The nation’s largest private employer and most prominent retail business has a bit of a problem with loss prevention. Wal-Mart Stores, as a company, has an enormous market share. The company brings in an absolutely unbelievable amount of revenue, has stores in almost every town, and sells just about everything you can imagine. Since Wal-Mart blazed a path into the grocery business, it’s been able to become the nation’s largest grocer as well — although it apparently hasn’t been able to find a way to keep all of that food from staying on the shelf, or leaving its stores through appropriate channels.
According to a report from Reuters, Wal-Mart’s head of U.S. operations Greg Foran disclosed that theft is evidently rampant at Walmart stores — so much so that it takes a good chunk out of profits. Reuters pegs average losses for retail companies from theft at about 1% of annual sales, and for a company with the size and scope of Wal-Mart, with about $300 billion in revenues, that’s billions lost every year due to theft.
“One percent of $300 billion is quite a lot of money. If you can save 10 basis points of it – boy I’ll take it every day of the week and put it into lower prices for customers,” Foran told Reuters reporters.
Clearly, theft and loss prevention are issues that Foran plans to address, especially as he steps into his new role as the company’s chairman. But there was one interesting morsel of information that Foran also shared about Wal-Mart’s theft issue that is being overlooked, at least in some capacity — about half of the company’s losses to theft occur in the food departments of its stores. Wal-Mart experienced a 0.13%, or 13 basis-point, decline in gross profit margin last year due to theft, and Foran says roughly 50% of that can be blamed on stolen food. If 10 basis points equals about $300 million, as Reuters reports, then at least $150 million in losses is attributable to food theft.
Those numbers, when put on the scale at which Wal-Mart is operating, reveal that people are stealing an awful lot of food from Wal-Mart every year.
What makes that statistic noteworthy is that it speaks volumes about the current state of the economy, and the quality of life, that ordinary Americans are experiencing nationwide. Wal-Mart has 4,555 stores across the country, so it makes sense that the nation’s largest grocer would see pretty high losses in terms of food theft. But with thousands of dollars worth of food being stolen every day from Walmart stores alone, it may point to bigger problems in the economy that are turning people to drastic measures — like shoplifting.
Ironically enough, Wal-Mart itself may be one of the biggest reasons that it’s happening. As the nation’s largest private employer, and one that notoriously pays low wages (although it has made some progress on that front), Wal-Mart has been blamed for being one of the biggest perpetrators of the poverty cycle in America. What that means is a lot of the theft Wal-Mart is experiencing may, in fact, be coming from the inside.
Wal-Mart claims that 75% of its associates earn between $50,000 and $170,000 per year, but as we’re becoming increasingly aware of, that still leaves for hundreds of thousands that earn much less than that. And when people don’t earn enough to cover the basic necessities, sometimes they resort to other means to get what they need.
Now, that’s not to say that only Wal-Mart employees, or any Wal-Mart employees, for that matter, are stealing from the company. But since Wal-Mart is hemorrhaging literally billions of dollars in food, which is something that is not typically resold for profit like, say, clothing or electronics, it points to the fact that people could be shoplifting for sustenance. There is actually evidence that this has become rather commonplace in the U.K., and it’s not too much of a stretch to think that some of the more hard-hit American communities after the recession would see similar activity.
There’s evidence stretching back decades to support the notion as well. A 1988 study conducted by researchers from the University of Washington and Eastern Washington University delved into the economic motivations behind shoplifting, and found that higher rates of theft are connected with economic strife. That is, when people are in need, they will do what they have to to get what what they want. That could mean stealing food.
Wal-Mart might be out billions because of our troubled economy, but as the nation’s largest grocer, it may not be that surprising. As the company’s leadership looks for ways to address its theft problem, working with low-paid associates to address poverty may be a solid place to start.
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