Organized Theft Buffeting Retail Industry

An epidemic of theft, fraud and robberies are forcing the shuttering of retail stores across many cities.  Walmart is closing stores in Chicago and New York City. Target shut down nine stores in four cities, including Portland and Seattle. Big box chains are abandoning downtown San Francisco.  

A CVS Pharmacy, located in Washington, D.C., has been ransacked so many times by mobs of teenagers that the firm announced it is abandoning the store next month.  A spokesman said groups of as many 45 teenagers regularly clean out the store, leaving rows of empty shelves.  

The crime wave is a burgeoning threat to the $1.3 trillion retail industry, according to a report by the National Retail Federation (NRF). Longstanding risks such as robbery and in-store theft are not the only problems. The industry also has been battered by return fraud, gift card fraud and payment fraud.

Petty theft and shoplifting are overshadowed by the emergence of gangs of organized criminals operating in major cities.  Teams of thieves smash stolen cars into stores and haul away hundreds of goods.  The criminals resell the merchandise on the black market to make a profit.  

NRF research found 70% of retailers reported an increase in organized crime incidents over the last five years.  The data shows 38% of organized crime occurred in-store, while 45% transpires en route from the distribution center to the retailer's store. 

The survey of retailers found that 48% of stores reduced operating hours because of crime. Another 29.7% trimmed product selection and 28.1% reported closing specific store locations.  Scores of Mom and Pop stores have been the hardest hit by criminal activity.

"Retailers are seeing unprecedented levels of theft coupled with rampant crime in their stores, and the situation is only becoming more dire," said NRF, VP David Johnson. "Far beyond the financial impact of these crimes, the violence and concerns for employee and customer safety are our priority."

Leaders from the retail industry testified before a Congressional Committee in December, detailing the scope of the problem.  Increased violence involving theft is causing injury to employees and consumers, the death of some retail associates and a fear of working or shopping in high-crime locations, they said. 

The NRF is lobbying Congress to pass a Combating Organized Retail Crime Act, to crack down on organized retail crime.  The bipartisan legislation, if approved, would create an intra-agency group within Homeland Security to coordinate with other federal law enforcement agencies to rein in crime.

Financial losses are soaring for retailers. Retailers were hit with $112.1 billion in retail theft in 2022, the latest annual data available.   Shoplifting losses grew 19.4% over 2021. Retailers lost an additional $84.9 billion in fraudulent sales returns, which represent a mushrooming concern for the industry. 

In the absence of 2023 numbers, William Blair Investment Banking analyzed NRF data and estimated that retailers absorbed $142 billion in inventory shrinkage and theft losses, a jump of 25% from 2022. Shrinkage is a retail industry term for the difference between inventory and actual physical goods.  

Large organizations of professional shoplifters are taking advantage of soft-on-crime policies in big cities to steal store goods and resell the merchandise openly on the streets, sometimes not far from the scene of the crime. The lucrative nature of the theft is encouraging more individuals to turn to crime. 

In California, home to the largest increase in organized theft, the state passed a law that stipulates stealing merchandise worth $950 or less is a misdemeanor.  It often means that law enforcement likely won't bother to investigate and prosecutors will let offenders off, even if police arrest someone.

Transnational criminal organizations crossing the southern border are contributing to the rising tide of theft in both urban and rural areas, Texas Rep. August Pfluger told a Congressional hearing.  Lenient crime legislation, no cash bail laws, reduced police presence and weak-kneed district attorneys are all to blame for the explosion of retail theft.

Many legacy news outlets and social justice advocates blame retailers, accusing them of manipulating theft data to camouflage a decline in profits.  Since most retailers are regulated by the Securities & Exchange Commission, auditors would have ferreted out these irregularities. 

There are liberals in Congress, such as Alexandria Ocasio-Cortez, who has repeatedly claimed that the spike in retail theft is evidence that desperate families are shoplifting food because of rampant hunger. The data undermines her attempt to raise sympathy for thieves.

Retail industry statistics show that among the most stolen items are athletic clothes, mobile devices, denim, cosmetics, handbags, jackets, sneakers, mechanic tools, beauty aids, alcohol, candy, gum and energy drinks.  Hunger may be a real issue in New York, but these items won't feed a family. 

The real victims are consumers--you and me--who end up paying for the thievery.  Retailers losses are passed on to consumers in the form of higher prices.  Without a sea change, stores will be forced to hire more armed guards and lock up merchandise to protect inventory, souring the shopping experience.

It's time to quit coddling criminals and declare war on organized theft. Since 2022, nine states have passed laws to impose harsher penalties for organized retail crime.  Inexplicably, states hardest hit, such as California and New York as well as the District of Columbia, continue their ineffective approaches.

Communities need to demand more police presence, stronger prosecutors and tougher laws.  Hard working Americans should not have to pay for the criminal spree sweeping the retail industry.  

Top 12 Predictions For 2024

Stock in prognosticators plunged in 2023.  Almost no one forecast last year would be a boon for the stock market.  Wall Street experts predicted doom and gloom, including the likelihood of an economic recession.  Despite bank failures and accelerated interest rate hikes, bulls trampled market angst. 

Many forecasters might be in hibernation after last year's experience, especially those who suffer from Atelophobia (the fear of being wrong). Against the current backdrop of wars, political chaos and global disorder, it will be challenging for prognosticators to divine a vision in a world of dense fog.    

