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Calculate the Cost of Shoplifting and Employee Theft

Written by: Fred Tarasoff

Article Overview: Shoplifting and employee theft cost the retailer a great deal in lost profits and everyone and everyone including the consumer pays for this crime. Unfortunately retailers often underestimate the actual figure in terms of losses. Unless a business has strict inventory control it is simple to come up short getting a good sense of overall losses. There is a basic formula for calculating total annual retail losses in your business, which will give you a fairly accurate idea of how much profits are actually walking out your door.

Calculate the Cost of Shoplifting and Employee Theft

Shoplifting and employee theft will cost the retailer a great deal of lost profits and everyone pays for this crime. Retailers suffer lower profits and consumers ultimately pay higher prices. Some stores charge up to 7 cents per dollar to cover retail losses which can make a business less competitive. But let’s break it down a bit further and examine the actual cost of shoplifting to both the retailer as well as the consumer.
Many retail business are unaware of the impact of retail loss on there business and some businesses live in a world of denial, in terms of profits walking out their door. There is a simple basic formula which applies to virtually every single retail outlets from the mom and pop stores to the large retail chains.


Formula for calculating total annual Retail Losses


Estimate your businesses gross yearly sales, then multiply this figure by a value of 1%. Repeat this calculation again but this time take your gross yearly sales and multiply it by 8%.

Example 1: $1,000,000 (yearly gross sales) X 1% = $10,000 (retail loss)


Example 2 : $1,000,000 (yearly gross sales) X 8% = $80,000 (retail loss)


Generally most retail businesses yearly losses are somewhere between the two example figures of 1% and 8 %. Although your yearly gross sales will vary the percentage figures will remain constant.

Please note that Example 1 represents a business with strict inventory control, ongoing staff loss prevention training and a combination of security systems and strategies. Example 2 represents a company with little or no anti-loss policies.


Although at times there is a notion that shoplifting and internal theft is a victimless crime, this is in fact not true. Everyone, except the thief pays as it is estimated that every consumer in the US and Canada pay's a minimum of $250 each year because of crimes against merchants.

Theft of a $2.00 item from a store operating on a 10% profit margin requires the sale of $20.00 in merchandise to make up for the loss. Supermarkets and other retailers operating on low margins of 1% must sell $500.00 in merchandise, just to cover the cost of a $5.00 stolen item. It's easy to see how out-of-control shoplifting can quickly threaten the viability of a business.

The cost of shoplifting is high and is expected to skyrocket due to the global economic crisis. Retailers need to re-examine their level of security and should begin to take a more proactive role in the battle against retail theft. Most retail loss experts agree that in order to be successful there needs to be a combination of anti-theft devices combined with good staff training in the prevention of retail shrinkage.

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Article Tags: crimes, denial, employee theft, gross sales, inventory control, loss prevention, notion, percentage figures, pop stores, prevention training, profit margin, retail business, retail businesses, retail chains, retail loss, retail outlets, security systems, shoplifting, thief, victimless crime



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