Resolved Or Solved? How Planning Can Make New Year’s Resolutions Work

Have you ever noticed how we all anticipate a New Year will bring new and exciting things into our lives (or businesses) but after the first month we often realize that nothing is new or improved or better? In fact, we may be disappointed as the year progresses that problems we hoped would be resolved (read, “magically disappear”) are still there. We make resolutions at the beginning of the year that are meant to help “improve” or “fix” something we know is an opportunity but then we slide back into our routines and those “problems” don’t get any better.

     In retail, those problems may involve personnel issues such as hiring and retention. Concerns may be for store profitability including expenses, sales, and shortage. Maybe concerns are over what may be classified non-controllable expenses, building rent, taxes, etc. Wishing problems away is not a solution nor is a resolution. If you want to resolve to solve problems you have you need to create an actual action plan and then take a partner(s) to stick to it, often one of your store managers or department management team. As you look at the areas of opportunity and break them down you can find that correcting one area can make a significant impact on other areas. Let me give you an example of what I mean.

e.g You identify that you have an issue with excessively high merchandise shrink.

      You need to identify all of the possible causes of the shortage problem.

  1. Do you use retail anti-theft devices?
  2. If you use a Sensormatic security system are you tagging everything?
  3. What areas are your highest shortage departments and are they vendor serviced?
    • If they are vendor serviced are you checking in and out vendors?
    • Are you improperly tossing out of date merchandise rather than receiving vendor credits?  
  4. Is employee theft causing shrinkage you haven’t seen?
    • Do you complete pre-employment background checks before hiring?
    • Do you require pre-employment drug screening?
    • Do you know the signals to look for that would indicate an employee may be stealing?
  5. Do you control your compactor and who throws out the trash and if you have a baler who is crushing cardboard?
    • Employees and vendors who are stealing and have access to a compactor will toss out the empty packages they would otherwise leave behind.
    • Uncontrolled compactors mean anyone can throw away anything that looks like trash but some small items can be overlooked and thrown away and cause a shortage.

These are not all of the contributors to a shortage. You can continue to drill down and I would encourage you and your team to do so. The project doesn’t stop there. Once you have identified the issues you need to create an action plan to address each concern. The plan should also include benchmarks or measurements that will show you are doing what you said you would do. There must also be deadlines for completion.

     There are areas that will cross over and can be beneficial to each section. Let’s say that you have focused on shortage and you also believe you have a hiring/retention problem. It seems people are going in and out like a revolving door. You have to ask yourself are you hiring the right people in the first place. If your employees keep leaving it could be they have stolen from you to get what they want and they are leaving before you catch on to them. If you start doing background checks you will be more selective in who you are bringing on your team. You may have been hiring a lot of people with criminal records or spotty work histories. Being selective and hiring the right people can also build a more dependable workforce. This leads to improved morale, more initiative and a better work ethic overall. Improving your hiring can improve shortage results due to dishonest employee activity.

     Another example of crossover would be compactor controls. Start regulating who is tossing out the trash and you impact retail shrinkage but you may also find that merchandise that was being overlooked is now being stocked more carefully. Overlooked items are getting back on the sales floor. Not only do you reduce shortage you improve sales.

     Wishing the New Year will bring improvements is no way to operate a business. Planning and follow through on those plans will bring about the positive changes you want to see. Resolve that 2019 will be a year of growth and profitable sales! Happy New Year!


          

Loss Prevention Systems For The New Year

For a loss prevention officer, the holiday season is a hard time to be jolly when the busiest shopping season of the year brings with it its shoplifters, crime, and theft.  During the holiday season, the number of incidents involving shoplifting increases considerably, and the losses the store suffers can be devastating to their bottom line.

For any retail store in the United States and across the globe, having a loss prevention system in place or a loss prevention officer in their store can be the difference between having profits or losses during their fiscal year. 

According to recent studies, more than half of retail stores in the United States have stopped investing in their loss prevention teams or systems even though their inventory shrink rate has seen an increase in the last year.  The inventory shrink rate takes into consideration the following:

  • Shoplifting
  • Employee theft
  • Vendor fraud
  • Administrative and paperwork errors

Shoplifting theft accounts for almost 40% of the total theft a store experiences, and even though the amount an employee steals can surpass that of the common shoplifter each instance it happens, the shoplifting theft can be considerable every year.

