Title: Walgreens Admits Strategic Decision Behind Limited Access to Toothpaste and Shampoo, Impacting Sales
In a recent earnings call, Walgreens CEO Tim Wentworth acknowledged their continuous locking up of merchandise as a tactic to combat retail theft, despite potentially lower sales as a result. Wentworth emphasized the ongoing struggle against shoplifting, mentioning they were exploring creative solutions without resorting to full product lock-ups.
Retailers like Walgreens are grappling with the delicate line between deterring theft and crafting stores that customers find appealing. Even if the strategy of locking up selected products results in decreased sales, the businesses are opting for this approach to protect their inventory from shoplifters, which impacts their profits negatively. It proves more cost-effective for them to secure merchandise through locking up than investing in additional security measures.
A Walgreens spokesperson confirmed their continued use of locked display cases, stating they consistently evaluate the impact of these practices on sales. They also test various strategies to balance inventory protection and product accessibility for customers.
Social media user reactions to Wentworth's remarks included comments like "Why wait 12 minutes for assistance opening unlocked deodorant?" and "I don't want to wait, just want to grab and go." Analysts note that locking up merchandise may not be a long-term solution and may drive shoppers to online retailers like Amazon, where unfavorable waiting and purchasing experiences can encourage online shopping.
Retail experts like Scott Mushkin of R5 Capital caution against relying heavily on physical locking up as a theft deterrent, claiming it is a blunt instrument and likely self-defeating.
During the pandemic, retailers began to lock up more products in response to an increase in small and large shoplifting incidents and organized theft groups. Highly politicized debates ensued, with former President Trump calling for shoplifters to be shot and lawmakers from both political parties pledging tougher actions.
However, some retail analysts question the extent of this trend, suggesting certain companies may have exaggerated the impact of theft to mask other issues. In 2023, Walgreens' CFO Jim Kehoe hinted at potential over-emphasis on theft, stating, "Maybe we cried too much about theft and other losses."
Despite this, a recent study by the Council on Criminal Justice found higher shoplifting rates in major cities during the first half of the previous year, averaging 24% higher than the same period in 2019. Retailers have employed various strategies to reduce theft, such as adding security guards, removing self-checkout stations, and working with law enforcement, but locking up products remains a useful deterrent, as highlighted by industry experts.
Some retailers have explored alternatives, like cellphone-based unlock mechanisms, but their implementation remains limited. Experts like Phillip Blee from William Blair suggest that new methods are not yet game-changing, with no "magic bullet" to replace physical locking up.
Overall, retailers find themselves in an ongoing balancing act between deterring shoplifting and maintaining a welcoming, enjoyable shopping experience for customers. While locking up merchandise can be an effective strategic tool, it can also negatively impact customer satisfaction and sales. By collaborating with law enforcement, using surveillance systems, and implementing effective store layouts, retailers can strive to reduce theft whilst optimizing the shopping experience for their customers.
Retailers are willing to endure decreased sales due to locked merchandise, as it provides an optimal balance between inventory protection and customer appeal. Businesses like Walgreens continue to evaluate the impact of these practices on sales, exploring creative solutions to balance security and product accessibility.
