Products displayed in locked security cabinets at a Walgreens in San Francisco

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Products displayed in locked security cabinets at a Walgreens in San Francisco

Shrink an industry term for loss in inventory amounted to 1.4% of retail revenue in 2021, or $94.5 billion. Most of that shrink is caused by theft. Walmart's CEOsaid that if the retail theft issue is not addressed over time, "prices will be higher and/or stores will have to close."

Covid-19 has worsened the risk of crime, partly because labor shortages have made it difficult to fully staff stores. Moreover, supply-chain shortages made certain products more susceptible to theft because they fetched high value in secondary markets. Supply-chain delays during the pandemic also meant more cargo was sitting around, leaving it more vulnerable to theft.

Shrink can have a substantial impact on already thin retail margins. At Dollar Tree, shrink shaved 1.7% off operating margins this quarter-substantial for a firm whose operating margin was 5.5% that same period. Drugstores are especially susceptible because they are located and designed for convenience. It's a quick in, quick out layout with valuable electronics, over-the-counter drugs, cosmetics and beauty care, which are desirable and mobile items. Walgreens estimates that shrink amounts to 3.25% of the company's revenue.

Mitigation measures can range from the most basic physical onessuch as locking up itemsto more technologically sophisticated ones, such as video surveillance with facial recognition. Some measures are designed to make the product less valuable for theft. These include ink tags, which stain clothes when removed, and products that must be activated by the cashier in order to be used. Some cordless power tools will only start functioning if the firmware is activated at the point of sale. More subtle measures include placing high-value items further away from the entrance or having employees stand close to those products.

questions:

2. What do some retailers (like Costco and Sam's Club) do to reduce shrinkage? Cite two sources.
4. Discuss some techniques to deal with this issue? (Hint: see "Control of Service Inventories" in Chapter 12 of your Heizer/Render/Munson text).
6. Why is it difficult to catch and prosecute shoplifters. Cite two sources