Business performance deteriorated because of theft? The reason why thieves are prevalent in rich countries

August 30, 2023 0 Comments

No matter how good your business is, money will flow. Because there are thieves stealing things everywhere. Which poor country are you talking about? These are the complaints of America’s leading retailers, such as Walmart , Target , and Home Depot .

Isn’t it corporate tyranny? At best you’re a petty thief stealing a few bars of soap or a dress or two? That’s not the case. There are thieves who systematically and brazenly sweep the stalls. It is said that each state government set up a task force to eradicate retail theft, came up with comprehensive measures, and began to revise the law. Today, we will deep dive into the problem of retail theft, which has emerged as a major headache in the US retail industry .

*This article is an online version of the Deep Dive Newsletter published on August 29th. Subscribe to the Deep Dive newsletter, ‘economic news that you fall in love with while reading’.
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Thieves cause poor performance?On the 22nd, the stock price of Dick’s Sporting Goods, a US sports goods seller, plunged by 24.15%. This is because the second quarter results announced on this day were so sluggish. Sales increased 3.6% in the second quarter, but profits shrank by 23%. Moreover, it surprised investors by mentioning a decline in earnings for the first time in 20 years (roughly a 0.5% decline in gross margin this year).

But what was more surprising than the poor performance itself was the reason. CEO Loren Hobart said in a statement , “Profitability in the second quarter fell short of expectations due to the impact of inventory shrink .” Inventory loss means that inventory that should have been on record is gone. Then why? Theoretically there are many things (fraud, corruption, accounting errors, etc.), but this is what Dick’s Sporting Goods stands for. thievery.

In fact, it is rare for distribution companies to directly reveal the fact that goods are being stolen en masse. It’s not always easy to figure out exactly how much was stolen. There is no obligation to disclose that figure. More than anything, “revealing this makes them look stupid” (Columbia Business School Professor Mark Cohen).

But things are changing a bit. A growing number of companies are openly stating that they are losing money as a result of theft. Target is a representative example of a major US distribution company. Last year, it announced that it was hit by $400 million annually due to theft, and in May this year, it already announced that it expected to lose $500 million annually . Not long ago, during the Q2 earnings call, Target CEO Brian Cornell said that the retailer was “competing an unacceptably high level of retail theft and organized retail crime.” Nordstrom CEO

Eric Nordstrom, who announced the second quarter earnings on the 24th, made a similar statement. “Losses due to theft have reached historic highs, ” he said.

Home Depot CFO Richard McPhail also cited “pressure from inventory loss (including theft)” as the reason for the decline in gross margin (33%) in the second quarter, down 8 percentage points from a year earlier. He complained like this. “Inventory losses have been a constant pressure for the past few quarters and years at most. This is a problem we deal with every day. ” For reference, the most stolen items from stores are personal care products such as soap and shampoo for Target, and wires, wiring harnesses and power tools for Home Depot.

To the extent that large retailers continue to confess like this, it is hard not to accept the fact that theft is eating away at the profitability of American retailers. For reference, there are no exact statistics on how many retail thefts occur in the United States each year. National Retail Federation ( NRF ) estimates are almost the only national data. It is said that the annual retail store theft in 2021 will increase by 4% from the previous year ($90.8 billion) to $94.5 billion (approximately KRW 125 trillion).

Brazen and bold thievesEven without mentioning Jean Valjean from Les Misérables, when it becomes difficult to make a living, the number of shoplifters increases. In the case of the United States, it has calmed down a bit now, but prices have soared for a while. Therefore, it is interpreted that retail theft has increased because of inflation.

There is also another factor that encourages the increase in the small (?) theft of these daily necessities. It’s a self -checkout machine . People prone to shoplifting can rationalize their theft by meeting a computer cashier rather than a human. In the United States, there is a term called ‘Banana Trick’, which refers to self-checkout theft . They scan barcodes for cheap produce like bananas and actually take T-bone steaks of similar weight.

But the theft that plagues retailers these days is not a crime of this magnitude. The main culprit is organized retail crime , which is increasingly rampant . They are much more professional, brazen and crafty thieves.

On the afternoon of Saturday, August 12th, a video of about 30 people wearing hoodie hats breaking into Nordstrom department store in LA shopping mall and stealing a whopping $350,000 worth of merchandise was released, which shocked the public . However, just a few days before that, on August 8, at least 30 robbers broke into the Yvreng Laurent store in LA and stole more than $300,000 worth. On the 13th, the day after the Nordstrom incident, thieves calmly walked out of a Nike store in East LA with thousands of dollars worth of merchandise in their arms. Cases of theft, in which several people rush in and steal things like a flash mob, are occurring very frequently throughout the United States, including LA . It’s to the point where the saying ‘theft is now at the level of a new epidemic’ comes out .

In April, 496 iPads (worth about $500,000) were stolen from an Apple store in a shopping mall in Linwood, Washington. Not just one or two sneaks, but a mob that smashes a window and takes an entire shelf. It is said that there are more and more cases where entire trailers are being stolen . According to the National Retail Federation 2022 Retail Security Survey, these organized retail crime incidents increased by 26.5% from a year ago .

You might think that these crimes would target luxuries like luxury goods and precious metals. Not necessarily. Everyday consumer goods, which are easy to steal and easy to resell, are rather prime targets. For example, razor blades, laundry detergent, clothing, and allergy medications are targets.

