Retail stores lose money on merchandise for all sorts of reasons -- damage, accidents, careless handling. But 30 percent to 40 percent of retail's losses annually are due to theft, and the cost for retailers nationwide is as high as $15 billion a year. That's a little more than $41 million in losses every day.
The fight to remain profitable amid losses from theft comes back to the consumer, who ends up paying higher prices to help stores cover their lost revenues. This can cause otherwise loyal customers to shop elsewhere for better prices. Consumers also end up paying higher taxes because for every item stolen, no sales tax is collected, resulting in higher state and local taxes.
Say your store operates at a 10 percent profit margin. This means that for every $2 item sold, your store nets 20 cents and $1.80 goes to operating expenses. But it also means that for every $2 item stolen, you now must sell 10 such items in order to generate the $2 that was taken from you. And the lower the profit margin -- in some sectors as low as 1 percent -- the more theft eats into a business' ability to survive.
Though Americans are used to heightened security measures since 9/11, many do not like being constantly monitored while they shop. But when anti-theft measures such as magnetic tags prove insufficient, stores must move onto more obvious security measures, such as receipt checks at the exit or cameras watching their every move. This not only makes some customers uncomfortable, but it also costs the store money to research, install and operate newer, more encompassing security systems.
Employee theft is the largest contributor to loss -- a.k.a., shrinkage -- for most retailers, regardless of size or segment, according to LPI, a loss prevention security agency based in Milford, Massachusetts. Beyond basic shoplifting or taking cash from the till, unscrupulous employees can cause a "double-dip" problem by ringing up phony discounts or phony returns at the register. This causes retailers to lose money from the till and on the merchandise at the same time.
Theft takes money directly from a business's bottom line, which means less money to spend on improving the store or to contribute to employee welfare. If there is no money to pay higher wages or offer benefits, employees have ample reason to take better paying jobs elsewhere. Worse, if theft cuts deeply enough into profits, a store might have to stop hiring, cut jobs or even close its doors, putting any number of people out of work.
