SHRINK

[HCal]

Retailers don't report shrink publicly, unless they absolutely have to. That means that they only report it when the shrink is a contributing cause of missing forecasted earnings, so they're required to disclose it at that time. I believe one of the reasons why these articles are being written speculating that shrink isn't real is in an effort to force the retailers to reveal their shrink publicly. And when they do reveal it they don't give a complete figure but rather a "snapshot in time" which is usually both incomplete and lacking comparable data thus it is of limited statistical relevance. Let me be clear: nobody who is a publicly traded retailer reveals all their shrink data.

And even if they say something about "shrink", they usually don't clarify what this means. Many people think that shrink refers only to shoplifting, whereas in reality it can also include employee theft, damaged or spoiled goods, shipping/cashier errors, etc. I imagine that a relatively small portion of the "shrink" numbers that retailers announce are actually due to shoplifting.

[Romr123]

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Another issue is that online shopping has taken away a easy weapon against shrink, and that is localized or "zone pricing" for the most part. Many retailers were deliberately adding the shrink costs back in on a store by store basis, but now they are having to be more consistent because of online visibility. Target got in a lot of PR hot water over this; nearly everything at their CityTarget format was priced 15% or more higher than surrounding non-urban locations and they were accused of being discriminatory in their pricing. So now we are seeing more of a regional spread of zone pricing where three or four cities all see the same pricing which still gets called out (Bagels did a good job proving Albertsons was doing this a few months ago). So ultimately the stores have to maintain the same prices across wider regions, like say all of SoCal, and that takes away their ability to raise prices to offset higher shrink rates in some stores and thus makes closure a more likely solution.
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Yeah, Target got in hot water as well about changing prices on the app when you were in proximity to the store--lower online prices at home automagically became identical to the shelf price when viewed in the app in the store. I refuse to use the Target app because of that fact...

[veteran+]

Retailers don't report shrink publicly, unless they absolutely have to. That means that they only report it when the shrink is a contributing cause of missing forecasted earnings, so they're required to disclose it at that time. I believe one of the reasons why these articles are being written speculating that shrink isn't real is in an effort to force the retailers to reveal their shrink publicly. And when they do reveal it they don't give a complete figure but rather a "snapshot in time" which is usually both incomplete and lacking comparable data thus it is of limited statistical relevance. Let me be clear: nobody who is a publicly traded retailer reveals all their shrink data.

And even if they say something about "shrink", they usually don't clarify what this means. Many people think that shrink refers only to shoplifting, whereas in reality it can also include employee theft, damaged or spoiled goods, shipping/cashier errors, etc. I imagine that a relatively small portion of the "shrink" numbers that retailers announce are actually due to shoplifting.

For any company I have worked for Shrink and Waste have always been separate and reported that way. Shrink is inventory not accounted for. Waste is accounted for and reduced or discarded.

[ClownLoach]

Sam's Club is much better at catching smcheckout items that are not rung up. Costco only goes by the number of items in the cart. The customer could ring up 15 low dollar items and then leave with 15 expensive items that total hundreds of dollars. The Costco employee will just let them walk out.

Sam's Club really scrutinizes the self checkout receipts and scans items in the shopping cart.

Unless Costco switches to a system where they scan items in the cart, there will be much more theft at Costco.

What bugs me is they're only allowed to ask "would you like to ring this up?" and the shoplifter customer just says "no" so they take it and set it aside. From what I can tell there isn't any record keeping. I would hope that it would trigger something like the system flagging their orders to be scanned 100% for the foreseeable future, and eventual ban for repeat issues. It does solve the most important issue for the store though and that's the shrink loss is prevented.

I think they should just ring it up. Not even ask if the customer wants it rung up. Maybe not even say anything to the customer but just note "okay your 8 items totaled up to 149.49 and your receipt has been e-mailed thank you." If the customer thought they only had 7 items totaling $85.69 since they neglected to scan one item and it just so happened to be the most expensive item that is random coincidence I am sure but the charge at the door will reflect the actual items taken out of the store.

Note the disclaimer that all transactions are subject to review and your total in app is "estimated total" but "final total" will come upon review at exit door.

Absolutely. Once they find something "extra" then it should flag them to scan the entire cart and add the extra item onto the transaction.

[ClownLoach]

Retailers don't report shrink publicly, unless they absolutely have to. That means that they only report it when the shrink is a contributing cause of missing forecasted earnings, so they're required to disclose it at that time. I believe one of the reasons why these articles are being written speculating that shrink isn't real is in an effort to force the retailers to reveal their shrink publicly. And when they do reveal it they don't give a complete figure but rather a "snapshot in time" which is usually both incomplete and lacking comparable data thus it is of limited statistical relevance. Let me be clear: nobody who is a publicly traded retailer reveals all their shrink data.

And even if they say something about "shrink", they usually don't clarify what this means. Many people think that shrink refers only to shoplifting, whereas in reality it can also include employee theft, damaged or spoiled goods, shipping/cashier errors, etc. I imagine that a relatively small portion of the "shrink" numbers that retailers announce are actually due to shoplifting.

