Comment by ChuckMcM
13 years ago
Tide as a poor man's bitcoin.
TL;DR version - Laundry Detergent is pretty fungible, everyone needs it, and its difficult to trace, unscrupulous retailers will buy stolen tide for cash.
This situation provides crooks with a couple of benefits, one they can separate the money trail for selling drugs, after all who thinks this looks like a drug buy:
Alice goes to grocery gets laundry detergent;
Bob sells stolen detergent to a grocery for cash.
No way to connect Bob and Alice until you add:
Alice goes to grocery gets laundry detergent;
Alice gives Detergent to Bob for drugs.
Bob sells stolen detergent to a grocery for cash.
Now you can connect them and see the drug deal. Hard to get a warrant to search Bob's car for laundry detergent.
> Alice goes to grocery gets laundry detergent;
No, Alice steals laundry detergent. The jugs are going for $5-$10 on the street, but $20 in the store. Nobody is buying the stuff from the store unless they're doing laundry.
It's not really like bitcoin. For one thing it does not broadcast to the whole world whenever it changes hands.
I have no idea how to reconcile this scenario.
Can you explain it in more detail?
If alice is buying $100 worth of Tide, how much $drugs does she get for her $Tide?
How much $cash does Bob get for his $Tide when he sells it back to the store?
How much $Profit does the store get from the $Tide bought from Bob?
I like Dan's explanation too but perhaps more directly.
Lets say that Tide is $20/bottle so $100 is 5 bottles. She then exchanges that for 5 tide bottles worth of drugs.
The value of the drugs is, by definition, 5 tide bottles.
The article discussed the value of buying stolen tide at a discount against retail in order to get better margins on their sales. The article claimed that the margins were roughly 150% better ($5 vs $2) although that number may have been made up by the author.
Bob prices his drugs in units of Tide bottles, the Store buying stolen tide establishes the exchange rate for Tide to Dollars. There is a 'posted' exchange rate of dollars to tide bottles, although the argument talks about people stealing Tide. This becomes low cost because apparently the store staff is unwilling to call the police, and the police apparently have issues because the monetary numbers are low enough that the crime is a misdemeanor rather than a felony.
So in our scenario Alice is risking getting arrested for shoplifting by stealing Tide bottles, Bob is risking being arrested for drug dealing or trafficking in stolen goods, the store is risking sanctions for buying stolen goods.
The entire point of the article was that because there is so little risk, this process of stealing Tide to buy drugs flourishes as actors in the system arbitrage the risk for cash (or drugs).
Alice steals $100 worth of Tide.
Alice doesn't care how much drugs she gets for that, because shop lifting is easier than prostitution and has lighter sentencing than robbing houses.
Bob sells his bottles for $5 each. That means the store can either sell at a big discount for friends, or can make more profit. The margins are not good on Tide.
This is in the article on page 3.
>Alice doesn't care how much drugs she gets for that
I think your explanation is wrong.
Alice would certainly care how much she got for $Tide, else she wouldn't see it as ($).
Bob is the lowest common denomiator here in that Bob must know that he can get $xY for $Tide from the store... whereas he is going to give minimal value for $Tide to Alice.
This is not only how Bob $Profits, but also how Bob lays low from the Law.
2 replies →
And if you get sent to prison you can always exchange Tide for canned mackerel: http://online.wsj.com/article/SB122290720439096481.html
Real TL;DR version: journalist got trolled.
Or publication got lazy and ran a lightly-edited PR release paid for by Proctor and Gamble.
I can't figure out why the unscrupulous retailer is buying Tide from anyone except P&G. Except that he knows Bob is up to something and willing to assist Bob.
Quote from the article: "Despite its popularity, Tide is not a big moneymaker for stores. P&G’s proprietary surfactants and enzymes are relatively expensive to produce, notes Bill Schmitz, a Deutsche Bank analyst, so Tide’s wholesale cost is steep. Only so much of that can be passed on to customers. “It’s so tight,” says Schmitz of the profit margin. In general, a retailer clears just a few percentage points on a Tide purchase. A store that charges $19.99 for a 150-ounce bottle might claim $2 in profit. But if it buys stolen bottles for $5, that jumps to $15."
"A few percentage points"? $2 in profit/$18 in cost is over 10%. That's nothing like the ~1-2% grocery store profit margin which I think of when I hear "few."
Quoting one source: "Total pretax profit for the industry in 2009 was about $5.2 billion," and "Convenience stores’ gross revenue for 2009 was more than $505 billion." "While the average gross revenue per store for cigarettes was about $576,354, the gross profit on those sales was closer to $89,923. Cigarettes are the second highest-ranking profit producers for convenience stores, after nonalcoholic beverages, which provide each store with about 18 percent of its profits." "Motor fuel [...] provides a gross profit margin of only about 6.4 percent"
That puts detergent a bit under the 15% margin for cigarettes, but a lot higher than the margin for the store as a whole, and higher also than the margin on motor fuel.
This is covered in the article. If the retailer's supply was exhausted by theft, their tracking system fails to alert them to reorder in time. They're in a bind and can't get supplies in time, so they turn to the local suppliers that very likely are selling them back the stolen goods.
I think 'barter' would be a better term to sub this up.
a) Why would anybody sell drugs? Answer: Money.
b) Why would anybody need money? Answer: To buy some thing useful called X. If X is something like detergent, sugar, wheat even more better.
a) and b) imply in many cases it makes more sense to trade drugs for X than directly with money.
Drug dealers aren't bartering for Tide to use themselves, they're selling the stolen bottles back to stores. So it's not that.
Thanks for the TL;DR version
Thanks for the TL;DR version
Thanks for the TL;DR version