Little Losses – Fraud, Theft & Mistakes

One of the aspects of business that crops up that most people who don’t own / run a store and/or deal with the accounts of a business do not realise is the amount of ‘little’ losses a business experiences. These come from a variety of areas, and I”ll discuss the 3 major one’s we see.

Fraud

I’ve written about online fraud before, the stolen credit cards that are used to ship products to others.  It can range from the simple stolen cards to the more elaborate fraud of having an order shipped and then declaring it not desired / charged-back to us.  The vast, vast majority of these orders are international and it’s why a lot of businesses don’t deal with non-domestic orders.  For us, it’s borderline about whether International orders are worthwhile and it’s only because we generate a small amount of additional ‘international’ business from our videos.

Overall, on a yearly basis we probably lose about $500 on average to these cases.  Let’s just say that we get hit by a significantly higher number of fraud attempts than this.

Theft

When we were a pure online store without events / open houses; theft was only something we ever had to worry in 2 instances – Conventions and Employee Theft.  In both cases, those numbers were significantly lower than a normal retail store.  Probably about $100 in total a year.

Now that we have Open Houses, we’ve had to significantly increase internal security (including the security cameras in the warehouse) to deal with potential (and real!) theft during these periods.  We’re still waiting to see what the numbers are like, but we’re likely to hit a few hundred at least we would think.

Mistakes & Errors

Mistakes and errors are the last major area for losses and sadly the most common.  There are 2 major areas – internal & external mistakes.  Most internal mistakes can be attributed to shipping errors (orders sent to the wrong address or the wrong product (or insufficient product) sent), etc.  Many of these can be (and have been) reduced by both technology and processes, but we still make a couple of mistakes a month.  It’s the nature of the beast, though we are always working to get it lower.  Generally, the cost per month is maybe a $100 (shipping cost back and forth, etc).

External errors are errors that we end up eating the cost of through no fault of ours.  These can range from board games that are replaced by us at cost and publishers never replacing the defective parts with us (rare, but it happens), damaged games in-transit due to shippers and distributor errors that cost us money.  These could range from bad shipping errors to math errors in the invoices (it happens) that we don’t catch. Again, these are rare so maybe a few hundred a year.

Conclusion

Not much really, but for us; all these losses add up to about a $1000 dollars at most, maybe a little more or less each year.  On the other hand, a $1000 is a lot of work – that’s $3000 at least in product sales, probably a good 60 orders more that we have to get a year just to break-even.