For any company I have worked for Shrink and Waste have always been separate and reported that way. Shrink is inventory not accounted for. Waste is accounted for and reduced or discarded.

Eventually the figures all merge into the only publicly reported number which is Cost Of Goods Sold or COGS. Shrink, waste, spoilage, non RTV defective etc. is all in that pot. My hypothesis is that the investment bankers want that figure broken down more so they can make bets on the winners and losers, thus making the shrink losses that much worse for the retailers they force fed their own stock. They will make billions on short sales while they bankrupt these companies who otherwise would be financially stable and they'll happily sit in their Wall Street high rise office towers smoking cigars and drinking their fine cognac as they put hundreds of thousands of workers out of business and move even more dollars into the Amazon empire.

[ClownLoach]

Another issue is that online shopping has taken away a easy weapon against shrink, and that is localized or "zone pricing" for the most part. Many retailers were deliberately adding the shrink costs back in on a store by store basis, but now they are having to be more consistent because of online visibility. Target got in a lot of PR hot water over this; nearly everything at their CityTarget format was priced 15% or more higher than surrounding non-urban locations and they were accused of being discriminatory in their pricing. So now we are seeing more of a regional spread of zone pricing where three or four cities all see the same pricing which still gets called out (Bagels did a good job proving Albertsons was doing this a few months ago). So ultimately the stores have to maintain the same prices across wider regions, like say all of SoCal, and that takes away their ability to raise prices to offset higher shrink rates in some stores and thus makes closure a more likely solution.
[/quote]

Yeah, Target got in hot water as well about changing prices on the app when you were in proximity to the store--lower online prices at home automagically became identical to the shelf price when viewed in the app in the store. I refuse to use the Target app because of that fact...
[/quote]

Fact is everyone else does the exact same thing. They have zone pricing based on the IP address, but if you enter a higher priced unit it changes. Target does a better job of clarifying than others now as the online price says it's for delivery and in store price may vary. This is also what has led to in store mode for most retailers, it will say "for the most accurate pricing use store mode."

[buckguy]

I am really unsure why the news media has decided in the last year or so that retailers are all lying about theft and shoplifting losses... I'm not exactly sure what the agenda is about here but clearly there is one.

Uhm....a pretty broad brush. It's a bit more complex---there's been a shrink narrative that's part of an urban hellhole narrative from a certain segment of the media. There's been a willingness to say shrink when chains say it because much business reporting is and always has been driven by re-writing corporate press releases. Most newspapers and general interest magazines have always done a lot of this and internet news sites do likewise. Many journalists aren't good with numbers (that's why they picked a profession without significant math requirements) and don't have the time/interest to learn about business sectors. Wall Street analysts also rely a lot of what companies tell them and a limited skill set for going beyond what they can get from public reporting and observations. Things get more interesting in the reporting of the outlets with the deepest reporting skills. An outlet like Forbes blurs the opinion and reportage more than others and their willingness to question corporate excuses is perhaps more significant because they are more willing to believe business people. WSJ blurs less but their best reporting usually is about politics rather than corporate fibbing.

Some of the examples on this thread are questionable. Walmart closed a store in Chicago with tons of big box competition and two of the others were in gentrified neighborhoods where they probably weren't popular. I suspect shrink had less to do with closing than failure.

We keep hearing how San Francisco is dying, but what I hear from actual people there is more complicated and most of them work not far from Market Street. There's a New Yorker article that points out how Bloomingdale's still soldiers on at Westfield while others have left: https://www.newyorker.com/magazine/2023 ... sco-really.

I would guess that retailers do what they've always done which is to keep shoplifting quiet on an everyday basis---security guards may make some people feel safe but having police drag people from stores does not.

To veteran+'s point, lousy operating policies always get papered over with some attribution to things that are outside management's control. All the major retail sectors have matured, there is population growth in a limited number of localities and increasing return on investment is ever less possible. Malls died for many reasons, but one was the lack of a new generation of mid-market mall stores---there was no need for them. Despite the success of Amazon and some niche pioneers, online shopping mostly benefits pre-existing businesses---existing direct mail operators, retailers who recognized the need and potential for online early, and brands with limited or no retail of their own who saw a way to go direct to customers. Retailers generate lots of cash but have limited room to grow and that encourages consolidation, vulture capital, and misplaced uses of cost cutting, often undermining brand equity. they need lots of distractions from prying eyes noticing their limited degrees of freedom and how easy it is to screw things up.

[ClownLoach]

I am really unsure why the news media has decided in the last year or so that retailers are all lying about theft and shoplifting losses... I'm not exactly sure what the agenda is about here but clearly there is one.