According to many pieces of research, retail stores lose approximately $35 million a day due to shoplifting or $48.9 billion in a year. Those detrimental statistics in the retail industry are worth considering when many stores and businesses decide whether to invest in a loss prevention system or a loss prevention team to combat the shoplifting in their store.

A loss prevention system expense can be recovered within a short period of time, and if your losses are increasing each year, the time you will recoup the money invested in the system shortens considerably. 

The introduction of a loss prevention system in the store allows your employees to dedicate more time with the customers entering your store, than attempting to catch the shoplifter. The system also allows your store to be protected and send a message to the shoplifters. Shoplifters know where and which stores to target.  If you are a store that doesn’t prosecute shoplifters or doesn’t have a loss prevention team or system, you are vulnerable and can become the target store for many of these shoplifters.


Keep Shoplifters From Stealing Your Holiday Spirit

It’s here! The holiday season and there is a spirit of goodwill that hopefully we all share towards each other. For retail owners and managers the joyful spirit is boosted when sales are good as customers are buying gifts and purchasing foods for baking and holiday meals. For the most part people seem to be a bit more patient towards each other (except maybe in a mall parking lot where drivers fight for the best parking places). It really is the most wonderful time of the year!

Unfortunately there are real Grinches out there who, for their own nefarious purposes have no compunction about committing crime that can steal your holiday spirit or that of your customers. These crooks create havoc for a store by stealing the hottest merchandise on the market or the most expensive merchandise. They may come in and take the latest video games off your shelf. They may be walking out in a new pair of sneakers or loading a couple of bottles of Grey Goose vodka under their coat at $70 a pop and waltzing out the doors. The impact is not isolated to the financial loss you experience from that particular item. The theft of your merchandise has a snowball effect that is magnified through the loss of additional sales.

I like to think of the impact of one shoplifter like the ripple effect of a rock tossed in a pond. The rock makes a splash that disturbs the water. The impact is immediate as the affect is seen with the splash. Then there are the waves that travel out from the point of impact. The water is disturbed far removed from the original landing point. When that shoplifter steals a video game you lose the $60 immediately. This is your cost plus the profit that you would have made. Now a customer comes in who wants to buy that game but it is gone and you lose a sale. You could make the argument you really have still lost only the $60 but wait a minute. You lost this sale and may have lost that paying customer from making future purchases at your store. This is the first ripple. Then no one on your staff notices that the empty spot for the game is there. They assume it was sold and wait for replenishment. How long does the store go before action is taken to replace the game? Now you have no idea how many other customers came in and did not bother to inquire about it because it wasn’t on the shelf? How generous is your return policy? Can the thief bring the game back unopened and get cash or a gift card? Now you are paying for the merchandise you already bought. You lose TWICE! The impact can be greater than even the confines of your store. Does the criminal trade it for illegal drugs and the drug dealer sells it online or to a mom and pop shop where you are undercut? That gift card may be sold online too by the way. In a sense one theft is supporting other illegal activities.

I don’t want to steal your holiday spirit but I do want you to understand that if you are not actively protecting merchandise from shoplifters they WILL steal your spirit and your merchandise. The sad part of this story to me is that many store owners could easily thwart shoplifters through a few relatively easy steps. First and foremost is a purchase of a Sensormatic security system. It is affordable! Too many owners look at it only as an expense and they don’t understand the benefits in shortage reduction. They work and they do significantly decrease theft in the store. The other step is to build a culture of customer service. We talk about it all of the time in retail but it has to be a genuine core principle in a store. Greeting customers as soon they walk into the building with a real hello is a start. Spending time finding out what they are in the store for is the way to sell and help accessorize purchases. The added bonus for the store is the deterrent effect that service has on shoplifting.

Retail crime does steal the joy from store owners and customers alike. The shopper is prevented from buying the special gift that a special person had their heart set on. The business owner is deprived of the merchandise and deals with the lingering effects of the crime. Take my advice protect merchandise with anti-theft devices, a Sensormatic security system and make customer service a priority in your store. You and your customers will truly feel the spirit of the season!


