When I first encountered the peculiarities of retail accounting, I was introduced to the term “shrinkage”, the euphemism for theft, damage, etc. of merchandise.
The editors of the Wall Street Journal are noticing shrinkage, too:
The shares of Dick’s Sporting Goods, Foot Locker and other retailers are selling off this week as companies report lower earnings amid softer consumer spending. But retail executives are also pointing to another trend shrinking profits: Theft.
Second-quarter earnings were dented by “higher inventory shrink, organized retail crime and theft in general, an increasingly serious issue impacting many retailers,†Dick’s CEO Lauren Hobart said on an earnings call Tuesday. Dick’s CFO added that “the number of incidents and the organized retail crime impact came in significantly higher than we anticipated.â€
Foot Locker executives likewise noted on Wednesday that inventory “shrink†has been increasing. Target CEO Brian Cornell last week said that “shrink†remained “well above the sustainable level where we expect to operate over time,†and that the company was facing “an unacceptable amount of retail theft and organized retail crime.†Home Depot execs last week also flagged “pressure from shrink†on earnings. As did Walmart execs. “Shrink has increased a bit this year. It increased last year,†its CFO noted, adding that “shrink†was “uneven†across the country. “There needs to be action taken to help protect people from crime, including theft,†said CEO Doug McMillon.
I found “sustainable level where we expect to operate over time” an interesting choice of words. It suggests that if the present level of organized retail theft continues, it will accelerate the transition to online that has been proceeding for the last 25 years, accelerate it even. That will only be good for online retailers and will especially hurt cities and the people who live in them, particularly people in the poorer neighborhoods.
What I expect to emerge from this are calls for the enforcement of sales taxes on all online retailers, whether they have a local nexus or not.
That is one of the best Seinfeld bits, probably second only to the “Master of your domain” episode.
Seinfeld is overpaid, just like the unimaginably wealthy families who own the country’s largest retail chain stores.
Combine that with an educational system that ridicules Christian values while simultaneously preaching grievances what can you expect.
Like you I don’t think that a law and order crackdown is going to happen, prices will rise and technology will make retail stores more expensive and difficult to navigate.
A labyrinth of security doors and proliferation of members only outlets will only help stem losses.
For the most part, poor minorities will pay for the cost of their own damage.
They don’t even need a labyrinth of doors. All they need to do is lock the doors automatically after somebody goes through without paying which is quite feasible. That would take the wind out of the sails of organized retail theft.
The reason they don’t want to do that is that it would affect all shoppers rather than just the thieves. That leaves two alternatives: phase out in-person shopping entirely or lock everything up. I suspect both are happening.
The horror of the black ghetto has spread to main street. This portends the actual collapse of all our cities a la Detroit and Baltimore. This country is in free fall, sociologically, demographically, economically, and militarily.
When I was working in convenience store, was taught never chase or interfere with a shoplifter, because, it was not worth getting beat up, knifed or whatever over a case or two of beer. The remote locking door was used when you left the bulletproof cage to clean, restock, etc especially for the female staff.
“lock the doors automatically”
And then what? Die in the ensuing conflict or be fired or sued for violating the civil rights of the perpetrator?
The only purpose to building a Byzantine entryway is to slow the escape route without unduly alarming honest shoppers, encouraging culturally unassimilated shoppers to take their business elsewhere.
How is enforcing online sales tax going to change anything?
All the online stores that matter (Amazon, Walmart, EBay, Target, Costco) already charge sales tax online.
I don’t have a solution but a sideways observation about earnings reports.
I am suspicious on earning reports where shortfalls are blamed on “shrink†— it’s an easy finger for management to point at when earnings fall significant short of projections. Remember theft has been a significant problem starting in 2020; I doubt management is actually surprised by it or failed to project it.
It’s sort of like how the number of companies mentioning “AI†went exponential this year as they saw how it benefited other companies stock price to mention the word; despite most companies not being affected by AI. An easy way for management to deflect attention that most companies saw a decline in profits so far this year.
My hunch is the weak retail earning reports is actually reflective that certain parts of the consumer economy is buckling under interest rate hikes.
It will generate revenue. As sales tax revenue dries up, they’ll need it.
The present law is that if you have a physical location (“nexus”) in a jurisdiction, you’re required to collect sales tax for that jurisdiction on online sales as well as sales in brick and mortar sales. So, for example, Amazon’s warehouses and Fresh stores and maybe Whole Foods stores are nexuses near me so Amazon charges Illinois sales tax on online purchases I make.