Will persistent theft compel Walmart to raise prices or close stores?

Discussion
Photo: Getty Images/artran
Dec 07, 2022

Walmart CEO Doug McMillon yesterday told CNBC that his company has a growing theft problem.

Mr. McMillon said that theft has reached levels that are “higher than what’s historically been” the case for the retailer. “If that’s not corrected over time, prices will be higher, and/or stores will close,” he said.

Walmart’s CEO said the company has put safety and security measures in place to address theft. He said that “local law enforcement being staffed and being a good partner” is part of the response needed to curtail the frequency with which goods are illegally walked out of stores.

In response to a question about laws that make it more difficult to prosecute shoplifters, Mr. McMillon said that laws and practices vary by location and that the retailer would benefit from greater “policy consistency and clarity” so that it would be able to make  capital investments where they make the most sense in thwarting thieves.

Walmart’s McMillon also offered a nuanced explanation of how inflation is affecting consumers in the CNBC interview.

“It’s probably helpful to break that [inflation] down into different categories. Fresh food is more volatile, it fluctuates more, so today’s beef prices are down and chicken prices are still high. Produce prices are relatively low relative to what they were before,” he said. “Dry grocery, processed foods and consumables are where the inflation is most stubborn. Double digit inflation rates have been around for a while and it looks to us like they’re going to be with us for a while. So that’s a primary area of focus for us — trying to come up with creative ways with our suppliers to get prices down. Customers choose private brands in those environments more often.”

Inflation, he said, was less of a problem in general merchandise categories such as apparel, sporting goods and toys where “prices have come down more aggressively.” Mr. McMillon said.

“We’re still inflated but we’re not inflated nearly as much as we are in the other categories,” he said. “So when you think about what’s happening, families are choosing when they buy their big basket of things that they need all the time to look for value. Many of them are coming to us for those big food and consumables baskets, and then they’re being selective on general merchandise.”

DISCUSSION QUESTIONS: Do you see Walmart raising prices or closing stores in some areas in response to increasing theft? Where do you expect the chain to make the greatest progress over the next couple of years — cutting theft or reducing prices?

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Braintrust
"A more holistic approach – including local law enforcement and community governments – will be required to address this effectively."
"Without a doubt, retailers will need to amp up investments in theft-thwarting technology in 2023."
"Large retail stores are organized chaos; there are many variables and only a few of them are in control of the store."

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33 Comments on "Will persistent theft compel Walmart to raise prices or close stores?"


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Neil Saunders
BrainTrust

If local authorities don’t get a grip on shoplifting – and that means properly prosecuting and punishing those who are caught – this will remain a growing problem. And that will lead to retailers simply hiking prices or closing stores to compensate – as some of the drugstore chains have already done. All too often shoplifting is seen as petty or unimportant crime. It’s not. It has consequences. In October, a North Carolina Home Depot employee was shoved to the ground by a shoplifter. He never recovered from his injuries and died last week.

Brent Biddulph
BrainTrust

Neil — sorry, but it’s not up to “local authorities” — it’s the retailers responsibility.

Do you think we need to shift law enforcement to sitting in retailer parking lots to take care of this, versus handling mass shooting/domestic terrorism investigations, domestic violence, traffic infractions, school and neighborhood patrols, etc.?

This question poses a false choice to close stores or raise prices. Walmart and other retailers have cameras all over their stores and parking lots — they need to better enable their own loss prevention teams using analytics and computer vision first. This technology exists today.

If retailers decide to raise prices or close stores, that is not a local law enforcement or “authority” failure.

Neil Saunders
BrainTrust

I am afraid I disagree, Brent. Retailers certainly have a responsibility to prevent and to catch shoplifters, however, other than report and hand over criminals to the police they have no authority to prosecute for the crime. That is the job of and duty local authorities. Unfortunately, too many — of all political shades — have simply given up. When you have bodies like the Manhattan District Attorney’s Office saying that prosecuting a serial shoplifter is a waste of resources, we have a problem. Being soft on crime begets more crime.