      

Tips That I Wish I Had Learned Before Entering Loss Prevention      

Loss Prevention is a wonderful career choice that can lead to other positions in retail. There are, however tips I wish I had known before I began the job that would have prepared me for the adventure I was about to embark on. I started out in a Loss Prevention Associate position after spending four years as a U.S. Air Force Law Enforcement Specialist and another 2 ½ years earning a Bachelor’s Degree.  I was offered the position and to be honest I went into it with the mindset that this was a Law Enforcement position in civilian clothing. There was nothing that really dissuaded me from the notion as I was taught to catch shoplifters, use closed circuit television cameras and electronic article surveillance equipment. I assisted with employee theft cases but these were few and far between. It was not until later when I had been a Loss Prevention Manager for several years before I started to understand the real role of Loss Prevention in a store. With this is mind there are some things that I would like share with those entering the profession that can be eye opening and prepare them for the job ahead.

  • You are not the retail police – Unfortunately it is easy to fall into the trap of believing you are an arm of the police department. You aren’t. You can and should build strong partnerships with police but you are not protecting the community. Your job is to make your store profitable. You need to learn about stock shortage and all of the ways it happens. Yes, you need to learn to identify, prevent and maybe catch shoplifters. You also need to add to that knowledge how employee theft occurs, how to identify it and investigate it. You also need to understand vendor processes, how to read invoices and credits. You should spend time learning and stocking freight and where operational shortage takes place. Become intimately familiar with cashiering procedures and cash office functions. Each of these areas of responsibility impact store profits and the more you know the better you become at multiple areas of the store.
  • Hiring and Supervision – You may only be starting as a Loss Prevention Associate but if you are smart you will partner with the hiring manager. Ask to be part of the store application review process. Learn to look for the red flags on a candidate’s application or resume that could spell trouble if that person is hired. You can be a valuable partner in helping in the hiring process. As a Loss Prevention Manager you will review applications, resumes and conduct the interviews. You will need to know your company’s hiring process and whether it includes a drug test or background check. While we are discussing it lets also talk about who you decide to hire. Hire people with skill sets that are different from yours. While I would not discourage you from hiring someone with Loss Prevention experience be mindful that that candidate may be more difficult to train. They will bring along training from other retailers that may not be in keeping with your store best practices.
  • Trainer and Leader – Get ready to train others and not just Loss Prevention personnel. You will be training store associates on electronic article surveillance alarm response. You will train cashiers on till tap and short change artist prevention. You will train employees on robbery procedures. You may work with the stock team on how to identify mis-shipped merchandise. Show them how improper stocking affects shortage and inaccurate merchandise reordering. You could be required to conduct new hire orientations. You will also instill in the whole team the importance of customer service as a means of reducing theft but also how it drives sales. As a leader you will request appointments to meet with other managers and discuss operational matters. The more informed you are in how things work the better prepared you can be to help improve operational procedures.

Clearly there is much more that a Loss Prevention professional can add to the store than just being a person who catches shoplifters.

     The core roles and responsibilities of the Loss Prevention team entail the reduction of retail shrinkage and even maintaining a safe shopping environment. You may not be a first responder but you could be the first person called to an accident inside or outside the store. Frequently it is the Loss Prevention personnel who are first called to find a lost car, lost child or stolen purse. You will be the one who has to calm an irate customer. Learn from these tips I am sharing. You aren’t going to be a police officer, you are going to be a Retail Loss Prevention Professional and that is a quite a job! 


Strategies to Keep Black Fridays From Becoming Bleak Fridays (A Focus on Sales, Safety and Security)

Black Friday and the holiday shopping weekend has generally been the time of the year that most retailers are excited about. This is the time when shoppers are going to pull out their wallets and spend money. Deep discounts, doorbusters, even gift bags for the first customers, have been used to entice shoppers to visit stores early. It has been so successful as a marketing tool that stores have even advertised early Black Friday sales in JULY! Unfortunately, it seems that there has been a dark cloud overshadowing this weekend and it is more ominous each year. This cloud is one that can turn a Black Friday into a Bleak Friday if a store owner isn’t prepared for it.

