How Costco is winning the war against rising retail theft

Costco says “strict check-in and check-out control and the use of a membership format” help it fight retail theft.
Anthony Bolante/Reuters

  • Walmart, Target and other major retailers are sounding the alarm over rising theft losses.
  • Costco’s chief financial officer says the wholesale club was lucky to steer clear of the general industry trend.
  • Here’s how Costco’s model helps it win against shoplifting.

Walmart, Target, Dollar Tree and other major retailers have warned of rising rates of theft plaguing stores across the United States.

But one company seems immune to the problem: Costco.

The warehouse chain’s chief financial officer, Richard Galanti, said Thursday that shrinkage – or inventory losses due to theft, fraud or other causes – was largely unchanged.

“We saw no major changes in shrinkage,” Galanti said in an earnings call. “We were lucky in that regard.”

Galanti said the company saw a slight increase after rolling out self-checkout three years ago, but those rates have since returned to the longer-term trend.

Target, meanwhile, said its shrinkage losses will reach more than $1 billion in 2023, up $500 million from a year ago. Walmart’s CEO said in December that stores would close if the theft didn’t slow down. Dollar Tree said this week it was considering locking down more merchandise in stores as it faces a growing shrinkage.

Overall, theft contributes to about $95 billion in losses each year for US retailers, according to estimates by the National Retail Federation, an industry group.

So what does Costco do? Here are four strategies that can deter theft in its stores.

Costco collects personal data about its shoppers

Costco requires a membership to shop there. To register, buyers must pay an annual fee and provide their photo, home address and other identifying data.

Shoppers are likely less likely to steal when a store has this level of personal detail about them.

Stores prevent shoppers from entering without a subscription

Costco is strict on its membership rules. Shoppers must scan their membership card to make purchases and display them to enter stores.

Employees posted at the entrance to each store check cards to ensure that a paying member is with any group of incoming shoppers.

“By strictly controlling entry and exit and using a membership format, we believe our inventory losses (shrinkage) are far lower than those of typical retail operations,” Costco states in its annual report each year.

Costco asks shoppers to show receipts at checkout

Employees are also stationed at store exits to check that receipts match items in customers’ baskets. Every receipt and every basket is verified.

A Costco receipt contains a lot more information than meets the untrained eye, employees previously told Insider. There is a code to indicate that the receipt was printed that day; a total number of items sold; initials of supervisors on major purchases; and codes for checking bulky items like paper towels or cases of water.

Large objects are harder to steal

A common strategy for retail organized criminal networks is the “push-out”, in which a thief rolls a cart filled with stolen goods towards a vehicle waiting outside. But the Costco store layout and receipt checks (and queues to leave the store) make this approach much more difficult to pull off.

And while bulky items like laundry detergent and personal care supplies are popular targets for organized crime networks, stealing one or two at a time isn’t as profitable if the goal is to resell the merchandise. on line.

Even small expensive items that can usually fit in a pocket or be tucked away in a cart are usually displayed and sold in oddly oversized packages that are too big to easily conceal.

In short, Costco is better able than most retailers to control its retail theft losses through some key strategies that are core to its business.

Leave a comment