Rising Shrinkage
Shoplifting at Wal-Mart
By Daniel Muniz

Shrinkage is the loss of inventory due to employee theft, shoplifting, vendor fraud, and even paperwork errors. And not surprisingly, it is also the bane of just about every big box retailer because of the enormous amount of merchandise that they carry on any single day.

Incidentally, the profit margin from the sale of their goods is already razor thin so retail chains rely heavily on selling huge volumes of merchandise in order to make their operations viable. Wal-Mart founder Sam Walton once noted that shrinkage is the top profit killer of the industry. And that assertion is rightly so because it takes the sale of so many more like items to minimize what was filched from inventory.

Accordingly, Sam Walton instituted a rigorous set of processes and procedures along with the implementation of high technology for all of his stores in order to vigorously halt shrinkage. Although combating employee theft and vendor fraud were a high priority, the most concerted effort was targeted directly at shoplifters with an aggressive zero tolerance policy which meant that Wal-Mart stores would file charges on just about any and every thief.

In fact, store managers had their bonuses directly tied to shrinkage and they could very well lose their jobs if they didn’t have a stranglehold on the pilferage.

The results from these efforts were breathtaking.

Shrinkage for Wal-Mart was roughly about half of what its peers in the industry experienced which amounted to saving billions of dollars a year. This aggressiveness in security and the prosecution of a very high number of thieves discouraged many shoplifters from attempting to steal from their stores. That allowed the giant retailer to enjoy a healthier share of its profits because their merchandise was not walking out the door without being paid for.

Of course, Wal-Mart had its critics.

At the top of the list were the criminals themselves who saw stealing as a way of life. These losers were unaccustomed to a big business entity actually wanting to prosecute them. Some retail chains are often reluctant to file charges against petty thieves because they tend to view shoplifting as immaterial to their bottom line when all factors are taken into considerations such as plowing through the bureaucracy of the local court system and the bad press from people who tend to view shoplifters as victims and big business as the culprits.

Consequently, such abandonment provided a perverse incentive to these losers. They felt emboldened to continue their thievery because they knew the consequences were minimal.

The other critics consisted of people and organizations who simply wanted to see Wal-Mart fail such as unions and the anti-globalization crowd. In fact, a union such as the United Food and Commercial Workers harshly criticized Wal-Mart’s zero-tolerance policy for shoplifters. Apparently, stealing is fine as long as you are pilfering from Wal-Mart instead of from a store that employs union workers.

There are also plenty of detractors who complain that Wal-Mart’s aggressiveness to prosecute shoplifters unnecessarily ties up local law enforcement and clogs the local courts. I wonder if these same people would feel as sanguine about thieves who break into their cars or into their houses.

Unfortunately, Wal-Mart reorganized its once notorious zero-tolerance policy by only pursuing charges against first time offenders if they are between the ages of 18 and 65. That meant that juvenile delinquents were now off limits and so were the shoplifters who stole merchandise that had a value of less than $25. Wal-Mart also relaxed some of their procedures and security staff as well as part of their vigilance against this criminal element.

The results from these new changes became equally breathtaking.

Small time hoods now took advantage of the new lax atmosphere in which they began shoplifting at Wal-Marts across the country resulting in an enormous spike in shrinkage. In addition, more Wal-Mart employees also began doing their own five finger discounts of merchandise.

First and foremost, stealing is wrong and doesn’t matter if it comes from a shoplifter or from an employee. The people who delight in this kind of thievery just because it is being done to Wal-Mart lack character and decency because they wouldn’t feel the same way about hoods who steal from them.

But more to the point, Wal-Mart caved in on their vigilance and they now are paying the price for it. Their shrinkage is now moving toward the industry average.

Thievery is not going to go away. There are people who just see it as a lifestyle. And worse, these shoplifters have plenty of sympathizers. And these sympathizers are not going to go away either. So in other words, there is no way to satisfy the critics without incurring a huge loss of profit.

This country already incarcerates a quite a number of people so shoplifters are never going to be harshly dealt with by our legal system because our prisons are already overflowing with so many criminals. But the worst thing to do is to look the other way because it emboldens these losers to keep stealing and that is clearly being demonstrated with Wal-Mart.

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