Uhm....a pretty broad brush. It's a bit more complex---there's been a shrink narrative that's part of an urban hellhole narrative from a certain segment of the media. There's been a willingness to say shrink when chains say it because much business reporting is and always has been driven by re-writing corporate press releases. Most newspapers and general interest magazines have always done a lot of this and internet news sites do likewise. Many journalists aren't good with numbers (that's why they picked a profession without significant math requirements) and don't have the time/interest to learn about business sectors. Wall Street analysts also rely a lot of what companies tell them and a limited skill set for going beyond what they can get from public reporting and observations. Things get more interesting in the reporting of the outlets with the deepest reporting skills. An outlet like Forbes blurs the opinion and reportage more than others and their willingness to question corporate excuses is perhaps more significant because they are more willing to believe business people. WSJ blurs less but their best reporting usually is about politics rather than corporate fibbing.

Some of the examples on this thread are questionable. Walmart closed a store in Chicago with tons of big box competition and two of the others were in gentrified neighborhoods where they probably weren't popular. I suspect shrink had less to do with closing than failure.

We keep hearing how San Francisco is dying, but what I hear from actual people there is more complicated and most of them work not far from Market Street. There's a New Yorker article that points out how Bloomingdale's still soldiers on at Westfield while others have left: https://www.newyorker.com/magazine/2023 ... sco-really.

I would guess that retailers do what they've always done which is to keep shoplifting quiet on an everyday basis---security guards may make some people feel safe but having police drag people from stores does not.

To veteran+'s point, lousy operating policies always get papered over with some attribution to things that are outside management's control. All the major retail sectors have matured, there is population growth in a limited number of localities and increasing return on investment is ever less possible. Malls died for many reasons, but one was the lack of a new generation of mid-market mall stores---there was no need for them. Despite the success of Amazon and some niche pioneers, online shopping mostly benefits pre-existing businesses---existing direct mail operators, retailers who recognized the need and potential for online early, and brands with limited or no retail of their own who saw a way to go direct to customers. Retailers generate lots of cash but have limited room to grow and that encourages consolidation, vulture capital, and misplaced uses of cost cutting, often undermining brand equity. they need lots of distractions from prying eyes noticing their limited degrees of freedom and how easy it is to screw things up.

The articles I'm questioning are the ones that explicitly paint with a broad brush and are basically accusing all retailers of lying about shrink, then trying to back up the statement with statistically irrelevant figures such as the crime reports for that exact location. These articles have been run by CNBC, CNN and others and aren't really focused on one market or urban areas but rather the entire company figures. This is where I suspect they're trying to get the retailers to reveal their specific data, and most are not taking the bait.

The articles about San Francisco for example are more narrowly focused and specific. I'm not talking about those situations.

[storewanderer]

I do believe there is a shrink problem, more people are shoplifting, and organized retail crime has expanded in the past few years. There is no question in my mind these things have happened. How much these things have happened is debatable.

Another area where I think shrink needs to be addressed is warehouse issues. Many stores have lousy inventory records and when they eventually do a cycle count or do physical inventory and find a bunch of counts are off and take adjustments they just assume that is all shrink. For some chains like CVS there is zero accountability on what is put into the totes by the warehouse and the stores just have to "accept" whatever the warehouse claims to have sent (even if the warehouse conveniently says they sent store 4856 12 of those $42 Olay Moisturizers but actually only sent 1 and that 1 that was sent is damaged and cannot be sold since they threw it in a tote with a leaking jug of bubble bath). Store 4856 now gets to have a loss of 11 $42 Olays because the store cannot argue if the warehouse says they sent it their word is non-negotiable, but they can try to claim credit at the store for the damaged items but who knows if they ever get it.

Another one is many understaffed stores with disorganized backrooms, not getting seasonal merchandise out timely, letting short shelf life like candy goods expire due to sitting in the back too long, etc. The costs involved with either disposing or discounting this type of merchandise is all going to shrink loss... this isn't external theft... this is inept store operations due to understaffed and/or poorly managed stores.

I have a clearance store in Sparks called FALLING PRICES that is getting what seem like semi truckloads of stuff from Target every week. They reportedly have locations all over NorCal, maybe 15 locations. They say they get returns from Amazon and then unwanted goods from Target. I see some Amazon stuff but really not a whole lot; they had more when they opened but the past month it is 90% Target stuff and this store is overflowing every week. Some of this Target stuff is so poorly styled/lousy that it doesn't sell until the 25 cent day on Saturday and there is still a lot left on Thursday when all items are $2 so clearly there has been a lot of overbuying/bad buying by Target that is causing products to have to go to this place. The amount of product they get from Target is unreal. The amount of summer and back to school they got in this one location in Sparks is enough to fill 5 Targets in April for summer set. I am sure this stuff is all considered "shrink" too when they give it to FALLING PRICES for almost nothing as salvage. Many items have Target tags that say DEF SALVAGE on them, but not all items. Supposedly the DEF SALVAGE items, Target claims on insurance and somehow gets reimbursed for. I have no idea how any of this works. But all of the seasonal stuff doesn't have any such tags and clearly is just being pulled and sent. They also get a ton of clothing, I cannot believe how much clothing, from Target.

[HCal]

For any company I have worked for Shrink and Waste have always been separate and reported that way. Shrink is inventory not accounted for. Waste is accounted for and reduced or discarded.

I just checked Walmart and Kroger's reports and they don't do it like that. Which companies are you referring to?