>Walgreens locations in San Francisco have often been a target of rampant shoplifting, with a recent incident even caught on camera during an "Inside Edition" segment. The San Francisco Chronicle reported that one Walgreens location lost on average about $1,000 a day in merchandise because of shoplifting. (SFGATE and the San Francisco Chronicle are both owned by Hearst but operate independently of one another.) Theft of less than $950 in goods is treated as a nonviolent misdemeanor under California law.
A decent size grocery store I assume might take $100,000 per day. Theft losses of 1% sounds very survivable - especially when all other stores in the region have the same theft losses, so prices can go up by the same percentage.
First of all $100,000 is significantly more than any Walgreens can reasonably produce. That is $70 per minute assuming 24hr/day operation. Most Walgreens have at most two registers open, and the average purchase, which takes more than a minute is probably lower than $30. Then they have operating expenses on top of that, and the margins are very slim, usually single digit. Remove $1000 per day and you might very well make it a loss.
Walgreens is not a grocery. Its official tagline is "Your go-to for Pharmacy, Health & Wellness and Photo products." In practice, it offers some foodstuffs that a Grocery might have like instant noodles, but does not market itself nor compete as a Grocery.
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.
There’s also increased cost on businesses to stay open in high crime areas as crime rises, the insurance rates go up and it costs them more and more to recover from property destruction and theft.
I think it makes more sense to compare against profit than revenue-- notwithstanding the old joke about how a business can lose money every day but they make it up in volume.
The operating income for Walgreens in the US (retail AND pharmacy, including mail order, but I dunno if Gross profit would be a better metric) is $324,000,000 across around 10,000 stores. So around $100 per store per day.
Is money the only thing that matters here? What about the people not feeling safe at their jobs? What about the community not feeling safe where they live?
I’m sure the city being shut with highly limited foot traffic even when it reopened leading to losses of revenues exceeding 50% in most cases has nothing to do with it.
Many stores closed. But Walgreens was one of the few stores that were allowed to remain open so that may have led to a bump in traffic, particularly as they sold masks, disinfectants, medicine, bottled water, toilet paper, and all that stuff that people during the pandemic wanted to buy.
But it's tough to say how much each factor contributed. We do know that Walgreens' parent company lost 1.7 Billion in the third quarter of 2020 but swung to a 300M profit in the 4th quarter and is doing well overall so far in 2021, so nationally they did take a hit but that ended 8 months ago.
It's not just about foot traffic. The Walgreens I live near in SF has had plenty of foot traffic during the pandemic (I literally live across the corner and the lines to check out were just as long after as before). Yet since the pandemic started, it gained.. a police officer stationed at the entrance.
Someone should conduct a study of businesses that close because of crime, in particular those destroyed during the riots of last year, to see which come back. I'm surprised a company like Walgreens had not done this sooner, given the breakdown of law and order in San Francisco
It isn't meant to. It's meant in large part to deter people from negatively impacting society and making otherwise good places to live deteriorate into shitholes. Which is what happens to those places when leniency and misutilized compassion allows for crimes to be committed against the citizenry with little or no recourse. It's that mindset that leads to the bizarre policies that plague many parts of the country.
It would be great if we somehow found a way to ensure that everyone had every need fulfilled. However, that is orthogonal to the issue of what to do when a person has crossed the line we've drawn in the sand for what is acceptable in a safe society.
Not everyone who shoplifts was "driven" to shoplift.
Some people simply decide they'd rather keep their money and the product. After you remove "law and order" that actually becomes the most rational individual decision.
I've known many middle and working class white girls that shoplifted for fun. Most guys I've known to do it did it at gas stations or for small items and we're predominantly working class or lower.
The sources in the linked article seem to suggest that the San Francisco Walgreens are not being driven from business due to an overabundance of middle and working-class white girls shoplifting for fun. Although the parent to your comment did seem to be generalizing quite a bit from the article at hand, and so perhaps your response deviated in kind. Fair enough, I'm making the argument anyway.
I have no doubt that the phenomenon you mention certainly exists. I do, however question whether its prevalence is enough to be noticeable on an income statement.
There seems to be something else at work in San Francisco, and the question is how we should contextualize it morally (which will influence our preferred policy approach as voters). Is it people stealing because they are desperate for the necessities that one would encounter at a drugstore (something we should feel sorry about). Or, are they organized crime rings making a quick buck at someone else's expense due to loopholes in the legal system (something we should be pissed off about).
