Target Pushes Back Against Retail Theft Epidemic: Bold Strategies Show Promising Results
In a retail landscape increasingly marred by rising crime and theft, Target is standing its ground and achieving significant progress in its fight against one of the industry’s most pressing challenges—inventory shrinkage. Recent statements by Target’s Chief Financial Officer and Chief Operating Officer, Michael Fiddelke, highlight a noteworthy achievement: the company is making headway in curbing the damaging effects of retail theft, a scourge that has been plaguing businesses nationwide.
On a call with reporters, Fiddelke shared that Target has managed to hit a crucial milestone in its battle against shrinkage—a term encompassing losses due to theft, damage, and poor record-keeping. “Inventory shrink was one of the tailwinds to profit in the quarter,” Fiddelke noted, “and as we stepped into the year, our aim was to have shrink plateau, so to improve from the deterioration we’ve seen over the last couple of years, two quarters in—we’re achieving that and then some.”
This success marks a significant turnaround for Target, which had seen its profits battered by the relentless tide of theft in recent years. In 2022 alone, shrinkage cost the retail giant a staggering $700 million, with the problem growing by over $500 million last year compared to 2022. From 2019 to 2023, these losses collectively reduced Target’s operating margin rate by a painful 1.2 percentage points. But now, with its second-quarter report showing a 28.9% gross profit margin—beating estimates and up from 27% a year ago—Target seems to be regaining its footing.
However, this victory is far from being solely a product of good fortune. Target’s success in curbing shrinkage has been driven by a comprehensive, multi-pronged approach that includes collaboration with law enforcement, strategic store closures, and investments in technology and security measures.
One of the most crucial elements in this strategy has been Target’s partnership with local, state, and federal officials. Fiddelke emphasized the importance of these collaborations in the company’s success. “The things that we feel good about are the progress we’re seeing in our partnerships at the federal and state and local level,” he stated. These partnerships have been instrumental in addressing the root causes of organized retail crime, a growing threat that has impacted retailers across the country.
Despite these advancements, the battle is far from over. Target remains vigilant, continuing to adapt its strategies to further mitigate the impact of theft. A key aspect of this ongoing effort has been the difficult decision to close nine stores at the end of October 2023. These closures included locations in high-crime areas such as Harlem, New York City; Seattle; San Francisco; Oakland; and Portland, Oregon. The company made it clear that these closures were necessary to protect both its employees and customers. “We cannot continue operating these stores because theft and organized retail crime are threatening the safety of our team and guests, and contributing to unsustainable business performance,” Target said in a statement at the time.
In addition to closing stores, Target has implemented a range of other measures to combat theft. The company has expanded the use of locked cases for high-theft items in stores most affected by organized crime. This move, though not without controversy, has proven effective in deterring would-be thieves. Target has also invested in additional security personnel, both in-house and through third-party guard services, while providing training for store leaders and employees to help them de-escalate potentially dangerous situations.
Moreover, Target is exploring technological solutions to enhance its defense against theft. The company has plans to collaborate with the investigations division of the U.S. Department of Homeland Security to develop cutting-edge cyber defense tools. These tools are expected to provide Target with the ability to better analyze and respond to fraudulent activities and other criminal threats.
Target’s success has not gone unnoticed by other major retailers, who are also stepping up their efforts to address shrinkage. Walmart (WMT), for instance, has seen improvements in its core merchandise mix, with CFO John David Rainey reporting a “benefit from improved shrink in the quarter.” Similarly, Dollar General (DG) has taken the bold step of removing self-checkout from 12,000 of its stores, a move aimed at reducing theft and improving customer engagement.
Meanwhile, TJX Companies, Inc. (TJX), the parent company of TJ Maxx, Marshall’s, and HomeGoods, has introduced body cameras for its loss prevention associates. This initiative is designed to deter would-be thieves by making them aware that their actions are being recorded. “When somebody comes in, it’s sort of—it’s almost like a de-escalation where people are less likely to do something when they’re being videotaped,” explained TJX CFO John Klinger.
As retailers across the nation grapple with the challenges posed by theft and organized retail crime, Target’s success story provides a blueprint for how to fight back effectively. While the road ahead remains fraught with challenges, the company’s proactive and multifaceted approach demonstrates that with the right strategies, it is possible to turn the tide against this growing threat. For now, Target’s progress offers a glimmer of hope in an industry under siege, showing that determination and innovation can indeed pay off.
