11/29/2004

Shoplifting Costs Increasing

A recent article on msn.com discusses the increased proliferation of shoplifting and the subsequent costs incurred on suppliers. Heading into the busy holiday shopping season, two recently released reports state that theft costs are starting to become a national problem and a growing financial burden. Companies must spend more money on surveillance equipment, training, and the legal costs associated with theft.

According to the 16th Annual Retail Theft Survey by Jack L. Hayes International, nearly $2 billion was lost to shoplifting and employee theft in 24 U.S. retail companies in 2003. Retail theft -- both by employees and shoplifters -- increased 4.7 percent last year from 2002.

Increased shoplifting is causing an increase in supplier costs which in turn could result in higher prices for consumers.

13 comments:

Rufio said...

I think that your idea about shoplifting leading to higher prices for retail goods is a very interesting one. Shoplifting really has become a big problem in the United States today, and you have shown the statistics to back that idea up. Is shoplifting really a bad thing though? It obviously increases the economic standing of the person who is stealing the items, and maybe that person is stealing with an intent to sell. So if we buy our products from the person that has stolen the goods wouldn't this still be good for the economy because we would be able to get our products at a low price regardless of what the department store is charging. I'm really not sure if the assupmtions I am making are very valid, but It shows that you can look at things like criminal activity in a variety of interesting ways.

Jake said...

That was an interesting assumption made by Rufio. Ethically that is something that we as consumers would and should not depend on. Shoplifting is a problem that we as society are going to have to face forever and is unfortunately something that retailers risk having happen. Investing in surveilence equipment can be very expensive, but can you blame the retailer for having to increase prices to help pay for something that should not be necessary?

Bruce Banner said...

I work in retail and it is amazing how many people shoplift and empoloyee theft. If people were honest and had integraty, the things we purchase would be a lot cheaper. The product margin would be smaller than it is now. I was told that a normal can good price would drop almost in half if it was not for theft.

Because of shoplifting and employee theft, retailers have to take action to compensate their loss by raising prices and which it affects us as consumers.

Maudi said...

It is hard to get people to stop shoplifting if they have no morals. In our society many kids today are raised on T.V. Television gives our children a warped sense of reality. Parents today are not doing there job hense the increase shoplifters. The only way we are going to decrease this theft problem is by increasing the parenting.

Kova said...

I think I am going to have to agree with Jake and Bruce on this one. I have worked in retail as well and have had many conversations with my manager about the costs he has had to incur in order to combat shoplifting.

Rufio, your point is an intersting one. I really hadn't thought of it in those terms. Seems to me like you have really enjoyed reading Lansberg!!! You are starting to think like him.

Your comment does remind me of a topic we covered in Business Law about void titles and good faith purchases. If I remember correctly, if the theif sold the good to a third party (we'll call her katie) and the original owner (the store) was able to track down the good, then Katie would be required to return the good w/o compensation and then try to take up a claim against the theif(the possibility of success for her claim would be miniscule).

I could be totally off base but that is how I remember it. and if it were to happen I see no benefit, economic or otherwise, occuring for anybody!

Dr. Tufte said...

-1 on Kova's comment for 2 spelling errors.

Shoplifting is actually like inflation, believe it or not.

The reason is that it is hard to see how shoplifting can make society as a whole worse or better off. The good that is stolen is still part of the economy. Just like an even inflation in the price of everything is a wash.

But, just like inflation, the problem with shoplifting is that is causes people to spend money on things they ordinarily wouldn't - like inventory protection. That's a deadweight loss for society.

Further, inventory protection is a strategic decision that isn't beneficial to firms. A retailer isn't hurt by shoplifting if they can pass that cost along to consumers. So, they will be hurt if their demand is elastic. But that wouldn't even make a difference if all the retailers colluded to provide no inventory protection - if no one did it, then the price rise would fall on consumers whether their demand was elastic or not. But, that equilibrium isn't Nash for the firms. What is the Nash equilbrium is for all the firms to offer some sort of inventory protection, and to eat some of the costs of it. The reason is that if your competitor provides inventory protection and keeps their prices down, they will steal your business. So every managers choice is to combat shoplifting.

Kristin said...

Wal-Mart also loses about 1 Billion a year because of theft. Recently, Wal-Mart has also been investing in new systems and personel to help with this decrease. Because it is an operationally excellent organization, internal costs need to be as low as possible to support the promise of low prices. A reduction in theft is essential to reap higher profits as a business, and to save money as a consumer.

Student 01 said...

Shoplifting is a fact of life; it is going to happen until someone comes up with a fool-proof way to secure merchandise. No matter what happens when someone shoplifts it comes out of consumers pockets. It comes out of is that of the customer pocket in more ways then one; it is taken from us in the form of higher prices and in the form of lost tax revenue, because for every dollar stolen the business offsets profits earned thus making less taxable income.

pramahaphil said...

Theft is most likely a bigger problem with employees than with the general public. Employees are more likely to commit thefts because of opportunity and the ease of rationalization. It is far easier for a sales manager to walk out of a store with stolen goods because they also have knowledge of specific internal controls that they need to avoid.

pramahaphil said...
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John West said...

Supplier and more importantly retail stores are not exactly paying for the costs related to shoplifting as much as the person posting this article would have you believe. Every t-shirt, pair of pants, shoes or anything else you buy already has a price percentage placed into it in order for the retailers to recoup their losses from shoplifting. I don't feel bad for Wal-Mart or any other retailer because I know that I'm paying for their shoplifitng problems every time I purchase something there.

Jordan said...

Dr. Tufte said:

"Shoplifting is actually like inflation, believe it or not."

I never thought of shoplifting as inflation before. But I think that the cost of shoplifting gets passed on to consumers even if businesses implement inventory protection. Especially if all businesses have inventory protection to some degree, the consumers will pick up some of the cost.

Dr. Tufte said...

Good point - you either pay for the stolen goods, or the costs of protecting them.