Here's why Target and Costco are having wildly different experiences with America's $41 billion shoplifting problem

Dominick ReuterSep 28, 2023, 05:48 IST

Business Insider

The Target location slated to close in New York is in the very same building as the neighborhood's Costco warehouse, and a brand-new Target store is slated to open less than two miles away.Jennifer Ortakales Dawkins/Insider

Costco and Target issued contrasting statements Tuesday about how retail crime is affecting them.
Target said it would close 9 stores, citing crime – Costco said theft was "not a big issue for us."

It was the best of times, it was the worst of times.A tale of two retailers played out within the space of a few hours on Tuesday when Costco and Target each issued starkly contrasting statements about how retail crime is affecting their businesses.Earlier in the day, a highly anticipated annual industry survey revealed that US retailers lost more than $112 billion to inventory shrink in 2022, with about $41 billion of that due to external theft like shoplifting and organized retail crime.While the survey found that the industry's financial losses are near the normal historical level of 1.4% of total sales, it noted that different companies are experiencing wildly different rates of shrink. It also noted that theft incidents seem to be getting increasingly violent.Target then made the surprise announcement that it would close nine locations in four metro areas due to ongoing struggles with retail crime that have made operation "unsustainable."With the news, Target became the first major general merchandise retailer to specifically cite recent struggles with retail theft in its decision to close a batch of stores. In particular, the company highlighted safety concerns for employees and customers as key drivers of the decision, echoing comments from CEO Brian Cornell in August that Target stores had seen theft incidents "involving violence or threats of violence" more than double since January.

Costco says theft is 'not a big issue for us'

Shoppers have their receipts and carts checked by an employee as they exit.Frederic J. Brown/Getty Images

Target's winter of despair soon gave way to Costco's spring of hope when the wholesale club's CFO, Richard Galanti, anticipated a frequently asked question from analysts on the company's annual earnings call."We are asked often, recently, about our inventory shrinkage results and whether it is dramatically increased in the past year versus historical shrink results," Galanti said. "The answer is no.""Over the past year, it has increased by less than one basis point (0.01%)," he added. "So no, thankfully, not a big issue for us."Meanwhile, Cornell said back in May theft was on track to cost Target $500 million more this year than the prior year's inventory losses of about $700 million.Costco's success in skirting the impact of retail theft comes down to several operational factors that seem to run counter to Target's approach to business.Where Costco requires shoppers to have paid memberships, tightly monitors stores' entrances and exits, sells bulkier items, maintains relatively high staffing ratios, and actively assists in self-checkout, among other things, Target in many cases does not.As a result, the Bullseye retailer is a substantially softer — erm, target — for retail criminals than the fortress-like Costco.

Self checkout and cashier stations at a Target store in Queens, NY. Lindsey Nicholson/UCG/Universal Images Group via Getty Images

Costco is staying open in the places where Target is closing some stores

Even though the metro areas where Target is closing stores have made headlines for shocking incidents of crime, it's not entirely clear that shoplifting is similarly problematic for other retailers nearby.Seattle (where Target will close two stores) is where Costco was founded in 1983, where it still has its headquarters in nearby Issaquah, and where it maintains a heavy presence.As a West Coast cultural icon, Costco has similarly robust footprints in Portland and the Bay Area, where Target is closing three stores in each.And it just so happens that the Target location slated to close in New York is in the very same building as the neighborhood's Costco warehouse, and a brand-new Target store is slated to open less than two miles away.Of course, multiple things can be true at once: violent shoplifting incidents are certainly scary and dangerous, but theft is not the biggest difficulty confronting retailers right now; state and local authorities can do more to stop crime, but companies can take steps to protect their stores; Target is struggling with theft, Costco is steering clear.If you are a Target worker or shopper at one of the affected locations who would like to share your perspective, please get in touch with Dominick via email. Responses will be kept confidential and Insider strongly recommends using a personal email and a non-work device when reaching out.

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Here's why Target and Costco are having wildly different experiences with America's $41 billion shoplifting problem

Costco says theft is 'not a big issue for us'

Costco is staying open in the places where Target is closing some stores