How Costco Keeps Shoplifting Lower Than Any Other Major Retailer
It's one of many secrets to Costco's success.
Costco's continued financial success is anything but accidental. From basement-low food court prices to endless free samples, the bulk retailer chain knows a thing or two about keeping both its members and its coffers happy.
Another way Costco gets an edge on its competitors is through its ability to keep shoplifting incredibly low. The company's Chief Financial Officer Richard Galanti told Barron's that the company's shrinkage—a term for merchandise lost to theft—is around 0.11 to 0.12%. That's considerably less than the retail industry average, which, according to National Retail Federation, currently stands at about 1.33%. Some experts believe that Costco might even have the lowest shrinkage of any major retailer.
Galanti told Barron's that this lack of shoplifting can be attributed to the single entrance and exit of most Costco warehouses, as well as the fact that staff check receipts at the door.
"By strictly controlling the entrances and exits and using a membership format, we believe our inventory losses (shrinkage) are well below those of typical retail operations," Costco's annual report from 2018 said.
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It also helps that Costco sells many items in bulk sizes. Could you imagine trying to sneak a 24-pack of toilet paper out the front door?
Ultimately, minimal shoplifting allows Costco to keep its prices low. According to Barron's, if Costco were to see shrinkage rates like its competitors, it would have no choice but to raise prices.