As Target Closes Stores, H&M Looks to Tech to Stop Retail Theft

The intersection of technology, social dynamics and economic factors has created an environment where theft — both individual and organized — has proliferated. And H&M is the most recent victim to grapple with the mounting challenges of widespread retail theft in the United States.

As per reports, CEO Helena Helmersson announced that the fast fashion brand is intensifying security measures across its stores due to the escalating issue of shoplifting, which is affecting the entire industry.

The company is actively developing fresh strategies to address this issue, as previously highlighted by H&M CFO Adam Karlsson during a press briefing, as reported by Reuters. Karlsson remarked, “It is an increasing problem in many markets.”

H&M is not alone in confronting the issue of shoplifting. In fact, just this month, Inditex, the corporate parent of Zara, disclosed ongoing initiatives to enhance a novel anti-shoplifting system. As reported by Bloomberg, certain employees had raised concerns with management, suggesting that this technology could unintentionally encourage theft rather than deter it.

The retailer aims to replace the traditional hard plastic security tags on clothing items, which employees discovered were easily detachable, with tiny RFID chips.

Growing Problem

Last month, Target revealed plans to shut down nine of its stores in significant U.S. urban centers. The company cited the rationale behind this decision as unsafe working conditions for its employees and an “unsustainable” business environment.

“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. “We know that our stores serve an important role in their communities, but we can only be successful if the working and shopping environment is safe for all.”

In late August, PYMNTS reported that the matter was consistently raised during recent earnings calls by retailers such as Target, Walmart, and Home Depot.

Brian Cornell, Target’s CEO, articulated the retailer’s struggle in confronting “an unacceptable amount of retail theft and organized retail crime” on August 16. This statement echoed a similar one he had made in November.

Target’s Chief Financial Officer, Michael Fiddelke, stated that the loss of merchandise led to a decrease of $400 million in the retailer’s gross profit for the year.

“Shrink in the second quarter remained consistent with our expectations but well above the sustainable level where we expect to operate over time,” Cornell said during the Q2 earnings call.

John Furner, the CEO of Walmart US, mentioned that shrinkage has experienced a slight increase this year, following a rise in the previous year. He also highlighted that the problem varies across different regions of the country.

Home Depot recognized that its profit margins were adversely affected by retail theft. During the second quarter, Home Depot’s gross margin stood at 33%, marking an 8-basis-point decline compared to the previous year. This reduction was primarily attributed to shrinkage.

“Shrink has been a consistent pressure over the last several quarters and even the last few years. It’s something we’re tackling every day,” Home Depot CFO Richard McPhail said on the company’s earnings call.

Read more: Home Depot: Consumers May Not Be Spending Big, but They’re Still Remodeling

Retail Crime Making Headlines

On Thursday (Sept 28), in Philadelphia, groups of individuals unlawfully entered retail stores in the early hours, taking merchandise. This occurred despite an escalated police presence that failed to halt the ongoing looting spree that had started the previous night. Initial reports of break-ins began shortly after protesters had dispersed from a peaceful gathering at City Hall, where marchers called for justice for Eddie Irizarry, who was shot and killed by a Philadelphia Police officer last month.

The two-night rampage, resulting in multiple arrests on Wednesday and Thursday of last week, specifically focused on an automotive dealership, an Apple electronics store, liquor shops and various other retail establishments. In the aftermath of these break-ins, local news reports stated that all state-operated liquor stores in the city were closed indefinitely.

The thefts continued on a reduced scale during the early hours of Thursday morning, leading to the apprehension of just six individuals connected to eight new cases of looting, according to the Philadelphia Police Department.

Based on data gathered in 2021, as indicated by the National Retail Federation’s (NRF) National Retail Security Survey, the issue of retail shrinkage amounted to nearly $100 billion for the industry. This figure is double the $45.2 billion reported in 2015. These concerns extend beyond mere shoplifting and encompass organized retail crime as well as employee theft.

The issue has escalated to include incidents of violence.

“During the first five months of this year, our stores saw a 120% increase in theft incidents involving violence or threats of violence,” Target’s Cornell said.

Adding to the problem, Marq Claxton, a former New York City police officer and the director of political affairs and public relations at the Black Law Enforcement Alliance, underscored that the increase in “successful outcomes for the thieves” has intensified the situation. Given this situation, Claxton cautioned that thieves are progressively turning to more violent, forceful and frequent actions, often involving larger groups of individuals.

Towards the end of August, culprits successfully made off with approximately $300,000 worth of goods during a “flash rob” incident at a Nordstrom store in California.