In other words, organized retail crime is related to the ease of reselling. These days, there are various ‘marketplace’ services such as online marketplaces where individuals can easily buy and sell goods. In the United States, Amazon, Facebook, eBay, and Offerup operate such services. This made shoplifting more profitable. If petty thieves in the past stole as much as they needed for their own necessities, now more and more bad guys are committing daring thefts for a windfall.

Both consumers and the government are harmed

If the crime of theft increases, who will lose? At first glance, you may think that only companies that sell goods lose money. In fact, the loss to the entire consumer as well as the local community is enormous.

No wonder retail stores are vulnerable to theft. The door is always open during business hours, and anyone can enter without hindrance. So what should we do to stop the thief? You have to attach anti-theft tags to each product, install surveillance cameras and security systems, and put expensive items in a glass cabinet and lock them with a padlock. Rick Derailing, CEO of Dollar Tree , an American Daiso, explains, “Some products are locked in cases, while others are moved behind the checkout counter.” Of course, this will require a significant investment. So what is the cost? Ultimately, it will be passed on to consumers. Consumers’ customer experience is also compromised. A New York supermarket even put laundry detergent in a locked cabinet. In order to buy laundry detergent that costs less than $20, the customer has to wait for an employee to unlock it. U.S. beauty retailer Ulta said it plans to install lockable display cases in 70% of its stores by the end of the year, citing too many perfumes being stolen. Not only is it inconvenient, but it also reduces consumers’ shopping motivation. Apparel company VF

Marty Andrew, vice president of the corporation, talks about his concerns like this. “People go to retail stores because they can see and touch products. So how should (stores) protect their products?”

If merchandise is stolen from a store, it is a tax loss for the state . This is because you lose that much of the value-added tax that is deducted when you sell the goods. Although tax rates vary from state to state, statistics show that the total annual tax loss due to retail theft is $3.86 billion.

In addition to this, if a store closes due to increased theft, the repercussions are one wave. Jobs will be lost and the local economy will be impacted. It is already known that one of the reasons department store Nordstrom closed its downtown San Francisco store was the increase in theft. In December of last year, Walmart CEO Doug McMillan said this in an interview with CNBC . “If time does not correct (the increase in theft), (sales) prices will rise or stores will close.”

After all, the rise in organized retail crime is not just a problem for retailers. That’s why the executive branch, the judiciary branch, and even the legislative branch must all come together to fight theft.

Raising the level of punishment, what is the effect?

One of the surest measures is to increase the level of punishment. In the United States , the average theft amount to separate a felony from a misdemeanor is $1,180, although it varies from state to state . If the amount of stolen goods falls below this threshold, it is a misdemeanor and is not subject to prosecution. There is a안전놀이터 growing voice that this standard amount should be lowered or that habitual offenders should be punished much more severely. In fact, after analyzing 22,000 cases of retail theft that occurred last year, New York City shocked citizens by announcing the statistic that 30% of all cases were committed by 327 habitual offenders (70% of them were even found outside jail). .

The US House of Representatives and Senate already have a bill related to this (the Organized Retail Crime Combat Act). Stealing a total of $5,000 or more in a 12-month period is defined as ‘organized retail crime’ and will be dealt with severely . It contains content that allows you to be prosecuted under federal money laundering laws if you commit such a crime.

Apart from this, online marketplaces are subject to seller monitoring obligations.The law has already passed the National Assembly and has been in effect since last June. It is a measure to strengthen surveillance to prevent online marketplaces from becoming a channel for selling stolen goods. For high-volume sellers who sell more than 200 new, not used (unused) products per year, the platform must verify and disclose information. Accordingly, Amazon and Walmart started posting messages on their websites to ‘report suspected stolen goods’. “It is up to the platform and the consumer to report suspicious activity,” the Federal Trade Commission’s ( FTC ) Consumer Protection Division explains.

Of course, as important as catching a thief is to make theft less likely to happen in the first place. It is closely intertwined with social issues such as poverty, mental illness and substance abuse. It is a matter of treatment, edification, and welfare. It’s not that easy to come to a solution. “We are committed to solving this problem (organized retail crime), but this is a community problem that no single retailer can solve,” said Target CEO Brian Cornell without exaggeration . By .Deep Dive

Is retail theft a new epidemic in the US? Or is it the groaning of retailers who have neglected to invest in basic security? Controversy still exists in the US. However, increasingly bold acts of theft are common on social media.As it was uploaded as a video on , there is a growing voice in support of stronger and more certain punishment. To recap

: US retailers explained in their Q2 earnings report that theft was hurting their profitability. It is said that the loss due to theft is the largest ever.

-Inflation and self-checkouts are cited as factors contributing to the increase in retail theft. A bigger problem is that organized crime is on the rise. The number of such crimes committed deliberately by multiple people increased by 26% in the last year alone.

-The fact that it can be easily resold through online marketplaces is the reason why such crimes have increased. Organized retail crime that damages businesses as well as consumers and entire communities. Efforts to eradicate it are in full swing.

*This article is an online version of the Deep Dive Newsletter published on August 29th. Subscribe to the Deep Dive newsletter, ‘economic news that you fall in love with while reading’.

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