I alternate between the two perspectives based on my own experiences viewing urban poverty up-close, the discussions shared in the HN Walgreens threads, as well as some of the videos shared of organized groups of people clearly looting high-value items. It's something I don't really have a solidly-formed opinion on, and there seems to be an abundance of nuance.
It’s not a question I would have thought to ask but if it is primarily basic necessities such as toothpaste, soap, and food items it might help suss out that the high cost of living which has exacerbated homelessness has left many unable to afford to live.
On the other hand, if it’s primarily cough syrup, mixers for alcohol, alcohol, etc it might point towards the addiction element of San Francisco’s impoverished as being the primary factor.
And I’m sure you could, at the very least, postulate on other possibilities. Whether or not the any particular theory holds water may be another matter.
I don't think it does matter. I'm just curious if it's specific high-value items that are being stolen, or a bit of everything. I don't live in San Francisco, so I don't have anything to contribute about the closing of a specific Walgreens location.
I am not sure how any retail business can survive in CA when laws basically allow people to steal, as long as they keep it under $950. Walgreeens is smart to leave.
Just here to point out that a misdemeanor can carry a 12 month prison sentence in CA. And before someone replies that you're unlikely to serve time for a misdemeanor, that's because our prisons are already too full - a situation that wouldn't be changed by making more crimes into felonies.
My comment isn't meant to suggest any particular solution, just to push back on the commonly expressed idea that repealing Prop 47 (the proposition that set these felony limits) would address this problem.
I know it’s not in line with current thinking but there is evidently enough criminality out there to justify custodial sentences and current prison capacity should not have to be a consideration when sentencing.
The problem isn’t that it’s a misdemeanor. The laws aren’t enforced at all.
I remember watching one of these thefts watching. The security guy told the manager: “Report it to the police. They’re not going to do anything, but you have to report it anyway.”
Certainly there are ways of handing this other than ignoring it and locking people up?
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[ 4.8 ms ] story [ 103 ms ] threadRelated discussion: https://news.ycombinator.com/item?id=27241085
A decent size grocery store I assume might take $100,000 per day. Theft losses of 1% sounds very survivable - especially when all other stores in the region have the same theft losses, so prices can go up by the same percentage.
https://en.wikipedia.org/wiki/Grocery_store
https://en.wikipedia.org/wiki/Walgreens
There's lots of Walgreens that accept SNAP though, ~8700.
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.
The operating income for Walgreens in the US (retail AND pharmacy, including mail order, but I dunno if Gross profit would be a better metric) is $324,000,000 across around 10,000 stores. So around $100 per store per day.
But it's tough to say how much each factor contributed. We do know that Walgreens' parent company lost 1.7 Billion in the third quarter of 2020 but swung to a 300M profit in the 4th quarter and is doing well overall so far in 2021, so nationally they did take a hit but that ended 8 months ago.
https://hoodline.com/2020/02/why-are-so-many-san-francisco-w...
It would be great if we somehow found a way to ensure that everyone had every need fulfilled. However, that is orthogonal to the issue of what to do when a person has crossed the line we've drawn in the sand for what is acceptable in a safe society.
Some people simply decide they'd rather keep their money and the product. After you remove "law and order" that actually becomes the most rational individual decision.
I have no doubt that the phenomenon you mention certainly exists. I do, however question whether its prevalence is enough to be noticeable on an income statement.
There seems to be something else at work in San Francisco, and the question is how we should contextualize it morally (which will influence our preferred policy approach as voters). Is it people stealing because they are desperate for the necessities that one would encounter at a drugstore (something we should feel sorry about). Or, are they organized crime rings making a quick buck at someone else's expense due to loopholes in the legal system (something we should be pissed off about).
I alternate between the two perspectives based on my own experiences viewing urban poverty up-close, the discussions shared in the HN Walgreens threads, as well as some of the videos shared of organized groups of people clearly looting high-value items. It's something I don't really have a solidly-formed opinion on, and there seems to be an abundance of nuance.
On the other hand, if it’s primarily cough syrup, mixers for alcohol, alcohol, etc it might point towards the addiction element of San Francisco’s impoverished as being the primary factor.
And I’m sure you could, at the very least, postulate on other possibilities. Whether or not the any particular theory holds water may be another matter.
I know it’s not in line with current thinking but there is evidently enough criminality out there to justify custodial sentences and current prison capacity should not have to be a consideration when sentencing.
I remember watching one of these thefts watching. The security guy told the manager: “Report it to the police. They’re not going to do anything, but you have to report it anyway.”
Certainly there are ways of handing this other than ignoring it and locking people up?