I'm a retail expert - Target and Foot Locker blame self-checkout theft for losses but it's excuse, I know real reason

SHRINKAGE has been a problem that affects both huge and small retailers - bosses are scrambling to find ways to mitigate its impact on profit margins.

Experts at the National Retail Federation have warned that it is an almost $100billion problem, affecting big retailers like Target and Foot Locker.

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Executives at major retailers have warned about how shrinkage impacts profits.

Shrinkage is often attributed to theft and self-checkout-related flaws, but retail expert Neil Saunders has warned that the reason behind losses is not simple to pinpoint.

He said that it’s tricky to establish how much theft contributes to retailers’ losses, according to CNBC.

He said: “It is a problem, we know that it does take money off margins we know that, but there’s too much opacity in the way in which it’s reported and it is being partly used as an excuse for generally bad performance.”

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Saunders warned that the risk of errors increases as items move about.

He claimed Target’s supply chain is “fragmented,” adding: “It’s very easy for things to be misallocated and misaccounted for within that.”

Target told CNBC that shrink numbers are dependent on locations, adding that they see a link between levels of retail shrinkage and safety measures in-store.

Retailers have noted how losses look set to impact margins. Foot Locker warned earlier this year that the sports chain’s gross margin was down four percentage points.

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Mary Dillon, CEO, told analysts: “This has been a multiyear dynamic in the industry.

"We are not immune to it. It’s increasing. You’ve heard Target talk about it and others. And so, it’s having an increased impact on Foot Locker.”

In May, Target CEO Brian Cornell warned that the company stands to lose around $500million in profits due to organized retail crime.

On a company earnings call, he warned: “It’s an urgent issue.”

Cornell stressed that Target is making investments in strategies designed to combat shrinkage-related losses.

Shoppers have said they were faced with items locked away in cabinets when buying goods at Target.

But Target isn’t the only retailer that is cracking down on shoplifting offenses.

Walgreens has padlocked fridges in one of its stores in San Francisco, California.

It comes as a staffer told local ABC affiliate KGO that the store is hit with 15 to 20 thefts daily.

Execs have resorted to putting frozen treats ranging from ice creams to pizzas under lock and key, and goods are also stored behind plexiglass.

Shoppers must push a button that grabs a staffer’s attention if they want an item.

A message blares out over the store’s overhead speakers, informing employees that a customer needs assistance.

In San Francisco, Safeway has installed receipt scanners and security gates at the exits of self-checkout stations.

But, security guards have warned that they are still witnessing theft-related incidents.

One security guard told The San Francisco Standard: "I’d say 60 to 100 [thefts] on my shift alone."

Walmart Canada president Gonzalo Gebara warned that security is an issue execs pay attention to.

He told CTV News: “We have been working on internal processes. We have been working on investing in technology.”

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But, Gebara revealed that the chain has no plans to scale back the rollout of self-checkout stations.

He said: “If you want to have a regular checkout, you can go there, and if you want to just attend for yourself, you can just do it.”

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