Best Buy Shares Plunge on Margin Pressures, “Organized Retail Crime”: A Look at Organized Retail Crime in the US and How Ecommerce Turned it into a Big Business, by Wolf Richter

Brick and mortar retail is plagued by crime. The Internet has turned into the greatest “fence” ever invented. Laws making thefts less than $950 don’t help either. From Wolf Richter at wolfstreet.com:

Stolen goods get sold to law-abiding Americans by third-party vendors on big ecommerce sites that profit from it. Legislation to control it struggles.

It’s a big profitable business across the US because the cost of the merchandise is zero: Organize a bunch of people via the social media, raid a store and and run out, arms-full of merchandise, and then sell this stuff into specialized distribution channels from where it gets sold by third-party vendors on some of the best-known ecommerce platforms in the US, such as eBay and Amazon and many others.

Shares of Best Buy [BBY] plunged 12.4% today after the company’s earnings call, during which it discussed a laundry list of headwinds and pressures on its gross profit margins, which, for US sales, fell 60 basis points to 23.4%, “primarily driven,” as CFO Matt Bilunas put it, by product damages and returns compared to last year, lower margins of services, and the infamous “inventory shrink.”

Inventory shrinkage or inventory shrink are the retail industry’s long-established terms for the phenomenon of inventory vanishing from the company due to vendor fraud, employee theft, and retail theft, including organized retail crime.

The total amount of shrink across the US from vendor fraud, employee theft, and retail theft in 2020 was roughly $62 billion, about the same as in 2019 despite many stores being closed for part of 2020, according to the National Retail Federation’s “2021 Retail Security Survey: The state of national retail security and organized retail crime.”

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