     The black cloud involves the safety and security of customers and retail sales for the store owners. There are factors owners must take into account to keep that cloud from raining on a weekend that should be making shoppers happy and keeping registers ringing. As a Loss Prevention Manager, I have seen to it that my stores have remained safe during the Black Friday weekend but I have followed incidents at other stores where things turned ugly. Customers have gotten hurt rushing into stores. People have fought over doorbuster items that were limited in quantity. I have had to intervene when shoppers argued over not receiving a raincheck for a one-time purchase item. I have also worked a Black Friday when all of the registers went off-line and customers became angry and abandoned shopping carts. All of these can have a negative impact on sales and hamper the weekend that should be one of significant profits for a store.

     Here are some suggestions for preparing your store and employees for the event:

  • One of the things that set customers off is waiting in a line only to find out that a particular doorbuster is sold out. If you have some item you expect will draw in customers but there is a limited quantity, have a ticket for each item. Have someone go through the line as it forms and ask who is there for that item. Pass out the tickets and set aside enough to fill those orders. Continue to do this until you open the doors. If you run out of tickets before you open the doors be honest with the customers who are continuing to walk up and let them know you are out of that item.
  • Consider hiring a security company to provide a presence at the front of the stores to help keep order. A lot of altercations begin outside when people who have formed orderly lines and have waited patiently believe others are cutting in front of them. They are also a great presence to keep shoppers safe as they leave with their purchases to go to their cars. If you don’t want to hire security you can see if local police are willing to make frequent drive-by’s. Another alternative is to have two or three employees mingle with the line, talk about the sale items and even hand out store maps where specific sale items are located.
  • Check all of your point of sale equipment at least a week in advance to try to ensure there are no equipment failures on Black Friday.
  • Have a technician test all of your electronic article surveillance equipment to minimize false alarms and reduce the opportunity for theft to take place.
  • A lot of cash transactions take place on this holiday weekend and it is a good time for counterfeit bills to be passed. Be sure cashiers are using counterfeit pens for $50 and $100 bills. If possible a counterfeit bill detector for each point of sale is a better solution. Know that if you take counterfeit bills your store is not reimbursed or covered by your financial institution.
  • If your store happens to use display cases for some high ticket items, be sure more than one employee is carrying keys to assist customers and minimize wait times (also consider all of the retail anti-theft options available from Sensormatic that can improve security while enhancing sales).
  • Think about offering free coffee or tea to patrons who may be waiting outside for the store to open. You would be surprised at the positive response you will get from shoppers.

By taking the time to prepare in advance and plan out your Black Friday weekend you can minimize safety and security risks. The same planning will boost sales and ensure that your business truly experiences a very profitable holiday.


Combating Shoplifting In Your Business

One of the most prevalent crimes in the United States is shoplifting.  While many state governments and lawmakers have taken a strong approach to combat shoplifting, it is a battle that keeps the retail industry checking their loss prevention measures, and their ability to combat this crime.

According to the National Association for Shoplifting Prevention, (NASP) the retail industry loses approximately $35 million per day. Even when advances in technology have aided the loss prevention team in combating this crime, figures about shoplifting has shown an increase in the average inventory shrink rate to 1.44 percent. 

The average shrink rates take into consideration shoplifting, internal theft, vendor or merchant errors and administrative errors.  And although shoplifting accounts for more than a third of the losses, internal or employee theft is pretty close behind.  An employee that is using the cash register as their personal piggy bank, or an employee that steals merchandise worth hundreds of dollars in one incident can be as detrimental as the shoplifter entering the store and stealing merchandise from the shelves.

How can you prevent or combat shoplifting in your store?

Training – One of the best measures for the prevention of shoplifting is training the loss prevention team and management of the store to spot and react accordingly when witnessing a theft. If a theft is happening and a trained employee is a witness to the incident, merchandise can be salvaged and the shoplifter can be apprehended without having the incident escalate to violence.