Your writer has many flaws but doesn't suffer from failure anxiety nor does he shy from predictions.  My confidence is bolstered by picking the S&P would increase 20% in 2023.  The index finished with a gain of 24%.  With 2023 gone and forgotten, here are the Top 12 forecasts for 2024:

1. The economy defied predictions of a recession last year, but the Gross Domestic Product (GDP) will grow a modest 1.9% for 2024.  Consumer spending was the driver for economic growth last year, however, signs point to a retreat.  Consumer debt is at a historic level of $1.3 trillion and credit card rates are near 20% APR.  After a robust 2023 and the usual Christmas splurge, consumer spending will taper off, but will not crater. Consumer spending accounts for about 70% of GDP.

2. The stock market rocketed higher in the final months of 2023, driven by the Magnificent Seven: Apple, Meta, Microsoft, Amazon, Nividia, Tesla and Alphabet while the rest of the stocks were stuck in limbo.  Adoption of generative Artificial Intelligence (AI)  juiced average gains of 100% for the seven as PE ratios reached the stratosphere. This year Wall Street will be looking closer at AI revenues not just shiny forecasts.  Overall, the seven and a few big tech stocks will outperform the overall market, but the growth will be pale in comparison to last year. Presidential elections are usually good for markets, but the three major indices will give back much of last year's supersized gains, finishing with mixed results.  The NASDAQ will eke out a single digit gain.    

3. The Federal Reserve will lower rates twice in 2024, with reductions in the second and fourth quarters, surprising Wall Street and roiling the markets. After teasing three rate reductions, beginning in the first quarter, the Fed turns cautious as stubborn inflation remains above the preferred target of 2% throughout the year.  The nation's fiscal deficit will nudge $1.9  trillion, worrying Fed governors enough to temper major reductions in interest rates. Each rate cut will be a tepid 25 basis points with more promised in 2025. There is one caveat: If the economy weakens in an election year, the Fed may bow to political pressure and vote to cut rates four times. 

4. Major union contracts will help stoke inflationary pressure. Unions won big increases at UPS, the Big Three automakers and Hollywood studios last year but a full-year of costs will hit corporate bottom lines this year, leading to price increases.  There are several big contracts to be negotiated this year, including at AT&T, Boeing, American Airlines flight attendants, postal workers and Anheuser-Busch.  Wage hikes and offsetting price increases are a major risk to inflation.    

5. Momentum in the job market wanes from 2022-2023 levels because the economy has fully absorbed the labor displacement caused by the pandemic. While some industries cannot find enough workers, other sectors are beginning to layoff employees in the face of softer demand and rising expenses. Job growth in December was driven by payroll gains in state and local governments and healthcare. The job quitting surge will gradually return to normal levels. As a result of these issues, unemployment will drift higher throughout the year, reaching 4.1% in the fourth quarter.

6. With housing affordability metrics already at a 40-year low, sales of residential property will flatline. More Americans will choose renting because home values in many markets continue to rise amid tight supply.  About 75% of Americans have mortgage rates locked in at 4% or lower, presenting another headwind for a rebound in the housing sector.  One optimistic scenario: Soft sales may actually lower home prices, triggering a fourth quarter uptick.

7. Geopolitical risks are increasingly creating global economic shudders.  Wars in Ukraine and the Middle East coupled with saber rattling by North Korea are a powder keg waiting to explode. The widening of conflict in the Middle East will disrupt shipping of goods, trigger supply chain bottlenecks and destabilize global oil supply.  An unintended incident may spark an increased military escalation. Meanwhile, Russia will make significant progress in its ongoing war against Ukraine, dashing hopes for a peace agreement.

8 Local TV stations, supported by the National Association of Broadcasters,  will increase lobbying of the Federal Communications Commission (FCC) to regulate streaming services as the agency does cable companies.  With cord cutting showing no signs of abating, there is an urgency to the effort. Streaming services currently have agreements with the major networks for carriage, but local TV outlets claim the deals are too low to support their operations. Streaming services are fighting back with their own powerhouse lobbying effort, which will quash the regulatory push. 

9.  Investments in data hubs skyrockets as global business demand soars for online content, cloud services and artificial intelligence.    Data centers are already experiencing a once-in-a-generation growth making it financially attractive to add more capacity.  Unless capacity increases, the rapid development of generative AI applications will be adversely effected. The big cloud companies--Amazon, Microsoft and Google--cannot expand fast enough to handle skyrocketing demand. 

10. China resorts to using political upheaval in Taiwan to bring the island nation closer to Beijing's rule, much as it did in Hong Kong.  The Communist regime will continue its hostile military provocations around Taiwan to spook democratic independence. Chairman Xi Jinping has vowed to bring Taiwan under Communist control. With the Chinese economy melting down, the leader needs a distraction to rally his country. There is no better time to act than 2024 with the U.S. military occupied with the Middle East.  

11. Small and regional banks with significant exposure to commercial real estate will be under increasing pressure, fueling a handful of bailouts.  With $550 billion of maturing commercial real estate debt this year, losses are forecast to mount for lenders and investors. Commercial real estate faces other turbulence, including the highest vacancy rate since 1979.  The national vacancy rate hit 19.6% in the fourth quarter.  Since the pandemic, remote work has become so ingrained at many companies which will hollow out office buildings.    

12.  There is at least a fifty-fifty chance that neither President Joe Biden nor former President Donald Trump will be on the general election ballot in November.  Biden's age, historically low poll numbers and his erosion with the Democratic Party base will prompt the donor class to back an alternative.  The most likely scenario: the president will bow out at the Democratic Party National Convention.  Trump and his Mount Everest of legal problems will deal a fatal blow to his candidacy.  The Department of Justice is determined to jail Trump by mid-year and major GOP donors are lining up to support Nikki Haley.  Predicting a winner in November is impossible without knowing the nominees. Republicans take back the Senate but lose the House by a handful of seats.