Crime rings targeting retail stores have become well organized.
The stolen goods quickly change hands through a network of criminals and often end up being sold online with little traceability. Fueled by the opioid epidemic, the problem has been growing steadily, causing serious shrinkage in retailers’ inventories. Home Depot and other retailers have increased their crime prevention efforts and are working with law enforcement to protect their bottom line and honest shoppers.
Video Spotlight: Fighting Organized Retail Crime and Sting Operations
This post is based on the CNBC.com article, Inside Home Depot’s Efforts to Stop a Growing Theft Problem at its Stores, by C. Reagan and J. Schlesinger, November 22, 2019, and the YouTube video, Behind the Scenes of Home Depot’s Operation to Take Down Professional Shoplifters, by CNBC Television, November 22, 2019. Image source: Â© SIBSA Digital Pvt. Ltd. / Alamy Stock Photo.
1. What is shrinkage and how does it occur? Why is the type of shrinkage featured in the article particularly worrisome?
Guidance: Shrinkage means that the retailer has less inventory than what is shown in accounting records. Theft by customers or employees, damage, defective items, loss of items, paperwork errors, and supplier fraud may account for the discrepancy. The magnitude of the shrinkage caused by organized retail crime warrants serious concern because it affects the retailers’ profitability, and the extra costs will have to be passed on to customers. Furthermore, the perpetrators can be armed and aggressive, threatening employees’ and customers’ safety.
2. How does theft impact the prices charged to customers? Could higher prices exacerbate the shoplifting problem?
Guidance: Some shrinkage is a normal part of doing business. However, when it exceeds a certain threshold, it affects profits. Lower profits have a negative impact on stock prices and on companies’ ability to attract investors. To maintain healthy profit margins, companies will have to raise their prices. Ironically, higher prices could also incentivize criminals who may get more cash for the stolen merchandise.
3. What recommendations would you make to prevent theft at Home Depot? What are the pros and cons?
Guidance: Major retailers have already tried many options. If criminals are armed, detecting and apprehending them may not be a safe option for personnel and customers. Metal detectors (for guns) and security guards are likely deterrents, but they may create an “unfriendly” atmosphere for regular shoppers. Cameras in the store as well as receipt checkpoints at the exits may be worthwhile. In the end, the cost of preventing theft and the benefit of creating a stress-free shopping environment will have to be weighed.