Rising Theft in North American Retail: Self-Checkouts Partly to Blame as Retailers Adjust Amid Financial Pressures [Interview]

Retailers across North America are increasingly dealing with theft in the industry.

For example, the National Retail Federation in the U.S., recently reported that retailers lost an estimated $112.1 billion last year from theft and lost inventory.

John Crombie, Executive Managing Director, Retail Services, Canada at Cushman & Wakefield, said it’s a bigger problem in the U.S. than in Canada. He said there is a movement in the U.S. to get stricter penalties for ‘grab and go’ theft.

One issue Crombie said is that self-checkouts have grown substantially in the retail sector over the past five years. He cited a study from the U.S. indicating that self-checkout now accounts for about 55 per cent of all customer transactions, up from 2017 when it was only 36 per cent. 

“There’s been reports especially in Canada where a lot of the grocery stores using the self-checkouts, it saves money for labour costs, customers seem to like it because it’s quicker especially if it’s vacant there, but they are having problems with theft. People aren’t scanning everything,” said Crombie, who is also Marketplace Council Director for the ICSC.

According to a survey of its members earlier this year by the Canadian Federation of Independent Business, 57 per cent said they have experienced theft/shoplifting; 56 per cent have experienced vandalism/breaking and entering. And 28 per cent said they experienced vagrancy and/or encampment issues.

And according to marketing firm Leger in a recent survey, Canadians are most supportive of retailers implementing security cameras (88 per cent), electronic anti-theft alarms (85 per cent), and security guards (78 per cent). Canadians are least supportive of retailers implementing limits to the number of customers allowed in stores (32 per cent), customers needing to leave bags in a locker/with an employee while shopping (32 per cent) and/or requiring customers to show ID to make a purchase (17 per cent).

It also said that 45 per cent of Canadians think retailers are implementing the right amount of security measures to prevent theft, while 27 per cent think they are not implementing enough. Only 10 per cent think retailers are implementing too many security measures.

There’s growing number of incidents, and videos on social media, showing people simply walking into stores, particularly in the U.S., and walking out with merchandise and not paying for it. 

Recently, Dick’s Sporting Goods in the U.S. blamed shrink, theft and damaged inventory, for its poor financial results in the second quarter which saw profit drop by 23 per cent while sales were up 3.6 per cent.

“I have one retailer I’ve been working with and he’s been broken into three times and it’s not only costs associated with repairing windows. In fact, they broke through the window twice and through the roof another time. The labour costs of fixing that, the security costs while it’s broken and open, and third the insurance cost. And that’s all driving down your bottom line. It’s just an expense that you didn’t anticipate and all your prices have gone and increased up there,” said Crombie.

Many retailers have increasingly locked up merchandise in stores such as tools and electronics to prevent people from shoplifting them.

“It’s like anything in the retail industry. You want your customers to feel that they can browse and look around and feel confident that they can touch and feel the product. I mean that’s what brick and mortar is all about. You’ve got the ability to go in and see the product, feel the product, get a sense of the product from a physical perspective but if it’s all locked up it’s just an extra barrier. Are you going to encourage more e-commerce business and really take away that tactile feeling that retail’s been all about for obviously forever and a day,” said Crombie. 

“That’s a danger you have.”

Crombie said many retailers today want both exterior and interior entrances. It’s been a discussion due to the pandemic. The retailers that did better during a lockdown in the pandemic were those that consumers could enter from the exterior especially when the interiors were closed. But for the retailer it adds another issue with regards to security with more than one entrance to your store.

The issue of theft hits the bottom line for many retailers and that’s not good considering the economic challenges the industry is facing with rising costs and ho-hum sales.

“When you look at statistically, the last two months have been relatively flat,” said Crombie. “The second quarter was actually negative returns. So we had that blip in January/February which kind of really supported sales. We thought maybe it’s going to be a good year.

“The consumer has been relatively resilient. But we’re now feeling that coming into the fall, the pressures of disposable income going down because of interest rates are affecting that, mortgage payments are going up, they’re suggesting that could go upwards to 25 per cent of what they were paying. So this is just cutting into the disposable income.

“I think the Gen Z’s and Millennials are going to be the most impacted because in as much as their incomes have gone up, they’re the ones most vulnerable because they don’t have a lot of cushion.”

Crombie said restaurant spending is also curtailing. There’s a slowdown taking place.

But the luxury retail market in Canada is being driven by tourism which is back after the pandemic. 

“We’ve seen a huge upswing in travel . . . People are traveling and that has impacted the luxury spend within the Canadian market. Tourism has come. It’s come back. There’s business travel. There’s tourism travel and I think that’s been a real driver for that,” added Crombie. 

He said he has been looking at overall retail store closures this year and it’s been pretty light.

“I’ve counted about 170 store closures up to September this year. And to put it in context, usually the average is about 500 to 600 a year. So we’re tracking very low. Year 2020, the year of the pandemic, we had over 2,000 store closures, about three and a half times the average. And then there was almost nothing in 2021, about 1,400 last year but there’s so few this year,” added Crombie.

“Retailers have had the chance to cull out their underperforming stores and really I think the damage has already happened. I think that’s actually a good sign with a market showing its health. So it’s nice to see we’re not seeing quite the store closures that we’ve had in the past. I don’t expect that many to happen in the next couple of months because October, November, December are very strong months. Any retailer tries to stay open up to Christmas.”