You can be stopped from going to the places where drugs are dealt. You can also be stopped from spending time with anyone else wearing a tracking device.
The devices are now able to constrain you not only to specific locations, but also to certain locations at certain times of the day. You can be at home, go to work, and go to your local store, but the store and the workplace are only "open" to you at specific times, and you can only go there by specific routes.
Deviate from the route, or leave the locations, and the police are called to pick you up. Get picked up too many times, and you lose the limited freedom of being out in the world and go back behind bars. So there's plenty of incentive to play ball, and you're not exposed to the other criminal elements in the prison or costing the state nearly as much money while you're out in the world. You're also able to earn your own money, buy and cook your own food, and share the burdens of housekeeping and child-raising.
Stealing from shops only works if you expect to avoid getting caught, but since the police will know exactly where you are at any given time, your alibi is going to be a bid harder than usual to fabricate.
Prison is only about punishment from the point of view of the victim. From the point of view of society, it's about protection of society from those who refuse to conform to certain laws and the deterrence of others from adopting a similar behaviour. The best deterrent is the one you don't have to use, or failing that, the one that doesn't bankrupt you. We shouldn't spend hundreds of thousands of dollars per year per inmate for the pleasure of hurting them back, even though the victims would like it if we did. The only legitimate reason to spend that much of the taxpayer's money to constrain someone is it they're a danger to society when you leave them their freedom.