3 ms·

Average revenue per store is around $7000 per day across all stores.

rsj_hn 5y ago
Yep, so assuming this is a figure relevant for SF, which it may not be, $1000 would be about 15% of revenue. Walgreen's net income was about 5 Billion on revenues of about 130 B, so they are running on razor thin margins of about 4% of revenue, which is generally the case for retail. A hit of 15% of revenue would put them well into the red. Even a hit of 5% of revenue, or $350 of shoplifting losses per day, would put them into the red. Of course if you are walgreens, then you are not operating to break even, you have a given cost of capital that requires a return greater than 0%, as an investor could pull their money out of walgreens and buy federally insured mortgage bonds and make about 2.0% risk free. But investing in walgreens bears substantial risk and volatility, so they expect returns of about 6-7% to compensate for the possibility of losing money. And most stores generally invest right up until they reach that threshold, so really any shoplifting that is out of what the store projected and budgeted for in their original investment calculation may be enough to close the store. In other words, there is no "free" money to be had. Just because a company wont go into the red if only $100 a day of extra costs are imposed doesn't mean the company can afford to keep the store open, as it is answerable to opportunity cost, not just break-even requirements. Even if a store is making money, the scrap value of closing the store and selling off the land, moving the inventory to stores in other states where it wont get stolen, etc, is such that it is more profitable to close the store than to keep it open. And it may even make more sense to expand in new growing areas where police keep shoplifting in check and pull resources out of the legacy locations where shoplifting is high. This is also one reason why you get "food deserts" and other types of areas where retail doesn't seem to be able to survive or only survives by charging extra high prices.

Yep, so assuming this is a figure relevant for SF, which it may not be, $1000 would be about 15% of revenue. Walgreen's net income was about 5 Billion on revenues of about 130 B, so they are running on razor thin margins of about 4% of revenue, which is generally the case for retail. A hit of 15% of revenue would put them well into the red. Even a hit of 5% of revenue, or $350 of shoplifting losses per day, would put them into the red. Of course if you are walgreens, then you are not operating to break even, you have a given cost of capital that requires a return greater than 0%, as an investor could pull their money out of walgreens and buy federally insured mortgage bonds and make about 2.0% risk free. But investing in walgreens bears substantial risk and volatility, so they expect returns of about 6-7% to compensate for the possibility of losing money. And most stores generally invest right up until they reach that threshold, so really any shoplifting that is out of what the store projected and budgeted for in their original investment calculation may be enough to close the store. In other words, there is no "free" money to be had. Just because a company wont go into the red if only $100 a day of extra costs are imposed doesn't mean the company can afford to keep the store open, as it is answerable to opportunity cost, not just break-even requirements. Even if a store is making money, the scrap value of closing the store and selling off the land, moving the inventory to stores in other states where it wont get stolen, etc, is such that it is more profitable to close the store than to keep it open. And it may even make more sense to expand in new growing areas where police keep shoplifting in check and pull resources out of the legacy locations where shoplifting is high. This is also one reason why you get "food deserts" and other types of areas where retail doesn't seem to be able to survive or only survives by charging extra high prices.