Inflation, rising interest rates, and bank failures are enough to make business leaders wake up in a cold sweat. Adding to the parade of horribles: crime. This month, Whole Foods executives abruptly closed their flagship store in San Francisco due to safety concerns. Before that it was Walgreens shuttering five stores in the Bay Area as well as Walmart and Home Depot flagging the drag of organized retail theft on their bottom lines.
So, what are policymakers or the public to make of a problem that the National Retail Federation estimated cost $94.5 billion in 2021 alone? Take industry and critical claims with a grain of salt, look at more than just trendlines—whether up or down—and invest now to save later.
While industry statements and numbers are clearly eye-popping, the extent of the problem is a bit blurrier. Since it’s not typically under the control of any given business, crime makes for a convenient patsy for businesses trying to explain away poor outcomes. After facing criticism, Walgreens, for example, recently admitted that while crime is a significant issue for its stores, it had overstated the magnitude of the problem.
These kinds of data points and receding crime in many places have led some to rush to declare “nothing to see here” and cast corporate decision-making as overreactions. Others have responded by picking other data points indicating rising crime or pointing to the fact that crime is typically underreported, especially in the face of indifferent local authorities, to justify these business moves.
But there’s no need to get into the weeds on the reasonableness of corporate decisions to reveal the far-reaching, yet typically hidden, costs of even low-level crime. The National Retail Federation’s estimates, for instance, could be wildly off base and it would still be a problem measured in the tens of billions. This will remain true regardless of whether the amount is headed a little higher or lower in the coming years.
Within these nationwide losses exist more acute shocks that may well shutter a store, potentially depriving a community of jobs and access to particular goods. Even for those that remain open, the losses inevitably bleed out into the community as customers pay higher prices, a kind of crime surcharge that companies pass on. One way or another, the bill comes due, and quality of life suffers.
This is why even relatively minor transgressions like shoplifting still frequently merit some kind of official response.
Yet so too do the costs of incarceration, especially when jail is the default response to minor theft and other low level, nonviolent offenses. If governments spend tens of thousands of dollars to lock someone up for shoplifting a few hundred dollars worth of merchandise, they just increase the financial toll retail theft already takes on the tax paying community. Diversion, probation, and other more targeted sanctions are often more successful interventions at a fraction of the cost.
Instead of fruitlessly trying to scare away prospective shoplifters with lengthy sentences, the trick is improving detection and ensuring any intervention is rapid. This is hard to pull off, however, when police are understaffed and courts are backlogged—a situation in which authorities understandably restrict scarce resources to more serious offenses. Private companies can fill some of this void through loss prevention efforts, but not all.
Although stores can make significant headway against most run-of-the-mill shoplifters, law enforcement is typically necessary to handle their more serious brethren: organized retail theft operations. The criminal organizations behind these coordinated strikes at retail establishments frequently target numerous stores, potentially in multiple jurisdictions, and can overwhelm any individual store caught in their crosshairs. Law enforcement agencies can shut them down, but only if they have the staff required to support complex investigations.
New funding is always a daunting prospect for policymakers, but if they can find the resources to properly outfit our justice system, they will quickly find that public safety’s benefits tend to compound. Spending a little today will help ensure prosperity tomorrow.