Brent Biddulph
BrainTrust

Generalization of “local authorities'” responsibility is what my reaction is — not prosecution as you now suggest as your point. And that can agree to a degree with your POV. However, that is not the headline here — fraud prevention and “theft” is. That involves overstressed public safety (police) to step in and “collect” shoplifters. Again — prevention is the key, and that is a retailer’s responsibility to help remove burden and costs for all — the retailer and public tax-paying citizens.

Neil Saunders
BrainTrust

That was always my point which is why my first comment specified: “…and that means properly prosecuting and punishing those who are caught.”

I completely agree with you on prevention. However, there is a growing problem of retail theft — from both individuals and organized gangs — and not all of that is down to retailers. Police and authorities have to do their part by sending a message that such crime will not pay and there are consequences for it!

Brent Biddulph
BrainTrust

Agree with that — just look at all the smash and grabs (e.g. California) to punctuate the point. Scary.

Lee Peterson
BrainTrust

Ahh, the magic words: closing stores — now coming from a behemoth. Sure, theft is bad, it especially has been these last few years. So here’s the plan: if you have a theft problem, just tell the legit customers they’re going to have to go online and have it delivered (i.e.: store as a warehouse), and blame the “bad few” that steal. The reality though is, they’re going to have to close stores anyway. And sure, theft is a part of the cost problem — but not as much as operations is. Think of it: labor, inventory, maintenance and just plain keeping the lights on when in fact, you don’t have to. I’d say read between the lines on this one.

Paula Rosenblum
BrainTrust

Agreed. This is one way to keep closing stores (a natural part of the retail lifecycle) from sounding alarms.

David Spear
BrainTrust

It’s so unfortunate that our country is witnessing out of control theft at retail stores. This is an issue that needs to be addressed by law enforcement, communities and the retailers if correction is going to happen. At a minimum, I’d argue that more punitive actions should be instituted. I think it’s fair to say that retailers have tried numerous solutions to curb theft, but it continues. Once it crosses over a certain percentage, it should not surprise anyone that senior management makes the decision to close a store. It saddens me to the core that in the next couple of years, Walmart will make more progress in reducing prices than cutting theft.

Paula Rosenblum
BrainTrust

I think they’ll close dicey stores. Raising prices punishes everyone for the sins of the few. Walmart has a lot of stores. If particular ones are the biggest problem, close them — at least for a while. Then let peer pressure change behavior.

Rich Kizer
BrainTrust

Will persistent theft compel Walmart to raise prices or — hire more staff to slow theft? Every retailer knows it takes observation to determine where theft areas are most frequent. The answer: Raise prices? NO. Get associates training and then implement them to areas of loss. Think about it: Raise prices and lose customers. I hate to say this, but these problems come with the territory.

KarenBurdette
Guest

If inflation doesn’t get resolved, I can see them raising prices where theft is lower and closing stores where theft is heavy. Mr. McMillon did say “and/or” in his quote so I truly think they will make decisions based on what happens with inflation and at the local level. The reason I say this is there are many families in survival mode right now and when I go to my local Walmart to buy the protein bars I actually like (Walmart is the only one that carries them in my market), I often find the shelves ravaged. Boxes are torn open on one end and protein bars are missing so a box of 6 is now a box of two.

Scott Norris
Guest

Which also suggests they don’t have enough staff to properly front merchandise and keep aisles stocked — and inadequate staffing is perhaps the single greatest factor in growing theft, as well as community poverty.

Jeff Sward
BrainTrust

Walmart is calling out the problem because they have the voice and the platform to do it. And they have the resources to take action. But a lot of retailers don’t have either the voice or the resources. Local law enforcement has to step up. It must become known that there will be consequences. Lots of communities would have a tough time with higher prices much less dealing with store closures.

Ken Morris
BrainTrust

It’s highly unlikely that Walmart will close stores because of theft problems. I can’t see how that makes any sense economically. So, I see a couple of ways that Walmart can deal with theft which, left unchecked, could eventually lead to stockouts and shortages. With fraudulent returns running at 10 percent of all returns, Walmart should implement serialized returns, leveraging RFID. Serialized inventory makes every item sold unique so that thieves can’t return what was not bought in a Walmart. They could also implement RFID-enhanced LP, leveraging gates and video to capture theft on camera. Thieves will steal from someone else if they are being filmed.

