Retail industry analysts say that rising concerns over theft may have contributed to Walmart’s decision last month to shutter its Portland stores. But it’s likely not the driving factor.
Theft and other crime, the Walmart watchers said, is surely a concern for the chain. But the impact is rarely enough to close an otherwise successful store without warning, and especially without appeals to local officials for assistance.
“The decision to close down a store is typically linked to sales,” said Neil Saunders, managing director of the retail division at GlobalData, a market analysis firm, “which often has nothing to do with thefts or shoplifting.”
After Walmart announced the pending closure of its two Portland locations, the role of retail theft in its departure took center stage as politicians and commentators sparred over the cause on Twitter. Texas Gov. Greg Abbott took aim at Portland last weekend, blaming the closures on “what happens when cities refuse to enforce the rule of law.”
Portland Mayor Ted Wheeler, however, disputed Abbott’s claim and pointed to the store closures in Texas in recent years, adding, “The retail industry is changing and retail theft is a national issue.”
It’s difficult to ascertain Walmart’s thinking. The company offered only that the closures were based on the stores’ financial performance. It declined to comment further.
Walmart CEO Doug McMillon said in a December interview with CNBC’s Squawk Box that shoplifting could lead to store closures and price increases, a statement Portland critics have seized on in the wake of closures.
Saunders, though, said Walmart may have struggled in Portland to attain the commanding market share it prefers, particularly in the face of an established competitor like Fred Meyer, which also sells general merchandise alongside groceries.
“Walmart typically needs to be where they can be a big player and capture all the shares,” he said. “There are some locations where they’ve struggled to gain a strong foothold, and they’ve left those places.”
That’s not to say Walmart didn’t have reasons to sour on Portland.
Walmart has had a difficult history with the city, notably when it pulled back multiple times on proposals to build stores in the city amid harsh criticisms from then-Mayor Sam Adams.
Kevin Coupe, author of food-industry newsletter Morning News Beat and adjunct faculty member at Portland State University’s center for retail leadership, agreed that many factors likely played a role in Walmart’s decision.
But he added that conditions in Portland have not been conducive for businesses in recent years, and it’s not the fast-growing city it was when Walmart opened its newest store.
“Walmart has the resources to keep those stores going if it wanted to, but it’s clearly decided that it doesn’t make sense at this point,” Coupe said. “It’s a tough economic environment for everyone. But also, Portland has grown inhospitable to many businesses. It’s a city desperately in need of reinvention.”
Coupe said the city’s business taxes and regulation can be a turn off when retailers are already facing other challenges. The Portland Business Alliance, which acts as the city’s chamber of commerce, have said that the city’s high business taxes might be affecting the local economy’s recovery.
A recent report on the city’s economy by consulting firm ECONorthwest, commissioned by the Portland Business Alliance, businesses paid 32% more in business taxes in 2021 compared to 2019, with much of the increase attributable to a new 1% tax on retail sales for the Portland Clean Energy Fund and a business income tax for homelessness services administered by the Metro regional government.
The city also passed a measure in 2016 that levies a small tax on businesses operating in the city that pay their CEOs more than 100 times what they pay their median worker. Companies like Walmart pay a 10% surcharge on top of the city’s regular business tax.
Those fees, though not publicly disclosed, are tiny — across all payers it would raise only a few million dollars — but Walmart was named as one of the prime targets by the tax’s champion, then-Commissioner Steve Novick.
Coupe said many businesses are dealing with inflation and have adopted a recessionary mindset, and businesses large and small are considering their retail strategy. He said a city’s social problems can be an added stressor that can play a role in business decisions.
“It’s hard for businesses because on top of everything else, you’ve got an environment in which retail staff employees feel at risk. If they feel at risk, customers probably feel at risk,” he said.
Saunders agrees that there could be cultural issues at play. He said Walmart has struggled in other markets, like San Francisco, Chicago and New York City.
“Portland is known for supporting independent retailers, and maybe there’s a lot of people who might not want to shop at Walmart,” he said. “And that can be off-putting and can drive performance and sales.”
Saunders said retailers have dealt with the issue of retail theft for as long as the industry has existed and have always found ways to address the problem, whether by installing anti-theft devices, increasing security or increasing prices of goods to make up for goods stolen from the store, or “retail shrink.”
And Walmart is not afraid to speak up about issues like crime if an otherwise successful store is at risk
“With Walmart, I do feel like if theft or crimes at these stores shot up so much that it was making a noticeable impact on its business, then I think Walmart would’ve said something,” he said. “They wouldn’t want to remove the business at a location just because of thefts. I think they would’ve addressed the issue first and talked to the city.”
Walmart has frequently worked with city police departments in the past to address theft and crimes, and has been criticized for its heavy reliance on local police across the country.
In some cases, Walmart dedicated prime parking spots for police vehicles near the front entrance, or it has paid off-duty police to man its store.
Cody Bowman, Mayor Wheeler’s spokesperson, said Walmart has never asked the mayor’s office for help to address retail theft.
Bowman said the company does detain shoplifters — a practice many retailers avoid because of potential liability, but which Wheeler has urged them to change to increase shoplifting arrests and prosecutions.
The Oregonian/OregonLive has requested but not yet received communications between Walmart and city officials under Oregon’s public records law.
Joe Feldman, retail analyst and senior managing director at Telsey Advisory Group, agreed shoplifting and organized retail theft has become a larger concern for retailers and a factor for retailers’ business decisions in the past couple of years.
“Though, I think there’s got to be other reasons beyond just theft to close the stores,” Feldman said, adding that Walmart might look at the financial health of the stores relative to the rest of the chain, the quality of the inventory, the age of the store and where it stands in its lease life.
Theft, he said, is certainly a growing concern across the chain.
“Investors worry greatly about it because of its big impact on profitability,” he said. “Especially when you look at what the shrink rate was historically — it was a very low single digit percentage of sales for the average retailer, and now it’s increased significantly for some retailers.”
Feldman said that a city’s business taxes and regulation can also play a big role in where a retailer would want to place its stores.
Industry leaders say retail theft is a growing problem nationwide, and an annual survey conducted by the National Retail Federation, one of the largest retail trade associations in the country. The federation estimates that stolen merchandise cost retailers $95 billion in 2021.
But the reported shrink rate across all reporting retailers, 1.44%, was slightly down from the five-year average of 1.5%.
A majority of retailers surveyed in the report also said the thefts were occurring across not just in stores, but also online.
RECOMMENDED•oregonlive.com
Oregon lawmakers are considering legislation that would give law enforcement and prosecutors more money and tools to investigate and prosecute organized retail theft.
Senate bills 318 and 340, would provide tougher penalties and money for state investigators and grants for communities.
--Kristine de Leon; kdeleon@oregonian.com
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