A recent report from the National Retail Federation (NRF) found that major U.S. retailers lost a total of $112 billion to crime last year.
However, Costco (NYSE:COST) hasn’t suffered as many losses as its peers. “Thankfully, it’s not a major issue for us,” Chief Financial Officer Richard Galanti told investors on the company’s earnings call last month, according to reports.
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Retail theft crisis
Reports of shoplifting have skyrocketed across the country in recent months. Retailers say they have seen a recent increase in product losses, or “shrinks,” related to theft, including organized retail crime and employee theft.
The issue has led some retailers to close stores. Target (NYSE:TRGT) recently announced it would close nine locations across the United States, citing an increase in theft and crime. CVS (NYSE:CVS) announced it will close 10% of its stores and shift to online retail, due in part to an increase in shoplifting cases.
Walmart reportedly closed half of the chain’s Chicago stores in April, and Walmart CEO Doug McMillon previously said that if the problem persisted, more stores would close and prices would decline. was said to be rising.
According to NRF research, 70% of the shrinkage experienced by major retailers is due to theft.
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Costco’s robust defenses
Costco has managed to contain the growing theft problem nationwide.
According to the CFO, the contraction rate in the most recent quarter was “0.1% to 0.2%.” This is significantly lower than the national average of 1.44% reported by NRF.
Galanti cited store layouts as a reason for Costco’s relatively low shrinkage rate. Costco stores are built like warehouses, with only one entrance and exit, making them less susceptible to thieves.
But Costco’s membership business model is one of its strongest defenses, Galanti said. “You have to show a photo ID when you enter the warehouse, so the fact that it’s members only is a plus,” he said.
Costco items are also relatively hard to steal. The chain sells a large number of products that are inconvenient for shoplifters. For example, it might be difficult to take 96 rolls of toilet paper without anyone noticing. Costco goes a step further and packs even the smallest items into large boxes.
However, chains are not without the risk of theft. Costco executives acknowledged that shoplifting has increased since the company introduced self-service checkouts three years ago. However, the problem hasn’t gotten so bad that the company can’t continue offering this feature.
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