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Bad for business

IN THE NEWS | Increasing crime in cities is driving a wave of closures

A shopper walks past the Harlem Target store in New York City, one of nine closure locations announced by the discount retailer. Anthony Behar/Sipa USA via AP

Bad for business
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A typical night at the Calabash restaurant in Oakland, Calif., features lively music, cocktails, and food made by chefs from around the globe. But on Sept. 26, Calabash was closed: Owner Nigel Jones joined other local businesses for a temporary strike. The participating businesses (over 200, according to organizers) say rising crime is threatening their existence. They hope the strike will force local officials to take action.

In Oakland neighborhoods, would-be restaurant customers weigh going out to dinner against the risk of getting their car broken into. Jones has heard of so many businesses closing, he’s lost track. “Today, I just got another text from somebody, another restaurant down the street from us is closing,” he said. “Before you know it, there’s going to be mass closures.”

Crime is closing establishments in multiple blue cities across the country. The same day as the business strike, Target announced it was shutting down nine of its retail stores in cities including Oakland, Seattle, and New York, the latest in a trend of big-box retail closures. Shoplifting is up all over America, and retailers blame “shrink”—an industry term meaning loss of inventory for reasons including theft, damage, or error—for the shuttered stores. Such closures affect not just businesses but the city residents who depend on local stores to buy food and household needs.

Jones came to America as a teenager after growing up in Kingston, Jamaica. When he first moved to the Bay Area in the early 2000s, he didn’t see his culture represented. That inspired him to train as a chef and share his cuisine. Jones loves the American entrepreneurial mindset, specifically the many “mom-and-pop” stores in California. That makes him particularly sad to see them dying.

According to a crime report published by the Oakland Police Department just before the business strike, police had received 1,109 reports of commercial burglaries ­citywide so far this year. That’s a 9 percent increase over last year’s trend.

However, Jones believes crime is severely underreported. He thinks people often don’t bother because reporting takes time and the police are unlikely to come out. He also said business owners fear their insurance may be canceled.

Target’s closure announcement left no doubt about the cause. “We cannot continue operating these stores because theft and organized retail crime are threatening the safety of our team and guests, and contributing to unsustainable business performance,” the company said. “We know that our stores serve an important role in their communities, but we can only be successful if the working and shopping environment is safe for all.”

Spending lots of money to make your store safer is a cost that you pass on to consumers that eats into your profit margin.

A Sept. 26 National Retail Federation report blamed theft, both internal and external, for nearly two-thirds of estimated retail inventory shrink. “When taken as a percentage of total retail sales in 2022, shrink accounted for $112.1 billion in losses, up from $93.9 billion in 2021,” the organization said.

Charles Fain Lehman, a fellow at the Manhattan Institute, thinks that business executives have simply decided it’s no longer rational to operate stores in neighborhoods with high inventory shrinkage. Stores like Target operate on thin margins, he noted, and security measures are expensive.

“Spending lots of money to make your store safer is a cost that you pass on to consumers that eats into your profit margin,” Lehman said. He thinks it’s unfeasible for stores to raise prices to exorbitant levels to offset security costs as well as losses from theft. “They would have been criticized for raising prices in areas where crime is high, which should be correlated with areas of other systematic social disadvantage.”

Instead, Lehman suggested, the responsibility lies with local governments to proactively monitor the needs of businesses in their jurisdiction: “That takes a certain degree of coordination, a certain degree of foresight, a certain degree of institutional competency that isn’t always there in city government.”

Police investigate a multiple shooting and homicide at a gas station in Oakland.

Police investigate a multiple shooting and homicide at a gas station in Oakland. Jane Tyska/Bay Area News Group via AP

Ultimately, those most hurt by the closures are law-abiding, local residents. They will be forced to travel farther and pay more to purchase food and other basic necessities, said Barry Popkin, a professor of nutrition at the University of North Carolina. “This just adds a lot of logistics and complexity to people’s lives that don’t have much money and in many cases don’t have much time.”

Jones, the Calabash owner, is hopeful that the Oakland business strike will get city leaders’ attention, and he believes he is seeing “some movement finally.” He and others involved in the strike are asking the mayor of Oakland, City Council representatives, and state officials for more funding for public safety—specifically more police officers on the streets, safer places for customers to park, more security cameras, and more community investment in education and job training.

“We’re not looking for any magic bullet,” Jones said, “but we need to see some very urgent and substantive engagement.”

—with additional reporting by Christina Grube


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