Chances are, you’re heard someone say “sales cure shrink” or they plan to “outsell their retail shrink.” When this statement is used, the person uttering the words often has no idea what they are saying. Because of this, it’s easy to dismiss this statement. After a while, it may even Read More
In the retail environment, the term “shrink” or “shrinkage” refers to the difference between the amount of merchandise (or inventory) that the company owns on its books, and the results of a physical count of the merchandise. Shrink can come in many forms, and impact a business in many different ways. The primary causes of retail shrink include operational errors, internal issues, and external losses.
• Operational errors can involve POS software glitches, paperwork issues and other operational missteps. These incidents typically occur when processing a transaction, receiving merchandise, shipping merchandise, or taking inventory.
• External losses can involve theft by customers (primarily shoplifting), issues involving vendors, or other incidents that pertain to those not working for the company.
• Internal losses are the result of incidents that involve store associates and other company employees who take advantage of opportunities to steal from the company.
In addition to theft issues, damage, waste and spoilage can directly contribute to a company’s losses.
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When merchandise is stolen or otherwise unaccounted for, it not only impacts the company as a result of the missing product, but also skews our inventories in other ways. This not only impacts current sales, but also affects product replenishment and future sales as well. This can have a significant impact on the bottom line, and a direct influence on the health of the company. Every year, shrink issues cost retail businesses tens of billions of dollars. This is a real and growing problem that affects all of us in a variety of different ways.
This is a much more complicated problem than simply accounting for the theft of merchandise and the direct loss of profits. Managing shrink is a critical aspect of inventory control, which involves the management of the supply, accessibility, storage, and delivery of the company’s goods. As a result, retail shrink reduction strategies require a multifaceted and broad-based approach in order to successfully manage the process.
For the majority of retailers, loss is an inevitable part of doing business. What form this loss takes and, critically, how much it costs the business varies enormously depending upon the type of retailer and the quality of their operations. In addition, the customer experience is often heavily dependent upon Read More
Over the course of four months, students in the UT MSBA program worked closely with asset protection professionals at 7-Eleven to fully understand the organization’s business model and develop hypotheses about how analytics might be used to identify fraudulent activity. Read More
What does a typical inventory control job description entail? Whether the specific title is inventory control clerk, specialist, manager, or coordinator, this vital position is usually responsible for ensuring an accurate and adequate quantity of product in a given organization. In a nutshell, this person manages the inflow and outflow Read More
At a time when store margins are under intense competitive pressure, retail shrink can make or break a retailer’s bottom line. But today’s retail shrink numbers are vulnerable to blind spots and imprecise metrics. In addition, most analysis and response to retail shrink are backward-looking: useful for staffing and long-term Read More
A new report from the Retail Industry Leaders Association advocates a radical new way to think about how to understand and measure retail loss.
Shrink No Longer Cutting the Mustard
There is no agreed definition of what constitutes “shrinkage.”
Most estimates are based only upon measures of merchandise losses where the cause is Read More
Retail shrinkage stems from a handful of causes that are rarely unique to a single retailer. Theft, whether internal or external, and operational error make up the majority of retail shrinkage. The level of severity is usually the primary difference; this can fluctuate due to product type, geography, and store Read More
How to Calculate Shrinkage in Retail
Understanding how to calculate shrinkage in retail is a fundamental but critical concept within the loss prevention profession as well as throughout the retail industry. Ultimately, retail shrink directly results in lost profits, and can have a dramatic impact on the success of the retail Read More
While the perception of shrinkage among the loss prevention industry has evolved from thinking about loss strictly in terms of theft to the consideration of all causes of inventory discrepancy, this change in approach hasn’t necessarily diffused into all of the other teams in a retail organization. Retail buyers are Read More
Integrating an effective loss prevention program can yield dramatic improvements when it comes to mitigating inventory shrinkage. But aligning an LP department appropriately within the structure of an existing company is not an easy thing to do. It is crucial to ensure that the LP team becomes an essential component Read More