Hiring – Background checks before hiring an employee can save you time and money.  An employee with a clean employment record can be hired and trained and become an asset to the business right away. According to the 2014 Industry Training Report, small companies with less than 1,000 employees spent an average of $1,238 per training per employee that year. If the new employee is not properly checked or interviewed, the company might lose money and labor that eventually translates into loses for the business and their ability to grow.

Customer Service – The research regarding this important area in the retail industry is unanimous in their findings.  Better customer service means less theft.  Not only that, but better customer service translates into more profits.  Happy customers can be an asset to any business.  Good PR can mean more sales, more customers and more profits.

Shoplifting System – Installing a shoplifting system in your store is part of a solution to the problem, not a whole solution by itself.  The system will discourage thieves and employees from taking merchandise out of the store without paying, and that is an advantage you cannot do without.

If you are interested in installing a shoplifting system, training your personnel, or using background checks to perfect hiring, call us.  We are a company dedicated to providing stores and other businesses the tools necessary to succeed.


Children shoplifting: how parents are using kids to steal for them and/or kids shoplifting on their own

I was once asked why I kept toys on my desk in my Loss Prevention office. I had two reasons, the first was they were collectible superhero figurines (The Tick to be precise) and the other was to keep children entertained. It is a sad fact in Retail Loss Prevention but there are children who shoplift, there are parents who shoplift and there are parents who use their children to help shoplift. As a Loss Prevention professional, it is not hard to handle an adult who steals. There may be anger, tears, and pleading but these are adults and they made a choice to steal so there should be consequences. What is not so easy to cope with is the child who has to sit in the office while the parent is being processed and does not understand what is taking place. There were many instances when I had to try to keep these young ones entertained as mom or dad were answering questions about the crime, providing personal information or trying to contact a family member or friend who would be willing to pick up the child. Add to the mix a parent who is throwing a conniption fit or making the scenario worse by bawling and wailing in front of the child begging you to let them go “Just this one time and it won’t ever happen again, I promise.” It becomes quite annoying. It also upsets the child who becomes a prop for the parent. The toys were my prop to entertain the children in a pinch.

     It may be hard to comprehend but aside from just shoplifting with their kids in tow, there are parents who use their children as tools or props to commit their crimes. What is worse than a parent who removes a price tag from a purse, straps it over their daughter’s shoulder and walks out with her and the purse? Well, it could be worse when the parent scolds the child and tells her she shouldn’t have done that when the parent is caught by Loss Prevention. Then there are the parents who walk through the store pushing a baby in an infant stroller with the little baby covered by a blanket. What can these doting mothers and fathers do with a cute little baby you may ask? It turns out baby strollers with blankets make great hiding places for designer blue jeans…MANY pairs of designer jeans. Aw gee, let’s not forget one of my all-time favorites, the pregnant mommy who gets more pregnant simply by walking through the store gathering clothing.

     If you aren’t shocked by now it could shake you up to know that some parents not only use their children as props or to disguise their own theft, some will steal while the children steal too. I caught two mothers and their combined five children ALL stealing in my store. The children wandered around areas of the store that interested them and the mothers did likewise. Everyone took their turn cleaning house. I once caught a father and his teenage son stealing jeans in a department store I worked in. It really gave perspective to the term, “Like father like son”… although I think the saying, “The apple doesn’t fall far from the tree” also came to mind. The unfortunate reality is, those cute, cherubic faces and tiny tots may not be just little cutie pies accompanying their mom or dad in your store. It is not uncommon for these youngsters to be covers for theft or potentially cranky crooks themselves.

     So how should retailers handle situations like these to prevent shoplifting family frolics? The number one deterrent to all shoplifters is customer service for everyone. Adults, as well as children, should be acknowledged and assistance offered. Electronic Article Surveillance systems will discourage adults from stealing. And while the systems may help prevent teenaged terrors from 5-finger discounts they will probably not have the same effect on young kids. It is probably not a good idea to try to stop a shoplifter if you do not have trained Loss Prevention Personnel working for you. Bad stops and aggressive shoplifters can lead to costly and/or dangerous situations. Aggressive, non-stop customer service is in order if you have a strong suspicion someone is stealing. Most importantly don’t let yourself be duped by those cute-chubby cheeked darlings. Those families might not be as charming as they look.


