls Missed Scan Detection—to monitor for, and sometimes correct, checkout errors both at SCO lanes and staffed registers.
Aside from the cameras, another part of Missed Scan Detection is technology that can alert attendants when theft may have occurred. For example, part of the program identifies when an item in a cart moves past a scanner without actually being scanned.
Apprehensions Drop and Aggression Rises
“When it comes to shoplifting, the survey showed many retailers moved away from apprehensions in 2021 and focused more on recoveries,” said Mark R. Doyle, president of Hayes International, a global security and intelligence consulting firm, citing his firm’s 34th Annual Retail Theft Survey.
This survey, published in May 2022, echoed the trends found by the NRF: while shoplifting increased by an estimated average of 26.6 percent in 2021, apprehensions were down partly because of “the pandemic environment, staff safety, lower police response, and higher risks.”
Increasingly, “what we’ve seen is that organized retail crime individuals and groups are coordinating with each other to steal things for resale,” Beckner says.
There is no uniform national threshold for felony theft, leaving U.S. states to determine their standards—typically between $1,000 and $2,500. Since 2000, more than 36 states have increased their minimum thresholds, with some criminal justice advocates claiming that these increases ensure that punishments are fair. Some state legislators support these changes to free up space in prisons for people convicted of more serious crimes.
Training Retail Employees to Be Better Bystanders
Retailers want staff trained in effective customer service and improved memory so they can be effective witnesses.
Historically, raising the felony theft threshold has no significant impact on overall larceny rates, which includes shoplifting, according to a study published in 2017 by the Pew Charitable Trusts.
“States that increased their thresholds reported roughly the same average decrease in crime as the 20 states that did not change their theft laws,” the study, The Effects of Changing Felony Theft Thresholds, found. Instead, “…experts attribute the nation’s sustained drop in violent and property crime rates to a host of factors, including better policing; the increased incarceration of certain repeat offenders; an expansion in private security personnel; an aging population that is less prone to criminal behavior; and technological advances.”
But that trend for retailers may be a thing of the past thanks to ORC gangs that take advantage of changes in technology, employees trained to avoid confrontation, and changes in those thresholds, according to Beckner.
“We’ve seen in the past when that threshold goes higher, some of the organized criminal activity that’s related to shoplifting knows what that line is,” Beckner says. “When they send people into stores, there’s sort of an effort to stay below that.”
And when stores reach out to local law enforcement about an incident involving shoplifting, the response from officers or departments can vary.
“The police are not making a lot of apprehensions unless they are serious crimes, so shoplifting goes way down on the totem pole. …The criminal justice system in most cases is not taking it to a place where it’s creating a deterrent,” says Michael Keenan, CPP, managing director of retail loss prevention at TAL Global.
Incidents of theft—unless they meet that felony threshold—are unlikely to produce an arrest or successful prosecution, according to Keenan. And without a deterrent, thieves have become bolder and even unafraid of confrontation. Instead, theft becomes another cost that retailers must eat.
Retailers are “already paying more for labor than ever before—not just with minimum wage increases, but the fact that you’ve got to be competitive. It puts a lot of pressure on people who are just trying to run a low-margin business,” Keenan says.
And inflation further compresses margins for grocery retailers, explains Alford. At the end of produce and food products’ supply chain, “supermarkets are the final conduit, and we probably take the lowest share of that,” Alford says. “Profit margins are anywhere from 1 to 3 to 4 percent. If you’re 4 to 5 percent, you’re one of the best in the nation.”
The increasingly risky environment has repercussions that extend well beyond a company’s bottom line into actual threats against employees and customers.
“The reality is that if theft goes unchecked and—in these inflationary times—people start stealing more, then these companies can’t stay in business,” Keenan says.
But if a store has cultivated a relationship with local law enforcement officers, and even educated them on the importance of arresting repeat offenders or those suspected of working for an ORC group, it improved the chances of a response from police and recovery of funds. Keenan, who has consulted on loss prevention for several different retailers, finds that such relationships with law enforcement are extremely helpful.
National grocery chains with loss prevention teams can illustrate the scope of the issue for law enforcement, explaining how ORC gang members will travel from store to store and city to city to initiate the same theft in various retail environments, according to Beckner.
“Either you have a loss prevention team that works with local (law enforcement) and gets support, or you sometimes do have police departments that do understand. Most of the time, it’s really the work on the part of the retailer to create a partnership with the police so they’ll come in and handle their cases,” Keenan says.
In building those relationships, loss prevention teams can also illustrate to law enforcement in a similar way as when they train other store employees. When Alford used to explain shrink in training sessions, he would reframe the issue, asking his employees to consider another perspective to theft.
“How much in sales do we have to do to make up for that $1 item that just walked out the door? We have to have $100 in sales just to make up for that $1 loss,” Alford says. “Trying to make everyone understand the volumes of sales that we have to do to make up for that shrink was one of my big challenges during my career.”
In 2021 retailers increasingly turned away from apprehending shoplifters, and instead focused their attention on recoveries—
resulting in a 9.9 percent year-over-year increase in recovery dollars, according to the Hayes International survey. This translated into more than $240 million recovered in 2021 from apprehended shoplifters and dishonest employees.
“Dollars recovered from shoplifters where no apprehension was made ($339 million) increased an astounding 51.1 percent in 2021,” the survey said.
Part of the decrease in prioritizing apprehensions came from a desire to decrease confrontations for the retailers’ employees, partly kicked off in 2020 as the COVID-19 pandemic emphasized the importance of social distancing. Some customers disagreed with mask or vaccine mandates, and sometimes those disagreements escalated into violent or even deadly incidents.
Based on gun incident and fatalities data from the Gun Violence Archive, Guns Down America found that between 1 January 2020 and 14 May 2022 there were an estimated four shootings per week at supermarkets.
“The increasingly risky environment has repercussions that extend well beyond a company’s bottom line into actual threats against employees and customers,” the NRF reported. NRF survey respondents said ORC groups were more aggressive and violent than in prior years.
In late 2021 and early 2022, so-called flash robs became a more common occurrence: several people quickly enter a store and—sometimes violently—grab as many items as possible before making a getaway. Fast but organized, these thefts are a recent evolution of ORC groups that have targeted department stores, as well as local pharmacies and big box stores.
Alford notes that larger chains have implemented a policy shift moving away from attempting an apprehension. Instead, retailers want employees to work on preventing potential thefts and reporting them to law enforcement when they do occur.
Apprehensions pose another risk for grocery companies: anyone with a smartphone can livestream a market employee diving after a thief trying to make off with food. And with food insecurity a greater presence from the recent combination of COVID-19 and inflation, such videos are unlikely to place companies in a positive light.
“If there’s some negative loss prevention incident that goes viral, it could actually impact the reputation of the organization, which could ultimately impact your sales,” says Keenan. He adds that it’s likely that loss prevention and asset protection departments for stores were scaling back on apprehensions even before recent inflation due to this concern.