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How much does shoplifting cost me?

How much shoplifting costs you is directly related to your profit margin. For example, if you have a 10% profit margin, and someone steals a $2.00 item, you will have to sell $20.00 in merchandise to make up for that loss. Some stores have very low profit margins, and suffer greatly because of shoplifting. Grocery stores often have profit margins of around 1%. If someone shoplifts steaks worth $7.00, the store must sell goods worth $700.00 to recover the loss. It's easy to see how out-of-control shoplifting can quickly threaten the viability of your business. Click here for a detailed explanation of the financial impact of shoplifting. Because of this relationship between profit margin and the cost of shoplifting, it's good to spend some time thinking about what merchandise you should spend the most effort protecting.
Before you can figure out how much shoplifting costs your business, you have to determine the difference between the inventory you should have and what you actually do have. Most businesses do inventories to calculate this difference, which is known as "shrinkage." Shrinkage is the result of four main things: administrative and bookkeeping errors, employee theft, vendor or deliveryman theft, and shoplifting.

Higher than normal shrinkage levels are associated with:
  • stores with persistent overstocks and higher markdown ratios
  • multi-floor stores with many entrances and exits
  • stores with supplementary storerooms and warehouses
  • sparsely staffed stores, open long hours
  • stores with high personnel turnover rates
  • mall stores with a combination of individual assistance, self-service, and central checkout counters
  • stores with inadequate screening of employees

It can be hard to tell what percentage of your shrinkage is due to shoplifting. You can get a rough estimate based on how many shoplifters you catch, and how much merchandise you recover, but this depends a lot on what security measures you have in place. You can also look for signs of shoplifting activity, such as hangers and ripped-off priced tags lying around, merchandise placed where it shouldn't be (on the floor, for example), and product packages disposed of in hiding spaces. Generally, stores where there isn't much customer service have bigger problems with shoplifting, and certain categories of stores have more shoplifting because their merchandise is more desired by thieves. You also have to take into account the neighborhood around your store. Stores in cities tend to have a bigger problem than stores in the suburbs and rural areas.

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