I’m having a debate with a friend abut the value of theft prevention. The question stands that if you were to catch 4 thieves per month using the below figures what would your expected value of theft prevention be?
Problem details: Once 3 items are stolen we consider this a ‘case’. We compile 4 cases per month. Once a case is created we are allowed to ban that thief from the store for 24 more months. Items sell for $10 each thus a case totals $30. Mark up on items is 25%.
What we agree upon:
Each item less the markup comes to a cost of $7.50 and 3 items to a case values the cost of a case at $22.50 ($7.50*3). Stopping a case thief and having them repay the lose for that case means you’ve prevented the loss of $22.50. Then banning that thief and assuming if they were not caught that their thieving trend stayed consistent we valued the bans value at $540 ($22.50 * 24). The total expected value at this point would be $562.5 ($22.50 + $540).
The part we don’t agree on:
The value of recuperating the cost of the stolen items. The proposition is that for every item stolen 3 items are needed to sell in order to recuperate the cost of those stolen items (3 items as an item less markup costs $7.50 and selling 3 items with 25% markup recovers $7.50). Any items that are sold that weren’t used to recuperate loss would otherwise be profit. In my opinion if the theft WASN’T prevented then you sold 3 items to recuperate you would break even at $0 and if you did prevent the theft then you would be up $7.50 from the sale of the 3 items. In either case you are gaining $7.50 it just depends on where you start being either down by $7.50 because an item was stolen or you are at $0 because you prevented the theft. My oppositions opinion is that this ‘resale’ value can be added to the total expected value of a prevent theft.
If anyone has any insight it would be greatly appreciated. Possibly we are both wrong and both miscalculated 😀 Please prove either of us wrong!!