Retail shrinkage is a critical issue demanding immediate attention. In 2022 alone, it cost the industry a staggering $112.1 billion, and it shows no signs of abating. And what is driving these losses? External theft, internal theft, and operational errors—all made worse by poor hiring practices and high employee turnover.
Retailers know that staffing mistakes play a significant role in shrinkage. As we move into the busiest shopping season, now is the time for businesses to rethink their hiring strategies. The right people can help prevent theft, and the wrong ones can make it worse. While employee turnover impacts shrinkage, hiring smarter helps with loss prevention and there are actionable steps that retailers can take to reduce theft and boost store security.
What Shrinkage Really Means for Retailers
Shrinkage not only results in a financial hit but also significantly impacts employee morale, customer experience, and store safety. External theft like shoplifting or organized retail crime, which comes to the forefront of shrinkage discussions by retail management, accounts for approximately 37% of all shrinkage. Internal theft (or theft from employees or vendors) adds another 29%, followed by process and control failures (26%), with the remaining percentage coming from small or unknown operational mistakes. Put another way, 63% of shrinkage is due to internal parties and processes completely within the purview of an organization.
But this problem is compounded and complex. Retailers also must deal with rising crime rates and even theft-related violence. This is why hiring the right people and keeping turnover low is crucial. A well-trained, engaged team can significantly reduce shrinkage.
The Connection Between Hiring and Shrinkage
Retail employee turnover is notoriously high. In the US, the retail industry has a turnover rate of nearly 60 percent—much higher than the national average. This constant cycle of hiring, training, and losing employees creates an environment ripe for shrinkage. Untrained, disengaged employees are more likely to contribute to shrinkage or not care about following loss prevention procedures.
Seasonal hiring, especially during the holidays, only adds to the problem. In the rush to get more staff, retailers often skip thorough vetting. The result? More theft and less effective security.
The bottom line: Bad hiring practices lead to a workforce that does not take loss prevention seriously at best, and may even actively contribute to internal shrinkage, costing retailers exponentially.
So What’s the Fix?
Start by rethinking and examining your hiring processes. It is not just about filling roles fast—it is about finding the right people to support your security goals. Here are easily implemented best next steps:
- Leverage Smart Hiring Tools: AI-driven hiring tools are a game changer. They help retailers screen candidates more effectively, finding people most likely to stick around. These tools also can highlight candidates with strong ethics and a commitment to security.
- Focus on Retention, Not Just Recruitment: Hiring for the long term reduces turnover and shrinkage. When employees stay longer, retailers spend less time on training and more time on keeping stores secure.
- Invest in Employee Training: Regular, hands-on training is critical. Retailers need to go beyond basic customer service training and focus on theft prevention and security protocols. Employees who understand the importance of loss prevention are more likely to follow the rules and stop theft before it happens. Re-evaluate and review your employee training.
- Create a Culture of Accountability: By fostering a culture of accountability and rewarding staff who contribute to loss prevention, retailers can simultaneously cut shrinkage and reduce turnover, creating a positive work environment.
By closely monitoring hiring trends, you can take proactive steps to ensure you are attracting the right talent. For example, the Frontline Worker Index recently revealed a significant drop in the retail resume index—down 74 points month over month—indicating fewer people actively searching for jobs. At the same time, the job posting index continues to rise, particularly as the holiday season approaches. This disparity highlights a more competitive hiring landscape.
To adapt, you will need to finetune your hiring strategy. Best next steps include:
- Start by optimizing job postings with clear, engaging descriptions showcasing your company’s unique benefits.
- Offering competitive wages and attractive benefits will also help you stand out to top candidates.
- Streamline your application process to reduce barriers and encourage more qualified candidates to apply, giving you more power to select the right qualified candidate for your team.
By staying informed on these trends and making strategic adjustments, you can position your business to hire effectively, even in a challenging labor market. Technology is a huge help when it comes to loss prevention. Tools like RFID tags, enhanced surveillance, advanced inventory management platforms, and AI-supported systems help detect internal and external theft. And the best part? These solutions provide real-time data so retailers can act fast before shrinkage becomes a major problem. But tech alone will not solve everything. Pairing these tools with a well-trained, engaged workforce creates a robust strategy for preventing theft and improving profitability.
Thad Price is CEO of Austin-based Talroo, the multi-award-winning talent matching platform for enterprises designed for sourcing essential and hourly workers.