UPDATE: The truth about Target

(Photo by Fatih Aktas/Anadolu Agency via Getty Images)

On September 26, Target announced it was closing nine stores "because theft and organized retail crime are…contributing to unsustainable business performance." Target said that before making the decision to shutter the stores, it had "invested heavily in strategies to prevent and stop theft and organized retail crime." But ultimately, Target claimed, those efforts failed to make those stores "successful." 

Target did not provide any data that substantiated the claim that it closed the stores due to theft. Nevertheless, the press release generated a flood of credulous media coverage from virtually every major outlet, sometimes contextualizing Target's decision as part of a larger trend afflicting many retailers. "The big box chain is part of a wave of retailers – both large and small – that say they’re struggling to contain store crimes that have hurt their bottom lines," CNN reported. "Many have closed stores or made changes to merchandise and layouts." 

On October 5, Popular Information analyzed publicly available crime data for the stores Target is closing in New York and San Francisco. This data revealed that stores that are being closed had lower levels of theft than nearby stores that have remained open. A report by the Seattle Times of the stores Target is shuttering in the Seattle area follows a similar pattern. 

Over the last three weeks, the narrative around Target's store closures has shifted. William Blair is an investment bank that manages about $61 billion in client assets. On October 25, William Blair published a report entitled, "Higher Levels of Organized Theft and Retailer Opportunism Boost Shrink Narrative." The report acknowledges that levels of theft in 2022 were elevated, but rather than an alarming trend, it represented "shrink normalization coming out of the pandemic, when temporary closures and subsequent in-store shopping restrictions led to a more dramatic decrease in shrink." The report states that retailers are emphasizing the impact of theft "to draw attention away from margin headwinds in the form of higher promotions and weaker inventory management in recent quarters."

Further, William Blair states it "believe[s] some more recent permanent store closures enacted under the cover of shrink relate to underperformance of these locations." The report raises questions about Target's store closures specifically, citing Popular Information's analysis, and suggests the company has "ulterior, more opportunistic motives." Many of "the stores closed by Target are smaller format locations, a concept the company started rolling out more in 2018." The report notes that "after making a big push into smaller format, Target has not discussed the initiative since 2020." According to the report, Target may be blaming increases in theft to "mask other issues." Walmart, the report notes, closed four smaller stores in Chicago in April 2023 and "did not blame crime or theft and rather acknowledged strategies like downsizing it (sic) footprint…underperformed expectations."

The William Blair report generated coverage that was much more skeptical of retailers' claims. "Chains are using theft to mask other issues," CNN reported on October 27, citing William Blair and Popular Information.

The report also states that "part of the reason companies are being more vocal on shrink relative to the incremental impact has to do with trying to stimulate some sort of government action." That strategy appears to be working.

Senators push for new bill based on industry data; industry says data doesn’t exist

Earlier this year, Senators Catherine Cortez Masto (D-NV) and Chuck Grassley (R-IA) re-introduced a bill that attempts to crack down on organized retail theft. Known as the Combating Organized Retail Crime Act, the bill seeks to create an “Organized Retail Crime Coordination Center” under the Department of Homeland Security. The authors of the bill claim that “organized retail crime…has been a growing concern to retailers, industry, and law enforcement.” The center, the bill says, will oversee “federal law enforcement efforts related to organized retail crime” and align these activities with state and local investigations. Its director would be appointed by the head of ICE.

Now, as retail lobbying groups intensify the pressure on Congress, Cortez Masto and Grassley are making a renewed call for the Combating Organized Retail Crime Act alongside the National Retail Federation (NRF). In a press release published last week, the office of Cortez Masto asserted that “[o]rganized retail crime costs retailers $720,000 for every $1 billion in sales – up 50 percent since 2015.” But the press release fails to mention that this statistic is from three years ago. According to the NRF, a trade association that represents the largest retailers in the county, “organized retail crime cost retailers an average $719,548 per $1 billion in sales” in 2020. After 2020, the NRF stopped estimating the cost of organized retail crime.

If this number is accurate, it would mean that losses due to organized retail crime made up 0.07% of total retail sales in 2020. This constitutes a very small fraction of the total “shrink” — an industry term for inventory losses from external theft, employee theft, damage, and administrative errors. The NRF reported that in 2020, the average shrink rate was 1.6% of total sales. This means that for every $1 billion in sales, retailers lost at least $15 million in inventory for reasons not related to organized retail crime. That’s more than 20 times the loss attributed to organized retail crime.  

The NRF’s most recent National Retail Security Survey, published in September 2023, reveals that internal issues like “employee theft” and “process, control failures, and errors” make up a majority of retailers’ shrink. In 2022, losses due to operational mistakes and errors, for example, made up 0.4% of total retail sales. This means that for every $1 billion in sales, retailers lost $4 million due to operational errors last year. 

Still, the Cortez Masto press release claims that “organized retail of (sic) crime increased over 25% across the country last year.” The Senator’s office told Popular Information that it pulled this data point from the NRF’s 2022 Retail Security Survey. But Cortez Masto’s statement is wrong. The study found that “organized retail crime incidents increased by 26.5% on average” in 2021, not in 2022. And in 2021, the year of the supposed spike in organized retail crime, the total shrink in the retail industry, according to the NRF, was 1.4% — 0.2% lower than the previous year. 

The 2021 increase was based on a survey of just 63 retailers. And whether a retailer had a significant organized retail theft problem appears dependent on whether they hired a team of people to track organized retail theft. "On average, respondents with an [organized retail crime] team reported 3.3 times the increase in [organized retail crime] incidents compared with those without an [organized retail crime] team," the NRF reported.

A spokesperson for the NRF told Popular Information that the group no longer provides estimates for the cost of organized retail crime to retailers. The group says it stopped attempting to quantify the problem because it believed the estimates were too low. "One of the reasons for moving away from reporting dollar figures is that the reported dollar value of [organized retail crime] probably represents the tip of the iceberg and may greatly understate the problem," the spokesperson said. The NRF claims "there is systematic under-reporting of [organized retail crime] activity across the industry." The spokesperson also emphasized that "an important part of the impact of [organized retail crime] is unrelated to the dollar loss," citing an alleged increase in violence.