How Does Shoplifting Affect Companies?
If your business is experiencing heavy shoplifting losses, you are not alone. According to the National Association for Shoplifting Prevention, shoplifting results in losses of about $13 billion to U.S. businesses each year, and only about 2 percent of shoplifters are ever apprehended. Consequently, shoplifting can pose a serious threat to the viability of your business.
Shoplifting is a primary cause of shrinkage, which is the difference between your paper inventory and physical inventory. For instance, if your records indicate that your inventory on hand totals $10,000, but a physical count indicates you only have $8,000 in merchandise, the $2,000 difference is shrinkage. Shrinkage represents a permanent loss to your business, as you are losing potential revenues from goods that you paid for but no longer have.
Small retail businesses typically do not experience the same customer volume as their larger counterparts, which can create the need to sell goods at higher prices to generate a profit. Many small businesses may resort to raising prices even higher to make up for lost revenues caused by excessive shoplifting. This can place small businesses at a greater competitive disadvantage, as loyal customers may seek out other businesses that offer the same goods at a lower cost.
Businesses may beef up security in an effort to thwart shoplifting. Electronic surveillance systems create an additional business expense that small-business owners may find difficult to afford. More overt security measures, such as hiring a uniformed security guard to patrol the premises, may deter some shoplifters, but honest customers can resent the presence of guards. They may feel that you are invading their privacy or that you do not appreciate their patronage.
According to Rutgers University, the true cost of shoplifting is directly related to your business's overall profit margin. For instance, is your profit margin is 10 percent and someone steals a $20 item, it takes $200 worth of sales to make up for the loss. Businesses operating with lower profit margins feel the impact even more, as they have a diminished capacity to absorb a shoplifting loss. If your profit margin is 1 percent, it takes $2,000 in sales to recover for that same $20 loss.