Shoplifting surge scares retailers

If you hear a whistle blown in a shopping centre, chances are it’s to alert other shops in the mall to the presence of shoplifters.

So says the sales director of a large retailer which is increasingly having to manage security issues, from shoplifting to full-scale armed robberies.

The thing is, shoplifting and what retailers call “shrinkage” are a growing problem not only in South Africa but globally. There’s been a dramatic uptick in brazen smash-and-grab incidents in the US and UK, affecting retailers from discounters to upscale stores.

In August, a “smash-and-grab flash mob” swarmed a Los Angeles mall in the US and took about $100,000 worth of luxury handbags and high-end clothing by using bear spray to chase the security guards away. A similar mob-style robbery took place at Yves Saint Laurent at the Americana at Brand, a large shopping, dining, entertainment and residential complex in Los Angeles. It’s all about goods to resell, rather than food to eat.

And the numbers are mind-boggling.

Retail shrinkage came to $94.5bn in 2021, up from $90.8bn in 2020

The “National Retail Security Survey” in the US found that retail shrinkage came to $94.5bn in 2021, up from $90.8bn in 2020. According to broadcaster PBS, the National Retail Federation said its latest survey of members found that inventory losses in the US cost retailers $112bn last year, though some say this number could include internal theft by employees.

Gabrielle Fonrouge, who covers the retail industry for CNBC, says it’s often internal issues that lead to such shrinkage numbers — not just inventory lost to theft but poor inventory management, such as not knowing where all your merchandise is along the supply chain. Fonrouge believes there are many instances where companies use theft as a smokescreen to cover up underperformance or mismanagement.

Still, one of the reasons behind the big rise in shoplifting was the US decriminalisation of low-level (low-cost) offences. As a result, people steal repeatedly and in smaller amounts to avoid prosecution.

In the US, Walmart and other retailers are now putting products behind locked displays and have introduced armed guards in stores, given the impact rising theft has had on margins. Target, for example, estimates it will lose $500m in profits this year to shrinkage. It has closed stores in the US, as have retailers such as CVS and Macy’s.

The US Congress has passed regulation which requires digital marketplaces such as Amazon, eBay and others to disclose the identity of high-volume sellers.

In South Africa, crime statistics for the fourth quarter of last year and the first quarter of this year show that shoplifting jumped 20%, driven by the Western Cape and Gauteng. Store incidents have increased over the same period, which a retail industry insider says coincides with the end of Covid and a rise in unemployment. Load-shedding doesn’t have much of an impact, says the retail insider; some small-time shoplifters capitalise on the periods of darkness but it’s not material. Rather, it’s big syndicates that are causing the biggest issues and the most loss.

Locally, retailers often share information and analytics to curb the trend; as with many other aspects of local business, they have taken on the fight themselves, employing internal intelligence and security to protect their turf.

A retail industry insider says employees in one chain will often collaborate with those in another. For instance, one will take some polony for the group, another will bring the shoes. But the real big money is being lost in organised crime: robberies and burglaries. “To fight that costs a lot and causes financial losses,” he says. Many of these perpetrators are recruited in jail and are paid between R2,500 and R3,000 for each armed robbery,” he says.

In Shoprite’s latest annual report, the retailer describes stock losses (shrinkage and wastage) as “critical”. It’s invested heavily in sophisticated security and other measures to protect customers and employees in the fight against crime, says Oswald Meiring, head of group security and loss prevention.

The group says its efforts have resulted in a year-on-year decline in armed robberies and burglaries. A centralised command centre and anticrime team, set up in 2018, give the group the ability to monitor stores and vehicles, remotely trigger security devices, follow up on criminal incidents and ensure suspects are arrested.

Through its intelligence network, the command centre receives live information on strikes, protests and other incidents. In addition to tracking devices, the group installed cameras and electronic locks on trucks managed from the command centre. Trucks can be opened and closed remotely, with alarms triggered if they are stationary for a certain time, or unusual driving behaviour is detected. Since the devices have been installed, there have been no incidents in transit on these vehicles.

Shoprite has an in-house investigation team as well as data and crime analysts who use predictive and historical analyses of all crime data to identify which stores or areas should be focused on

Shoprite has an in-house investigation team as well as data and crime analysts who use predictive and historical analyses of all crime data to identify which stores or areas should be focused on. The group works closely with the police and the National Prosecuting Authority to bring about arrests. It has also employed an expert criminal lawyer to assist with prosecutions. From July 2020 to date, jail sentences totalling 1,384 years and three months — including 22 life sentences — have been imposed thanks to its actions against criminals.

TFG has a specialist internal forensics department to prevent criminal activities and bring perpetrators to justice. The team is responsible for conducting forensic investigations, fraud prevention and detection, and risk assessments.

“As with other businesses in South Africa, and given the increasing economic pressure citizens find themselves under, TFG does experience crime-related incidents, including shrinkage,” says a spokesperson.

TFG takes a zero-tolerance approach to fraud, corruption and other forms of crime or dishonesty, and has a number of countermeasures to guard against shrinkage, such as data analytics to monitor the movement of stock. “We have various controls and interventions in-store and our area managers and store managers are regularly trained in identifying and guarding against shrinkage,” says the spokesperson.

In the last two years just more than 6,000 shoplifters have been arrested and referred via court proceedings

A statement from Pick n Pay says retail crime (shoplifting and concealment) is a problem for the whole industry, given South Africa’s socioeconomic challenges.

Pick n Pay CEO Sean Summers argues it’s always been an issue but admits people “are just a lot more desperate. I think in this polarised world, people are just getting more and more angry with the establishment. There’s a feeling of ‘Sod you, I’ll just help myself’.”

Alec Abraham, senior equity analyst at Sasfin Wealth, says while much of the rise in theft is driven by cost of living pressures, “you don’t necessarily rob an LVMH store because you’re hungry”.

Abraham says criminals and staff understand the value of goods and are out to make money. The prevalence varies in different retail categories, but in recent years has probably increased by at least 50 to 200 basis points overall to as high as 2.5% of sales.

According to crime prevention and offender rehabilitation organisation Nicro, in the past two years just more than 6,000 shoplifters have been arrested and referred via court proceedings. Of those, 68% were under the age of 35.

In South Africa’s case, this is easily explained by the fact that more than 43% of people between the ages of 15 and 34 are unemployed, says Danielle Keeve, national lead for the retail section at audit, tax and advisory firm Mazars.

As it is, the October household affordability index indicates that the average household food basket on a monthly basis costs R5,297, but the minimum wage is just R4,067. Throw in monthly costs for housing, travel, health care and education and the resultant gap is clearly a contributing factor to the rise in shoplifting statistics.

Ultimately, however, it’s another cost to doing business in South Africa.

“The cost to curb this loss is taken privately through physical and security preventative measures. Retail prices are impacted as retailers attempt to recover the costs of both the shrinkage itself and the increasing costs of security. This will further impact what is already being experienced across the world as a cost of living crisis,” says Keeve.