There is little consensus on what constitutes “loss” within the retail world nor how it should be measured. The terms “shrinkage” and “shortage” have been loosely applied to encapsulate some of the areas that generate loss, but they are not terms enjoying a clear and agreed-upon definition across the sector. 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.
In his bestselling book, The 7 Habits of Highly Effective People, Stephen Covey presented a holistic, principle-based approach for solving personal and professional problems. This got the ECR team thinking: what if for “highly effective people,” we read “low-inventory shrink retailers”? What then would be the habits of low-shrink retailers? Read More
The bedrock upon which healthy retailers are built is the supply chain that provides the goods to be sold. A retailer’s competitiveness, then, or lack thereof, is in measurable part a reflection of the extent to which these avenues of supply are cost effective and efficient.
The responsibility of a supply-chain Read More
Few things are as frustrating for a loss prevention leader than discovering a bad packaging design they know will promote retail shrink— a feature which could easily have been prevented if those who created and approved the packaging had included shrink reduction in the initial design criteria.
For example, in a store, Read More
If connectivity in today’s digital world represents “everything,” then surely the opposite must be true of disconnectivity.
As we immerse ourselves in the 21st century and the Internet of Things—the symbiosis between design and device—and live our lives according to the new laws of online and omni-channel retailing that are but Read More
We are all familiar with use of the word “shrinkage” to describe the losses experienced by retailers, although it is impossible to find any industry-wide agreement on what it actually means or the types of losses that are typically included when it is used by different retailers.
For some, it only Read More
Emerging point-of-sale systems technology, including self-checkout, was on full display at the annual National Retail Federation (NRF) conference in January. Among the companies showcasing advances was NCR Corporation, which was also celebrating 20 years since the installation of its first self-checkout solution.
At the show, NCR introduced its new vision-based scanners—replacing Read More
Most retail companies have a department dedicated to maintaining processes and procedures related to inventory management and retail shrinkage. The inventory control department ensures that optimum inventory levels of products are available and accessible to the stores; that stock levels/turnover are efficiently managed; that inventory is maintained in a safe Read More
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 results in lost profits and can have a dramatic impact on the success of the retail enterprise.
The term “retail shrink” or “retail Read More