Although pop-up shops are helping small businesses (thanks to a growing market value of $50 billion), big box stores still reign supreme in many cases. While we’d all like to support locally owned hardware stores, the reality is that chains like Home Depot are still the go-to stop for many homeowners. That said, the renovation retail giant has forecasted lower-than-anticipated sales for the next fiscal year — and you might be surprised by the reasons why.
It was estimated that 809,000 construction machines would be sold worldwide in 2017, which might point to a higher demand for the kinds of equipment (as well as other home improvement products) that Home Depot sells. But according to the company, their operating profit margins are on the decline. Company executives claim that this is partially due to an increase in merchandise thefts.
Inventory shrink is a common problem, but it’s hardly new. However, Home Depot Chief Executive Craig Menear was one of the first to publicly proclaim that the continuing trend may actually have ties to something deadly: the opioid crisis.
By 2022, the global pharma market will reach $1.12 trillion. And while steps are being taken in an effort to reduce opioid use and dependency, the nation has yet to make major changes. With as much as 80% of the population experiencing a back problem at some point in their lives, prescription opioids are still in use. These highly addictive drugs are responsible for a growing number of fatalities throughout the U.S., with roughly 130 Americans dying each day from an opioid overdose.
But while alcohol and other illicit drugs also play a role in the upwards of 15,000 car injury deaths that take place each year, opioids may also play a role in organized criminal activity. When addictions spiral out of control, people may feel so desperate to support those addictions that they steal from retailers to resell.
Home Depot has stated that the company believes the opioid crisis is driving their inventory shrink. Executives even point to a major criminal event involving a group of thieves from Rochester, wherein the group was caught with $1.4 million in stolen goods from Home Depot (and another $15.1 million from other retailers). Other Rochester-area criminal acts, like a 2017 case involving $80,000 in stolen Home Depot merchandise, may or may not have had drug-related ties.
Thieves in Rochester might not be deterred by the risks or even the cold winter temperatures. After all, if hydraulic load cells can operate at -76 degrees Fahrenheit, those determined to streal Home Depot merchandise may be willing to commit their crimes regardless of the season. Home Depot, in response, is determined to learn more about crime rings and to adopt technology that will render certain kinds of stolen merchandise useless. The chain is currently developing and installing tech that would make power tools useless unless they are scanned through Home Depot’s point-of-sale system.
But the real question is: is the opioid crisis really to blame for Home Depot’s problems? Organized retail crime cost American retailers roughly $778,000 per $1 billion in sales during 2018. Certainly, crime is on the rise — but the reasons behind it may not be definitive.
Some critics are quick to say that Home Depot’s CEO has contributed to “opioid hysteria” — particularly because even the brand admits that they aren’t certain as to whether the opioid crisis is really the driving force behind the thefts. On Twitter, the brand faced backlash, with users citing desperate attempts to pass the buck.
Ultimately, it isn’t clear as to whether widespread opioid abuse is the root cause of Home Depot’s inventory shrink. But what is obvious is that the chain will need to step up if it wants to see increased profit gains — and reassure the public that its stocks are a sound investment.