Retail shrinkage cancels millions of dollars in sales.  That means all of your hard work for an entire year can be wiped out by a single retail shrinkage loss.                                                            

Our goal as business managers is to get retail shrinkage and retail loss down to a manageable level. We will never eliminate it all together. However, we can push retail loss down and maintain it at a point where we can predict and budget for it.
 
What steps do you take to prevent retail shrinkage losses? 
                                            
Let’s examine some of the common inventory shrinkage problems:

• Pricing errors                           
     – Inaccuracy when pricing               
     – Low price on item                     
     – Incorrect tag on item
• Missing SKU/price tickets                
     – Sales at the wrong price cause lost profit                           
     – Extra time is involved in tracking down correct price
• Receiving errors                
     – Accuracy in counting                  
     – All items must be correctly piece counted
• Illegible or incorrect writing on documents                                
     – Written information must be easy to read                               
     – Information must be accurate
• Padding inventory                        
     –  Gives a false picture of the company’s profits
• Merchandise or product transfer                     
     – When a transfer is not generated, retail shrinkage is created for the sending store or unit
     – Incorrect transfers create retail loss
• Shoplifting                           
     – Makes a substantial impact and can add up quickly
     – Shoplifting must be accounted for through incident reports and then writing off the items                       
     – Losses also include empty packages, price tickets hidden in bathrooms, etc.
• Register discounts                       
     – Discount errors create retail loss 
     – Only management should authorize discounts                             
     – Management must insure the correct amount of discount is taken
     – Deception constitutes fraud
• Fraudulent or improper refunds/returns   
     – Evaluate each situation               
     – No receipt could mean possible shoplifted  
     merchandise                    
     – An associate’s best friend with receipt and no merchandise.

Retail Return Policy

                                           
A good return/exchange policy should contain the following items:                                 
                                            
A time limit for returns and exchanges should be made. For example, no returns are allowed after 30 days.

Require ID

If an exchange is given, the original item should be circled and noted on the customer’s receipt. A new receipt should not be given to the customer.

Receipts should be required (train the customer). If a receipt is not available, then ask for proof of purchase such as a canceled check or charge statement.              
  

• Voids                                    
  – The “number one” way employees steal cash                   
  – Associates void legitimate sales and steal the cash                       
  – Investigate voids without management approval
•  Fraud or improper use of time card     
  – Ghost “employees” created in order to collect pay                        
  – Clocking in or out for another employee  

For more information on retail shrinkage contact us at: retail loss or call 1.770.426.0547                        
                                                         

Three of the major contributing factors to retail loss are internal and external theft, and paperwork errors.  Paperwork errors are frequently the easiest to control and just require some thought and care to prevent.  Although this type of shrink would seem to be harmless – since the merchandise is not stolen – it is still a serious problem and a drain on profits.

 One of the major contributors to the large overall problem of inventory shortage –  retail shrinkage  – is carelessness and a lack of control over paperwork.

 What causes paper shrink and how can you help to control it?

• Receiving.  The receiving paperwork says you should receive 30 items, which you sign for, and you only receive 28.  Detailed receiving counts will avoid the loss of 2 items.
• Breakage, spoilage, items for company use, and other inventory adjustments.  Sometimes, physical items are removed from stock for legitimate purposes, only some of which are named here, with the intention of completing the adjusting paperwork later.  If we forget, the result is inventory shortage.  Complete the paperwork and process it immediately to prevent unnecessary  retail loss.
• Mispriced merchandise.  An item is carried in inventory at $10.00 and priced at $9.00.  Every time a sale is made, $1.00 is lost to shrink.  Any mistake when marking, changing, or recording prices can mean increased shortage, which means less profit.
•  Inaccurate counts.  At inventory time, when making price changes, or when transferring merchandise, incorrect counts mean unbalanced inventories, which contribute to shrink, which result in unexpected losses to the company.

 These are a few of the ways inaccurate, incomplete, or an absence of supporting paperwork can affect inventory.   There are many other ways, and you can probably think of more of them yourself.

 The way to solid inventory control is to assign jobs correctly; take time to avoid errors; and accurately complete the paperwork in order to complete the job.

 Retail loss caused by paperwork errors is preventable.

 For ideas on implementing an effective loss prevention program, go to  retail loss 

If shoplifting accounts as the second biggest retail loss area how do you combat it?

Training, Training and still more Training. If you are not training your employees how to prevent shoplifting you will never, ever succeed as a retailer. The key is the type of training. Do not put the main focus on apprehending the shoplifter.

Although this is important prevention is more profitable and will reduce retail loss in this area.

This prevention training involves the actual approach to a suspected shoplifter. It is easy and can be entertaining as you drive the shoplifter crazy and send them down the street to your competitor who is doing nothing but watching their profits walk out the door. The approach is simple and varied by each situation. Every store employee must be trained in this method, which should be made a job duty. Do this and you will decrease your shoplifting losses. You do not need to be a loss prevention or security expert to approach a suspected shoplifter.

Loss Prevention Systems has shoplifting training programs that are proven and effective. Don’t be the guy down the street that is watching their profits drain away.

Want more? Contact us at retail loss or call 1.770.426.0547

The University of Florida publishes an annual retail loss report that is considered to be the ultimate reference in the loss prevention industry.  They have identified five areas of inventory shrinkage/ losses which are: Administrative errors, Vendor Fraud, Unknown, Shoplifting and Employee theft.

Surprising to many at first is that employee theft is the primary source of retail loss.  Vendor fraud is mostly not even on a retailer’s radar but can account for 3 to 5 percent of annual losses.

Shoplifting is usually what comes to mind first when you mention retail loss.  This accounts for  around 35% of total retail shrinkage. 

One complication in calculating and categorizing these losses is that an unknown portion involves employees collaborating with shoppers and or outsiders.  This is called “sweet hearting”.  The employee running the cash register simply does not ring all items, or carries bar codes of inexpensive items and rings them instead of what is actually brought to the register. 

This bleeds into organized retail crime to a degree as well.  Organized retail crime is on the rise and is a serious threat especially to understaffed retailers.  A group or team will enter the store, one or more creates a distraction while others clean house.  The distraction can get very creative… everything from a scantily clothed female that strips to a false trip and fall. 

If you are suffering from retail loss and want help, contact Loss Prevention Systems today.