      

RFID Technology

For a small business owner, bringing sales to their business is not an easy feat.  It requires lots of hard work and diligence.  For an owner or manager of a retail store, it requires a lot of hard work to be profitable and to prevent shrink and losses in their stores. 

For them, the acquisition of affordable technology and software to help them prevent losses due to shoplifting, shrinkage, clerical or merchant errors is instrumental in having a successful and profitable business.

For many years now, the increased use of technology and the benefits associated with it has been self-evident in many industries, and the retail industry is no exception.

The value and transformation technology has brought to retailers, merchants and customers have been invaluable to them and to their bottom line. Technology usage has allowed them to decreased costs while maintaining better data and solutions that allow them to target specific areas within their business.

RFID systems and software have been around for many years now, but the adoption rates have increased considerably over the last few years due the lower cost and ease of use. Still, small retailers that are struggling financially will be less inclined to invest in an RFID system or any other type of loss prevention system despite needing it most.

The cost associated with acquiring a system that will help prevent losses, and help you target issues in your retail store can help you recover the cost associated with the system within a year in many cases.

Loss prevention systems and the costs associated with them can vary considerably, but businesses have many options depending on what they want the system to accomplish. Here is a technology linked with the retail industry that may be gaining ground with many benefits associated with its adoption.

RFID technology

  • RFIDs systems usage has provided many merchants great ROI and revenue increase within the first year of usage. The capabilities of this system to provide accurate inventory to the store owner or manager of the stores has seen an increase in their revenues while providing customers the merchandise they need and want.
  • RFID technology will allow businesses across industries up to the minute data and reliable inventory data.
  • RFID technology will save expenses where inventory related labor is concerned while achieving better and more accurate inventory data.

Acquiring a  loss prevention system can be daunting in the beginning due to the financial expense the business has to go through, but it is necessary if the business wants to stay competitive and profitable.


Suspect Signs Of Employee Theft? What Is Your Next Step?

Maybe you have seen it before and never gave it much thought, you walked by a cash register and saw a gift card lying next to it. A customer probably just changed their mind, right? Perhaps you saw your salesfloor person wearing a heavy jacket while working but you just attributed it to them being cold all the time. You may notice cash shortages periodically but they are under $10 and some people get busy and make little mistakes, it happens. Then there is the cashier that seems to be really interested in the store and always reports suspicious people he sees. He even asks managers if there might be security camera footage that could be reviewed to see the “suspect” in case they return. There is the saleswoman who finds a lot of empty packages on the floor and reports them to the manager and where she found them so managers would know about theft taking place in the store. These each seem like harmless issues on the surface but could there be something more nefarious going on under your nose? Is something starting to seem a bit curious after all? If you are suspecting something dishonest may be going on in your store what is your next step?

     You may be thinking this would be the time to call the police and report your suspicions. Hold your horses, what are you reporting, a gift card tucked next to a register? A couple of low dollar cash shortages? You won’t get very far with the police and they certainly aren’t going to do any investigation for you. The appropriate step is to contact Bill Bregar at Loss Prevention Systems, Inc. He will walk you through the next stages of what you need to do to look into this further. Sure you are busy and have a million things to do each day but if you suspect theft is taking place something has to be done before it gets out of hand. Then again maybe there is another way to tackle this. Yes, Bill will be happy to talk to you and discuss your case but it might be in your best interest to let Bill conduct the investigation for you.

     Why hire Bill to do the investigation for you? Well for starters Bill served in the U.S. Army as a Military Policeman, a Military Intelligence Officer and he was a police officer.  He is no stranger to conducting investigations. He is a trained and licensed private investigator, skills that are well suited to a successful retail investigation. Bill has also been a Retail Loss Prevention Director at the national level which makes him uniquely qualified to conduct store-level dishonest employee investigations. Who better to have on your side as a detective unless you could hire Sherlock Holmes and I hear he is currently unavailable?

