Furthermore, management can require employees to electronically sign any checklist, form, or report to further increase employee accountability and reduce human errors. Shrink captures the loss of inventory from a variety of factors, including employee theft, shoplifting, administrative or cashier error, damage or vendor fraud. Today, average shrinkage in retail is calculated in the billions of dollars each year. It is also on the rise, by lone operators and criminal enterprises alike. Internal employee theft and “sweethearting” also plays a part in the loss of revenue for big retail brands. For all the aforementioned reasons, shrink is an issue retailers must address head-on.
- Additionally, after completing all checklists and tasks, you can require employees to submit an “end of day report”.
- In addition, real-time data analysis triggers alerts for suspicious activities, such as unusual inventory activity or transaction anomalies, aiding in immediate loss prevention.
- So, you may be asking yourself, how do I combat these three areas of shrinkage, and thus turn that 2% into a big fat zero?
- Is there a way they can deter thieves before a crime has been committed?
- It can be challenging to detect and prevent cash skimming without robust security measures.
Retailers, financial analysts and accountants might speak of theft and loss, but they use the term “shrink” synonymously. Henry David Thoreau was quoted as saying, “It is not what you look at that matters, it’s what you see.” Today’s issue of retail theft and violence will not be resolved by looking at financial shrink percentages. We, as a society, need to see what is happening and focus on correcting the root cause of these crimes.
How to Fix Retail Shrinkage
When shopping on online marketplaces, consumers should be wary of buying Zyrtec, 60 or 90 count, Allegra and Claritin. Other OTC drugs that could be stolen goods include Prilosec, Nexium, CQ10, Advil, Tylenol and Prevagen, the sources said. In 2022, one retailer lost $2.9 million worth of allergy medicines alone, the sources said. “It keeps going back to the lack of accountability, and the massive profitability that criminal actors are experiencing as a result of the fact that they can hide behind their computer screens,” she said. I’ve been with this fantastic team since 2016, and I absolutely love helping Shopify merchants like you thrive in the world of eCommerce. My expertise in marketing and optimizing operations ensures that our clients get the best possible results.
Have an Intelligent Return and Exchange Policy
Anti-theft signage also helps create a sense of boundary inside the store. Plus, signage can effectively state or deliver what the consequences of shoplifting can be. By putting anti-theft signage across the entire store, retailers effortlessly give warning to potential thieves from acting against the law. Physical security works to protect business personnel, software, and hardware, as well as data from behaviors, actions, and events that could cause loss or damage to a retailer, company, or business. This also includes immediate protection from fire, typhoons, flood, burglary, theft, and such.
Regain Control in High Employee Turnover Environments with InstaKey
The employees of the store are often the first line of defense in stopping shoplifting as well as return fraud. Employee training should cover all forms of theft, including internal theft and return fraud, with procedural information on what to do in each scenario. According to the National https://business-accounting.net/ Retail Federation, retail shrink costs businesses more than $94.5 billion in losses with the average retail shrink percentage at 1.44 percent in 2021. And while some shrinkage is unavoidable, retailers typically want to have a total shrink percentage of less than one percent.
The collective financial impact of loss due to shrinkage tops $50 billion a year. That’s why preventing this profitability plague is top-of-mind for store owners and facility managers across the country. Retail accounting, on the other hand, values inventory based on retail price.
Even with shrinkage lowering to 1.44% in recent years, that number translates to over $94 billion lost. Sometimes goods are broken without any theft or administrative error being at fault. As well as easy-to-remember, repeatable processes, provide POS technology that makes inventory management easier and doesn’t force them to use manual methods. You want managers and keyholders to process them, but in busier periods, like the holidays, you might be comfortable with cashiers processing returns and refunds. In that case, your POS software should make it easy to change permission. If you don’t display your policy, customers have to call you with their questions.
Your shrinkage is whatever discrepancies arise between the sales and orders you have recorded and the actual value of the inventory you have on hand. Whether it’s misclassifying a product, a typo in a name, scanning a shipment twice or incorrectly entering numbers after a cycle count, if your records are off, your reorder and revenue calculations are off. You’ll also get more buy-in from employees if they are part of your defense against shoplifting and theft. RF works by having a transmitter and receiver at the door, and every item in the store contains a concealed RF tag. If a customer tries to remove the tag, the ink spills out and ruins the item they’re trying to steal.
It should be easy to spot minor or significant discrepancies, see which employees are logged into your system, and what transactions they approve. For example, the crime of petit larceny is charged in New York when an individual steals less than $1,000 worth of goods. But they can also receive probation, community service and fines, in addition to restitution.
Failing to properly prepare for internal theft leaves you vulnerable, however. After all, employee theft makes up 90% of significant theft losses, with businesses losing $50 billion per year as a result. There are almost 300,000 retail outlets in the UK and 3 million people work in retail.
Shrinkage can occur at any stage in the retail cycle, but the most significant percentage of product loss is due to shoplifting and employee theft. Discover what industry research reveals about what causes shrinkage in retail. Employee training reduces retail shrinkage by creating a more vigilant and knowledgeable workforce. Educating employees about the various types of shrinkage, including theft and errors, raises their awareness of potential risks.
So how are experts in the retail industry tackling this shrinkage issue to ensure profits are high? We’ve done some investigating and spoken to some of the world’s leading retail companies to understand how they combat shrinkage on a daily basis. Retail businesses will too often dismiss shrinkage as an unavoidable cost.
Inventory shrinkage is when you lose inventory due to factors other than sales. It can generally be defined by the difference between your inventory levels on paper and your actual inventory what causes shrinkage in retail levels. Every retailer across every industry is impacted by shrink, with organized retail crime being one of the industry’s prime concerns (but not, notably, the only cause of shrink).