Walmart has the resources to adjust for higher inflation and higher theft at the same time. As for having their hands tied when dealing with shoplifting, yes, this is long overdue for being addressed.

Gary Sankary
BrainTrust

I believe Walmart, Target, and others will be making more technology investments to prevent theft to hold the line on pricing and keep stores open. It’s the one piece of this issue that is in their control. We also know that a large percentage of retail theft comes from employees. This is another place where technology and processes can help to reduce shrinkage.

There is no silver bullet here. This issue has a number of factors that need to be addressed. Closing stores, in my opinion, is being penny wise but dollar poor.

Jeff Weidauer
BrainTrust

We tend to think of shoplifting as petty theft, but in recent years it’s become more organized and at a much higher level than ever. Stores are not equipped to deal with organized gangs; self-checkout has exacerbated the problem. Closing stores will only move thieves to open stores, so a more holistic approach – including local law enforcement and community governments – will be required to address this effectively.

Dave Wendland
BrainTrust

Organized theft is running rampant across all retail sectors and disrespect across our nation has put retail employees and overall operations on their heels.

We need to return to civility — SOON! Unfortunately, the answer may very well be to shutter locations in high crime areas (as Walgreens and other retailers have been forced to do). The consequence of that action is the pain it may cause the community.

Carol Spieckerman
BrainTrust

Some of Mr. McMillon’s comments seem to point to (relatively) petty theft yet surely organized retail crime (ORC) is part of the picture given the level of alarm. Each scenario calls for different strategies. A single Big Box store can exhaust local law enforcement, especially in small communities so placing the burden there is unrealistic and unfair. It should go without saying that store associates shouldn’t be expected to police these situations. Legislation hasn’t caught up with retail reality, particularly when it comes to monitoring and regulating online marketplaces where stolen goods are fenced. As Mr. McMillon pointed out, a lack of consistency and clarity between jurisdictions is a real problem for retailers like Walmart that have locations all over the country. It’s a multi-pronged problem that requires multi-pronged solutions and cooperation. Without a doubt, retailers will need to amp up investments in theft-thwarting technology in 2023.

Gary Sankary
BrainTrust

Carol, your comment on better policing the places where fenced goods are being sold is spot on. The motivation for the scale of theft we see from organized retail crime is the money they’re making in the grey market. eBay, Facebook Marketplace, and all of these sites need to do a better job shutting down this activity. Thanks for bringing this up.

Dave Bruno
BrainTrust

I honestly don’t know how to combat theft at these levels, but I hate the idea of letting the bad guys “win” by closing stores that are likely important to the communities they serve. I hope people smarter than I am can find ways to overcome the criminal activity and keep otherwise performing stores open.

Shep Hyken
BrainTrust

The cost of theft/shrinkage is built into the price. That cost comes from two places: the cost of the stolen merchandise and the cost to prevent stolen merchandise. Any retailer, not just Walmart, must deal with those costs. Over time, we’ll see more digital security products that can track unpaid merchandise leaving the stores.

Steve Montgomery
BrainTrust

Whether Walmart raises price in certain stores or closes them will be based on the degree of the theft problem. The greater it is the more likely Walmart will be to consider closing the store. The theft triangle used to include motivation, opportunity and lack of detection. Today the shoplifter’s motivation remains the same — money. There is no fear of detection because they know they are unlikely to be stopped from leaving the store because companies don’t want to risk the employees getting injured. The fear of getting caught is basically nonexistent.

Gene Detroyer
BrainTrust

What a sad statement about our culture! What do the shoplifters think? Walmart makes a lot of money; they can afford it? I deserve the same stuff as those who have more money? Or just, so what?

I was at a Starbucks in China with a colleague who joined me for the first time. He saw the other things Starbucks sold (coffee, mugs, tchotchkes) shelved right next to the door and wondered why people didn’t walk out with the products.

I suggested we ask the manager. The manager said, the customers will stop them and call the police. By the way, you rarely see police patrolling. They rely on the people.

Jeff Hall
BrainTrust

In the absence of having an effective means of curtailing shoplifting, including the ability to prosecute thieves, I see Walmart having no choice but to both raise prices in certain markets/stores and undertake focused store closures. The long term solution will require a combination of local policy, technology, enhanced police presence and, as has been mentioned by other panelists, an eventual return to civility.

