The part you missed is that supermarkets sell a significant amount of stock.
If shop lifting is a serious enough problem in a particular store to make it financially unprofitable then there’s more at play than just the theft:
1. The store isn’t following best practices of having electronics tagged, and high value items at the back of the store.
2. The store isn’t making enough legal sales. This could be for a multitude of reasons from the stores location to its cleanliness. Or maybe they’re just stocking stuff people don’t want to buy or at the prices they’re advertised for
3. The overheads are unsustainable regardless of the sales. For example the land rental might be so high that the store wouldn’t turn a profit with the types of products they’re trying to sell.
Shops also factor in loss of stock in their margins. Eg spoiled food, damaged products and theft. This actually comes to less than the cost of personal nor rental costs.
There is still value in anti-theft measures. But that doesn’t mean that the GPs comments were correct when they said:
> it doesn’t take much theft to put the business in the red.
…because if you run a supermarket correctly then it does. Despite what the knee jerk reactions to my initial comment suggest.
Let's assume an average marginal loss of 2% of gross sales to theft at a business with a net margin of 4% (typical of retail). Let's also assume wholesale markup of 50%, just to be conservative.
On two million in gross sales, a 2% loss equates to a $40,000. Assuming a 50% markup, the retailer has lost $20,000 in COGs. We'll ignore the other $20,000 for now.
On two million in gross sales, and a 4% net margin, the retailer can expect to make an annualized profit of $80,000.
We deduct the $20,000 in COGs loss, the retailer is now making only $60,000 a year, that's a loss of 25% in profit.
And that's using 50% markup.
In your stated case, with a 30% markup, the retailer would have lost $28,000 dollars in COGs, meaning the retailer is now making only $52,000, a reduction of 35% in net profits.
There is no universe in which this is a non-meaningful amount or to be dismissed as "well, something else has to be going wrong. Theft just isn't that big a deal."
Those figures aren’t accurate (eg shrinkage is estimated at around 1.6% and theft is just one of many factors that contribute to shrinkage, so the actual percentage for theft is going to be even lower) but I’m done arguing with you because you keep taking my comments in bad faith, eg:
> Theft just isn't that big a deal."
That’s absolutely not what I said and if that’s the message you’re taking then you’re looking for an argument instead of discussing the facts.
The part you missed is that supermarkets sell a significant amount of stock.
If shop lifting is a serious enough problem in a particular store to make it financially unprofitable then there’s more at play than just the theft:
1. The store isn’t following best practices of having electronics tagged, and high value items at the back of the store.
2. The store isn’t making enough legal sales. This could be for a multitude of reasons from the stores location to its cleanliness. Or maybe they’re just stocking stuff people don’t want to buy or at the prices they’re advertised for
3. The overheads are unsustainable regardless of the sales. For example the land rental might be so high that the store wouldn’t turn a profit with the types of products they’re trying to sell.
Shops also factor in loss of stock in their margins. Eg spoiled food, damaged products and theft. This actually comes to less than the cost of personal nor rental costs.
There is still value in anti-theft measures. But that doesn’t mean that the GPs comments were correct when they said:
> it doesn’t take much theft to put the business in the red.
…because if you run a supermarket correctly then it does. Despite what the knee jerk reactions to my initial comment suggest.