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Shoplifting in Canada: A Growing Threat to Retail and Insurance

Shoplifting in Canada has become a growing concern for retailers, with organized retail crime and store theft on the rise. “Retail crime contributed about $5 billion in losses across Canada,” Retail Council of Canada Loss Prevention and Risk Manager Rui Rodrigues said in an interview with CTV National News. This trend has significantly impacted businesses, from financial losses to increased security measures. As a retail business owner, understanding the current landscape of retail theft is crucial to protect your assets and maintain profitability.

This article delves into the escalating issue of retail fraud and its implications for your business insurance.

The Rising Tide of Retail Theft

Statistics on Increased Shoplifting

Canadian businesses are facing a growing challenge as retail theft continues to rise. According to data from Statistics Canada, there has been a significant increase in shoplifting rates, with a 31% rise in 2022 compared to the previous year. The Retail Council of Canada (RCC) has reported that some of its members are experiencing a staggering 300% surge in thefts since 2020, resulting in estimated annual losses of $5 billion.

“These crimes are costing all of us because they drive up the prices of products that we purchase on a regular basis,” said Chief of Police Myron Demkiw.

Organized retail crime might not be something that the average person thinks about very often. However, it is a growing problem across Canada and it impacts all of us in different ways.

Every year in Canada, a staggering $10 billion is lost due to various forms of theft, including shoplifting, robbery, and burglary. These financial losses have contributed to a staggering 30% of all business failures.

Police-reported crime for selected offences by census metropolitan area, 2023

The rates are determined by considering a population of 100,000. The percentage changes are calculated using unrounded rates.

Police-reported crime in Canada, 2023 — Sourced from Statistics Canada

Factors Contributing to the Surge

The surge in retail theft has multiple causes. Inflation has played a role, with rising costs of essential items pushing some individuals to resort to shoplifting. Economic uncertainty and financial insecurity have contributed to this trend as more consumers struggle to make ends meet. Additionally, reduced store staffing has created more opportunities for theft.

According to Sylvain Charlebois, a professor in food distribution policy and senior director of the Agri-Food Analytics Lab (AAL) at Dalhousie University, the inflation in food costs has been one of the driving forces for Canadians to steal. “I do believe a very small portion of people want grocers to pay because they think they’re profiteering,” says Charlebois. This perspective is supported by a recent survey conducted by AAL, revealing that 82% of Canadians associate rising food prices with profiteering.

During the pandemic, there was an alarming rise in bold and aggressive behaviour within retail stores, as observed by Rui Rodrigues, executive advisor, loss prevention and risk management at RCC. With the use of masks, perpetrators became more confident in concealing their identities.

Furthermore, there was a significant decrease in police and court response when it came to prosecuting these offenders. According to Rodrigues, the strain on police resources and prosecutors trying to make up for lost time has created a backlog of cases. As a result, criminals have become increasingly emboldened, knowing that the consequences of their actions are diminishing.

Impact on Retailers’ Bottom Line

The financial toll on retailers is substantial. The average shoplifting incident cost retailers $461.86 in 2020. With stores catching shoplifters only about 2% of the time, the impact on profits is significant. The retail industry experiences significant losses, with approximately 70% to 80% attributed to internal issues such as cash and inventory shortages.

On a daily basis, customers contribute to theft losses of nearly $6 million. Similarly, employees within the retail sector are responsible for theft losses amounting to almost $3 million per day. This has led to difficult decisions for retailers, including raising prices, closing underperforming locations, or making deep cuts to labour costs to remain solvent.

Evolving Tactics of Shoplifters

Organized Retail Crime

Organized retail crime (ORC) has become a major concern for you as a retailer. Unlike individual shoplifting, ORC involves large-scale theft with the intent to resell stolen goods. These criminal enterprises employ groups to steal large quantities of merchandise from multiple stores. The impact is significant, with 67% of retailers reporting increased violence from ORC perpetrators compared to the previous year.

Cybercrime

Grocers are not only dealing with the challenge of managing a large inventory but also facing the risk of cybercrime, which puts their data in jeopardy. Cyberattacks often target customer information, which criminals can exploit for fraudulent activities and identity theft. These attacks come at a significant cost, with an average cybersecurity breach in Canada amounting to $6.94 million, as revealed by a survey conducted by IBM on 26 affected organizations. In recent years, prominent entities like Indigo Books & Music, the LCBO, the Nova Scotia government, the Toronto Public Library, and the City of Hamilton in Ontario have all fallen prey to cyber incidents.

As per Statistics Canada data, the country witnessed 74,073 police-reported cybercrimes in 2022, a rise from 71,727 in 2021 and 33,893 in 2018.

Resale Marketplaces

When it comes to organized retail crime, thieves are capitalizing on the growing popularity of resale platforms. According to RCC’s Rodrigues, the rise in outlets has contributed to the increasing prevalence of organized retail crime. Criminals are utilizing social platforms to sell stolen goods directly to end users, bypassing traditional channels.

In June 2024, Vancouver police inspectors Mario Mastropieri and Mike Kim reported a significant seizure of cash, drugs, and property, totalling over $650,000. Kim, who oversees Vancouver police’s identity theft and anti-fencing unit, explained that these criminals acquire stolen merchandise from multiple sellers and then sell it on popular e-marketplaces such as Facebook, Craigslist, and Kijiji.

Comprehensive Insurance Coverage for Retail Businesses

While preventive measures can significantly reduce the risk of customer theft, it is crucial to have comprehensive insurance coverage to protect your retail business from potential losses.

1. Theft Insurance

Theft insurance covers losses resulting from theft, burglary, or robbery. It compensates you for the value of stolen merchandise, equipment, or cash. Having theft insurance ensures you can recover financially and continue operating your business despite theft incidents.

2. Cyber Insurance

Cyber insurance coverage aims to safeguard businesses against the financial losses and liabilities that arise from cyber attacks. When we mention “cyber,” we are referring to various aspects such as computers, electronics, networks, data processing, and transfers. Cyber risks encompass data breaches, privacy breaches, and computer attacks. Data breaches usually occur due to malicious attacks, security system glitches, or human error.

3. Business Interruption Insurance

Business interruption insurance covers lost income and operating expenses if your retail business is temporarily unable to operate due to a covered event, such as a theft-related incident. It compensates you for the financial losses you incur during downtime, allowing you to recover and rebuild without significant financial strain.

The surge in shoplifting profoundly impacts retail businesses and their insurance needs. The rising tide of theft, from organized retail crime to employee fraud, is causing significant financial losses and forcing retailers to adapt.

To tackle this growing threat, store owners should consider a multi-faceted approach. This includes investing in advanced technology, training staff to spot and prevent theft, and working closely with insurance providers to ensure adequate coverage. By taking proactive steps to mitigate risks, retailers can better safeguard their businesses against the evolving challenges of retail theft. Ultimately, a combination of strategic planning, technology adoption, and insurance optimization will be key to navigating the complex landscape of retail security in the coming years.

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