Shrinkage is the loss of inventory that can be attributed to factors
including employee theft, shoplifting, administrative error, vendor fraud,
damage in transit or in store and cashier errors that benefit the customer. Shrinkage is the difference between recorded and
actual inventory.
Causes
The main causes of
retail shrinkage are employee theft and shoplifting. Employee theft accounted
for 43.7 percent of all shrinkage in 2010, according to the National Retail
Security Survey. Shoplifting made up nearly one-third, or 32.6 percent of
shrinkage during the same year. Accounting errors and vendor fraud made up 18.3
percent of the remainder. These accounting issues basically mean you have to
account for lost inventory even though it didn't physically leave your store.
Customer
Service
One of the best
deterrents against shoplifting is good customer service. The elements of
friendly, helpful service naturally conflict with the accessible environment
shoplifters want. Greeting customers when they come in the store makes them
aware you notice their presence. Approaching them to ask if they need help and
checking in periodically helps prevent them from feeling comfortable enough to
steal. An open floor plan where service associates can see much of the store
from central locations helps as well.
Technology
Technology also is
used to deter stealing. Security cameras and electronic surveillance tags and
scanners are among the more common tools used to prevent shoplifting.
Detectable security cameras alert would-be shoplifters that they are being
watched. They also allow store personnel to either watch activity live or have
recordings for use in prosecution. Electronic tags and scanners are used to
signal loss prevention employees when someone tries to slip out the door
without paying for an item and having the tag removed.
Preventing
Non-Shoplifting Shrinkage
Minimizing or
eliminating employee theft is a challenge. Building a trusting environment with
a motivated work force is the ideal starting point. If employees are motivated,
fairly paid and empowered, they are less likely to feel compelled to steal.
When you have a problem with internal theft, you may have to institute bag
checks and other measures to stop thieves. This goes against the trusting
environment and can demotivate staff. To prevent accounting errors and fraud,
employees need to accurately count products when they arrive and compare them
against what the computer says they should receive.
Importance
Inventory shrinkage levels vary by industry. Generally, levels in the 1
to 5 percent range are ideal. Maintaining a low shrinkage rate allows you to
stick to quality customer service and employee treatment standards. Effective
service and motivated employees are core to success for many retail businesses.
When shrinkage becomes a problem, you face a difficult decision in designing
security measures that don't alienate loyal c
