The leading retail lobbying group has walked back a key claim about shrink, or inventory losses from various sources, after a news investigation revealed that the evaluation was incorrect.
The Friday retraction from the National Retail Federation underscores just how difficult it’s for the industry to accurately measure the impact and source of inventory losses, whilst it uses that data to lobby lawmakers to pass stricter laws that crack down on theft.
In April, the NRF published a report about organized retail crime along side private security firm K2 Integrity that claimed “nearly half” of the estimated $94.5 billion that retailers said they lost to shrink in 2021 “was attributable” to ORC.
That claim contradicted the NRF’s own annual shrink survey that showed all external theft – not only incidents related to organized groups – accounted for just 37% of those losses in 2021.
Typically, organized retail crime refers to incidents that involve coordinated groups of people that shoplift from stores after which resell the items either online or in informal street and flea markets. Retailers often point to it as one in all the most important issues affecting their stores, associates and profitability, and are mounting a concerted lobbying campaign to persuade state and federal lawmakers to pass laws that might bring harsher penalties for organized theft offenses.
External theft, however, includes any goods stolen by someone who doesn’t work for the retailer. It includes petty shoplifting incidents, which retailers often say they will not be as concerned about.
The NRF retracted the claim after an investigation from Retail Dive published at the top of November revealed the discrepancy. NRF spokesperson Mary McGinty told CNBC it was based on U.S. Senate testimony given in 2021 by Ben Dugan, a current asset protection executive at CVS Health and the previous president of advocacy group the Coalition of Law Enforcement and Retail.
In his testimony, Dugan said that ORC accounted for $45 billion in annual losses for retailers, in keeping with the coalition’s estimates.
“The statement that ‘nearly half of… [shrink] was attributed to ORC’ was a mistaken inference made by the K2 analyst linking the outcomes of the NRF NRSS survey from 2021 and an assertion by Ben Dugan from CLEAR in 2021 Senate testimony,” McGinty told CNBC.
The NRF modified the report and removed the claim, McGinty said. In an announcement, CLEAR said it stands by its Senate testimony and the estimate that it gave.
“This estimate was based off loss data collected directly from retailers and federal and state law enforcement agencies involved within the difficult work of defining and dismantling massive criminal networks targeting our communities,” CLEAR said. “Equivocating over a number we acknowledge is an estimate misses the purpose and is counterproductive to CLEAR’s mission to guard consumers and businesses from the very real harm being attributable to Organized Retail Crime.”
McGinty said that the NRF “stand[s] behind the widely understood incontrovertible fact that organized retail crime is a major problem impacting retailers of all sizes and communities across our nation,” but acknowledged how difficult it’s to assemble data on theft.
“At the identical time, we recognize the challenges the retail industry and law enforcement have with gathering and analyzing an accurate and agreed-upon set of information to measure the variety of incidents in communities across the country,” McGinty said. “The fact is retailers and law enforcement agencies proceed to experience every day incidents of theft, partner in large-scale investigations and report recoveries of stolen retail goods into the tens of millions of dollars.”
The NRF’s studies are one of the best guess the industry could make about how shrink affects firms. The media widely reports on them, and lawmakers use them as evidence after they call for stricter laws and regulations.
However the flawed data reinforces skepticism concerning the claims that retailers and their powerful trade associations make about organized retail crime, because even the industry’s own data is difficult to trust.
The NRF’s retraction is not the primary time the firm published data that later ended up incorrect.
In a previous NRF shrink survey, it reported that retailers saw $94.5 billion in inventory losses in 2021. It calculated that by applying the typical shrink rate of 1.4% to preliminary retail sales data reported to the U.S. Census Bureau that yr.
When the U.S. Census later published its final retail sales number for the yr, those figures were lower than estimates, making shrink losses about $600 million lower than what the NRF originally reported.
When CNBC brought this discrepancy to the NRF’s attention earlier this yr, the firm didn’t revise the info point in its survey. It did use the right figure in its 2022 report when it compared that yr’s losses with the prior years.
McGinty noted that the Census “revises after which revises many times,” however the firm doesn’t revise its published numbers “since it is a ‘cut-off date’ number.”
“It isn’t flawed data,” McGinty said. “It’s data based on one of the best available information on the time.”
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