"When you lock things up, you don’t sell as many of them."

Lock 'Em Up

American pharmacy store chain Walgreens has discovered — quelle surprise! — that locking up its wares in an effort to stop shoplifters has backfired spectacularly.

As Fortune reports, the company has been battling with a major year-over-year decline in earnings, and announced it would close an additional 450 stores across the country this year.

As part of its efforts to turn things around and stop "shrink" — the loss of inventory not due to sales, which includes theft or fraud — the company invested in increased store security.

But the measures proved to be ineffective in the long run. Physically securing wares at its retail stores in locking containers that require a staff member to open them, in a consumer-hostile and widespread practice in the US, proved particularly counterproductive.

"It is a hand-to-hand combat battle still, unfortunately," said CEO Tim Wentworth during a recent earnings call, as quoted by Fortune, referring to shrink.

"But it does impact how sales work through the store because when you lock things up," he added, "for example, you don’t sell as many of them. We’ve kind of proven that pretty conclusively."

Safe Keeping

Apart from treating its customers like criminals, Walgreens is also dealing with far more insidious problems plaguing its retail business, with consumers often no longer being able to afford the goods they want thanks to skyrocketing prices.

The "turnaround of our consumer retail business" has been made "more challenging by the persistent deterioration in consumer discretionary spending," Wentworth said during the earnings call. "Our consumer remains under pressure from accumulated inflation and higher interest rates, and we are seeing continued value-seeking and channel-shifting behavior."

Walgreens came under fire in 2021 after closing five stores in San Francisco due to what it called "organized" shoplifting. At the time, the San Francisco Chronicle found that these claims were unfounded, with a mere 23 shoplifting incidents occurring between 2018 and 2021, according to police records.

During a 2023 earnings call with investors, Walgreens chief financial officer James Kehoe admitted that "maybe we cried too much last year," as quoted by the New York Times, admitting that it "probably" spent too much on security measures to crack down on theft.

In other words, Walgreens executives have a long history of using the perceived threat of shoplifting as a cover narrative for its flailing retail business.

A lot of companies are using theft as a reason why their performance is less than what they had hoped it would be," Columbia Business School director of retail studies Mark Cohen told USA Today in 2023. "Whether they're using it as an excuse, or as a valid reason, it's difficult to know."

In short, padlocking wares at the local Walgreens isn't a viable solution. But Wentworth stopped short of telling investors during the most recent call what the company would do to stop shrinkage, vaguely promising to come up with "creative" solutions.

"More on retail: Amazon Abandons Grocery Stores Where You Just Walk Out With Stuff After It Turns Out Its "AI" Was Powered by 1,000 Human Contractors


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