The Effects of Shoplifting on Increase In Operational Cost: The Effects Of Shoplifting On Businesses (Essay Sample)

The Effects of Shoplifting on Businesses Name Institution Affiliation The Effects of Shoplifting on Businesses Shoplifting causes both direct and indirect effects on business. The immediate loss of goods previously available for sale harms the business’ capacity to provide products to the customers. Similarly, the cost of replacing the stolen items imposes more cost of production or acquisition to the company. Measures put in place to prevent possible theft also inflict additional overheads to the respective business. According to Farmer and Dawson (2017), businesses revenue in the United States incur an estimated loss of over ten billion in annual losses, which translates to direct dip in. Thus, shoplifting causes an increase in operational cost, which translates to decline in profit. According to Smith (2018), shoplifting remains the second primary cause of inventory loss for businesses after employee theft. Stealing goods from the business reduces the inventory, consequently affecting return on investing. In addition, shoplifting largely shrinks overall revenue leaving less money for profit distribution. To compensate for the lost inventory, the company has to incur additional production cost. No wonder this will further reduce profits as the business will have to settle employee wages, utility bills, and additional raw materials. Perlman and Ozinci (2014) argue that shoplifting causes more effects on small business than on larger companies. Large-scale businesses can absorb shoplifting losses by diversifying and increasing product prices while enjoying economies of scale and competitive advantage. In contrast, smaller companies feel incapable of increasing their product prices due to fear of reducing their competitiveness (Smith & Clarke, 2015). Thus, in most cases, business has to pass the impact of shoplifting to their customers to absorb the loss. Otherwise, it may take longer to recover, especially for businesses operating with a lower profit margin. For example, if a company operates at a profit margin of ten per cent and products worth forty dollars get stolen, then it will take four hundred worth of sales to absorb the loss. Apparently, business with less inventory may not recoup easily due to their diminishing capacity. Moreover, implementing security measures to prevent shoplifting increases business’ operational costs. Such measures include video surveillance cameras and security alarms, which increase overhead cost. Inflicting additional burden on the business’ financial obligation reduces its total revenue. The result could be decline in net profit unless the company compensates the shoplifting cost and the cost of preventive measures by selling enough products within the shortest time possible (Hirtenlehner, Blackwell, Leitgoeb, & Bacher, 2014). In addition, employees may face increased tension while working hard to regain the loss, while maintaining the current profit level in the business. Ling and Kramer (2015) argue that heightened security initiatives can deter legitimate customers due to association fallacy. For example, customers may resent the presence of surveillance cameras, guards, and the practice of leaving their bags at the entrance. They may feel that the business does not appreciate their patronage or even invasion of their privacy. To sum it up, shoplifting affects businesses to a great extent. Recovery cost of stolen products takes time and puts businesses in more debt. Additional operational costs such as the installation of security measures combined with negative effects of such initiatives impacts business’ revenue and may even render it bankrupt (Lasky, Jacques, & Fisher, 2015). In t...