Friday, August 26, 2011

How Much Retail Shrinkage Do You Have?

According to the National Retail Federation, in 2010 Retail Shrinkage rose to 1.58% of all retail sales.

(Note: Retail Shrinkage is the difference between your physical inventory and your "booked" inventory, divided by your total sales)

What is more interesting is to what NRF attributes all that shrinkage.


  • 44% is due to employee theft

  • 33% is due to shoplifting

  • 23% is due to other errors (billing, receiving, cash register, etc.)
Think about that...

Two-thirds of your shrinkage is caused by your staff either intentionally or unintentionally.

Here are some ways to shrink your shrinkage.

Shoplifting
Make sure you greet each customer coming through the doors. Shoplifters love anonymity. Saying hello can sometimes be the best deterrent. Wal-Mart has an amazingly low 0.75% shrinkage and I'm sure those greeters at the front door play a part in that.

The next best thing is to be available. If your staff is always walking the store working with customers then would-be shoplifters have no place to hide. In fact, make sure you design your store so that there are no hidden places. And if you cannot avoid them, visit them often. Just as a policeman on patrol deters crime, an employee on patrol deters shoplifting.

Video cameras are helpful, too, but they come with a couple downsides. As a deterrent, they have to be visible. Would-be shoplifters have to know they are being taped. But that can cause some of your better customers to feel uneasy and not want to shop in your store. Plus there is the added expense of the system. But if you are in a high-crime area or sell a lot of high-ticket items that can be easily pocketed, cameras can be your best investment.

Employee Theft
The three biggest reasons employees might steal...


  1. They are thieves to begin with - you should have done a background check!

  2. They do not feel any ownership of the store.

  3. They are pissed at you and want to get back at you.
Take care of your staff. Empower them to make decisions for the store and they will feel ownership. Reward them for great behavior. Treat them with respect as human beings. Be aware of their time, their needs, their families. When you talk about the staff as "we" instead of "they" your staff will feel like part of the family and most of them will not steal the merchandise.

Errors
Check, double check and triple check.

Check that the order confirmation from the company matches the order you requested and entered into your computer. (You do request order confirmations, don't you?)

Double check that the packing list matches what is in the boxes.

Triple check that the invoice matches what you actually received.

Our shrinkage has averaged about 0.3% for our sixty-two year history. With an inventory as deep as ours, a store as large as ours, and the number of employees we have, we're pretty happy about those numbers. What is your shrinkage?

-Phil Wrzesinski
www.PhilsForum.com

PS For more on keeping your inventory under control, check out my free eBook Inventory Management. Thirty seven businesses downloaded it last week to help improve their cashflow. What do they know that you don't? (Hint: download the book and find out)

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