      Are there other signals you might be overlooking that may indicate dishonest activity other than those touched upon earlier? Do you know where to begin looking? Do you know how to look for indications of employee’s conducting fraudulent refunds? What are the signals of sweetheart deals taking place under your nose? You can have an inkling that theft is happening in your store but if you know what signals to look for you can be sure when it takes place. The critical piece to getting your merchandise and/or cash back and restitution is a successful investigation. Loss Prevention Systems, Inc. has training seminars and workshops that can educate you on how employee theft takes place, signs to look for and how you can prevent it. When it does take place you will know what is going on and can call on Bill to be your personal gumshoe.

     Investigating employee theft is no game. Private investigators are a dime a dozen but finding a reputable company that is experienced in retail theft investigations is a more difficult task. Hiring an investigator with the background Bill has may seem to be an unattainable goal. Fortunately for the small and medium-sized retailers searching for a sleuth is simplified with a single stop at Loss Preventions Systems, Inc. Theft is probably happening in your store, the question is, what are you going to do about it?


What is Shrink And What Does It Mean For Your Profit And Bottom Line?

 What is shrink? Obviously, that will depend on the context in which you are referencing it. It may be what happens when we wash a new pair of jeans in hot water. Maybe it is what happens to our household budget when our children get older and require more food, clothing, and school supplies. In retail, it has a different meaning altogether. Shrink is not a downsizing of a store or reduction of staff (although it can lead to those things if not addressed). Retail shrink is merchandise we cannot account for due to any number of reasons. It impacts the profit margin of a store and since those losses directly affect the retailer there are usually steps the store owner takes to try to offset those lost dollars. If not well thought out those measures the store owner takes could hurt the business further. There is a vicious circle that follows and can lead to a store closing down.

     In Retail Loss Prevention we generally identify four primary causes of shrink, shoplifting, employee theft, vendor shortage/fraud and administrative errors. According to the 2017 National Retail Security Survey, approximately 66.5% of shrink is attributable to shoplifting and employee theft combined. 21.3% of shrink is due to administrative and paperwork errors, 5.4% is related to vendor fraud or error and 6.8% was unknown (pg. 8). The same report states that the average retail shrink rate in the U.S. was 1.44% in 2017 (pg. 6). Since this is an average that means there are industry sectors that are higher and others that are a bit lower so where your store may fall can depend on what you sell.

     What mistakes do retailers make when trying to cover the profit losses from shrink? Often they increase prices on merchandise. Those price changes may be a few cents per item or a few dollars but no matter how small the increase regular customers notice those hikes. There comes a point when customer loyalty takes a backseat to customer’s budgets. No matter how minute you may feel a price increase is there is a threshold that customers will finally say enough is enough and they relent and shop at a big box retail store. Some store owners will make up for the lost revenue through reduced payrolls. This may include getting rid of full-time positions and making them part-time positions saving on benefit expenses. Employee hours may be reduced all around with the store owner picking up more of the workload themselves. The impact of this strategy is a blow to employee morale and loyalty. It can also lead to increased employee theft as those employees feel the financial pinch of the reduced hours and feel cheated. Reduced employee hours also means fewer people on the salesfloor providing customer service which results in more shoplifting, ergo more shrink. As you can see taking the wrong steps to address shrink can lead to a cycle that is hard to break and can lead to a store shut down.

     So if a retailer opts not to raise prices what is the resolution to solving the problem of shrink? Retailers cannot afford to continuously bear the costs of shrink. Assuming over 60% of a store’s shrink is incurred through theft then anti-theft measures are a logical starting point. Sensormatic security systems and tags play a critical role in theft prevention. They are proven to significantly cut into theft related shortage. They also help reduce a portion of administrative shortage. If it is tagged, merchandise overlooked in a shopping cart will activate an alarm and be paid for or returned to the store. Requiring vendors to check in and out of the store on a sign in sheet and making them talk to a manager about what they have done that day holds them accountable. Store managers should be doing weekly reviews of vendor credits to ensure they are not losing money for product removed from the store.

     Shrink can cut into your profit margin and if that isn’t bad enough addressing it improperly can make the situation for your store worse. Taking positive steps to address each of the areas where losses occur will improve shortage results. It will make you, your employees and your customers happier when your actions are directed towards the real culprits of shortage.