Michael Blackburn
Guest
2 months 1 day ago

This is clearly not an issue just with Walmart, as Dick’s, Rite Aid, CVS, Walgreens, and Target have all called out increased shrink (theft) as a growing problem. If you live in a city, it’s clear to see the softer touch to non-violent crimes is not working.

Brent Biddulph
BrainTrust

This is not a false alarm — for any retailer. Anecdotally, I have witnessed three instances of local law enforcement handcuffing and taking away shoplifters just last week at both local Home Depot and Walmart stores.

Yet this is following recent law enforcement outcries that Walmart is already taking too many (limited) public safety officers away from primary duties – in effect, already over-leveraging these limited public safety resources.

Perhaps it’s time for Walmart and other retailers to better leverage computer vision, to better address the problem by enabling their own resources (security teams) to blunt this behavior. Closing stores and raising prices are not the only options.

Mark Self
BrainTrust

They will close stores. To combat the theft trend with higher prices is contrary to their value proposition. It’s easier to just close the store, as Walgreens and others have done in San Francisco, which, sadly, has negative implications for whatever area(s) lose their Walmart.

Regarding question two: reducing prices. The ability to lower prices is in the Walmart DNA, although there is an obvious case that cutting theft increases profits — which is ALSO in the Walmart DNA, however my vote goes to lower prices.

Craig Sundstrom
Guest

Why not both? Or more precisely, I think the former will be tried before the latter; and of course it’s a location-by-location decision. This is one of those times — like the one I mentioned the other day on inflation — where economic theory seems to clash with reality: doesn’t the market set prices, so won’t raising them just diminish profits? Perhaps, although that same theory might also tell us theft shifts the cost curve up, so higher prices really are a market response.

Obviously this is not a problem exclusive to Walmart. Higher operating costs — of which shrinkage (and security efforts to prevent such) is a major component — are one of the major reasons for “retail deserts” … most impacting those who are least able to deal with it.

Brad Halverson
Guest

Walmart needs to raise the flag on this issue for the industry, for large chains to small shop owners. Hiring more employees won’t stop the brazen because they are told not to detain a thief. And raising prices will only hurt the very customers who need price breaks during this inflationary period.

They could hire armed security guards like the newsworthy gas station owner in Philadelphia — bold, but not for everyone. Or local governments could do their jobs by hiring more officers, patrolling communities, and having a more visible presence to deter risky moves.

Ricardo Belmar
BrainTrust
Every retailer, Walmart included, is constantly evaluating their business to see where prices need to be and which stores may need to be closed as well as new ones opened. Theft/shrink is just one factor that goes into that equation. I read this as McMillon being clever enough to get ahead of future financial trends and letting people know theft is a factor in the equation should they need to raise price and/or close stores. Will it be the deciding factor? Walmart is just too large a business for that to be true. However, the recent increases in organized retail crime and general shoplifting is an alarming trend in general, and it’s not a simple issue that can be solved with a single silver bullet. It takes a village — collaboration between retailer, local community, law enforcement, and government to create the right environment that not only prosecutes theft, but also addresses the “why theft happens” issue. Add to that troubling economic conditions, and probably the only truth you can conclude from all of this… Read more »
Carlos Arambula
BrainTrust

Large retail stores are organized chaos; there are many variables and only a few of them are in control of the store.

Reducing prices is Walmart’s consumer promise — it needs to be a constant, so that’s a given. In regards to theft prevention, I believe the industry will deliver best practices since the theft increase is not unique to Walmart, and it’s already forcing some retailers to take drastic measures.

Anil Patel
BrainTrust

Cutting theft is not going to be an easy drive. The only solution is to close down retail stores where fraud is consistently at the peak. Furthermore, establishing stores in desirable neighborhoods will attract customers who are decent and do not intend to steal.

wpDiscuz
Braintrust
"A more holistic approach – including local law enforcement and community governments – will be required to address this effectively."
"Without a doubt, retailers will need to amp up investments in theft-thwarting technology in 2023."
"Large retail stores are organized chaos; there are many variables and only a few of them are in control of the store."

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