Two Different Ways to Lose $1.6B

I admit it: it’s unlikely that you’re trying to figure out different ways to lose $1.6B. After all, you have to have a lot of money to lose that much money in the first place. Billions.

I ran across two unrelated stories in the retail space where that sum was central, so I thought I’d call your attention to them. At the very least, there’s a symmetry and a lesson in these stories.

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The first story is here. It talks about how physical retailers are getting fleeced by shoplifters – to the tune of about $30B.  So where’s the $1.6B number?  Read on:

“Oh, and just in case you’re sitting there shedding zero tears for the Targets of the world — this affects all of us.

Since large-scale shoplifting can drive up prices for both the manufacturer and retailer, the US loses roughly $1.6B in sales tax revenue per year (money that could be spent on parks and schools) thanks to ORC (Organize Retail Crime).”

This story was in my head when I read an amazing statistic about Amazon.

While this story is theoretical – it’s not what has happened to Amazon, but what could happen – it demonstrates the difference between what keeps physical retailers up at night and what keeps Amazon up at night.

Here’s the stat: based upon research on how impatient we are (e.g. how likely we are to abandon a page after a second or three), guess how much revenue Amazon would lose if their page loaded just one second slower?

You guessed it: $1.6B.

Target, Home Depot and all the others are trying to lock down theft – something they’ve been at for quite a while. Good luck with that.

Amazon is concerned with page loading speed (among other things), which seems much more solvable as internet speeds increase (thus the irony of last week’s AWS outage).

Companies and investors are always seeking leverage – driving more returns with fewer financial resources. Here, through the symmetry of one number, we see how much easier digital companies will find leverage and cost control than will their physical competitors.

Bonus link on this topic: It’s Easy to Sell Mattresses, Right?

In your business, look for the leverage. Orient yourself toward the digital path.

Good luck!