According to a recent Global Retail Theft Barometer (report), Americans will shell out an additional $423 per family this year to account for the theft that occurs throughout the supply chain in various retail shopping segments. This number for America is higher than the $186 global average, but I guess that shouldn’t come as a surprise given the relatively higher cost of goods and income/expenditure patterns here in the US.
Theft Doesn’t Just Hurt Stores
People often think it’s only hurting a store when they steal or know someone else who is. For instance, we used to be friends with someone who was actually very well-off, but they had this penchant for doing some sort of return/cash scam thing with clothing stores that we never fully understood. The way she had explained it, she’d go in and make a few hundred bucks returning stuff that she never bought somehow (I guess stealing it first?), and she didn’t seem to have any remorse or fear of getting caught. It was rather bizarre since she was easily making $200K per year and that’s not the “usual suspect” I normally think about when it comes to retail theft. But her justification was that it’s just these big corporate outfits that don’t even notice – it’s “noise” to them. Well, this recent report reiterates that we all pay for this in one way or the other. Obviously, supply chains have a particular cost of goods sold (COGS), of which, theft or “leakage” is built in. They then target a particular profit margin, see how that’s matching up with demand, and set a price to optimize their profits. If there were no theft, we’d be paying less. Hidden costs for these malls and clothing chains includes security measures, technology, guards, legal issues dealing with prosecutions and counter-suits and more.
Other Hidden Costs in Life
This got me thinking about all the other hidden costs we pay in life that aren’t directly related to the good or service we’re paying for. Right or wrong, we’re all also paying for the following:
- Car accidents, Thefts and Lawsuits – Car insurance premiums are often pretty significant budgetary items, running into the thousands of dollars per year for a typical family. Why’s it cost so much even if you’ve never caused an accident and are unlikely to do so in the future? You’re basically subsidizing all the bad drivers, drunk drivers, thieves and careless accidents that occur on a daily basis in order to smooth out the big events. A few thousand perfect drivers are subsidizing the one idiot who killed a family by running a red light which resulted in a multi-million dollar settlement by the insurance company. While you may feel it’s unfair, and you’re forced to carry the bare minimum insurance, it’s a necessary burden. Because on a bad day, that guy or that family could be you.
- Health Care Insurance Premiums – Usually the people who complain about the premiums are relatively healthy people who “consume” very little service/cost from the system. They don’t complain as much though when they’re a heavy recipient. It just works that way, that the young. healthy generation is pretty much subsidizing the older and less healthy population. Now, some of that risk is factored in by way of higher premiums for the more risky demographic, but for say, employer-sponsored health-care, we’re all paying the same. And because my company employs as many young/healthy people as it does older/risky people, we’re all spreading that risk around in our monthly contributions. So, for now, I’m a financial loser, but in 25 years (if corporations are even covering their employees any more), I may very well be on the receiving end.
- Medicines – While branded medications seem expensive, the reality is that the cost is reflective of the massive financial burden associated with testing and bringing a new drug to market. For every blockbuster that eventually makes $1 Billion annually, there may have been 5 dropped from Phase 2, 10 dropped from Phase 1 and many others that didn’t even make it that far, costing several Billion dollars up-front which was never recouped. That’s why companies are always doing all they can to identify the best drug candidates and knock out the losers early, but sometimes, you just can’t tell without expensive human clinical trials. The price of progress…
There are surely dozens of other similar costs I’ve missed. But it makes you wonder – imagine if everything “just worked”? If we had no theft, no drug/alcohol/tobacco addiction, no frivolous lawsuits and more…what would things really cost? That’s a parallel universe of course and doesn’t reflect reality on Earth and perhaps relatively speaking, it would be a wash in the end (since we actually provide employment to people who deal with all this stuff, so the economy would be lacking jobs), but it’s interesting to ponder.
What Are Some Hidden Costs that Bother You?
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