Shrinkage: the retail problem that never quite seems to go away. It’s an enduring problem for retailers and it rears its ugly head in numerous ways, from administrative errors and product obsolescence to more malicious activities such as employee theft and customer shoplifting. Despite the uphill battle against retail shrinkage, many businesses are taking steps to fight back.
Leverage a Retail Inventory Management System
The best weapon to eliminate administrative errors is a purpose-built retail inventory management system that provides up-to-date insights into your stock availability, location, and more.
We offer guidance on how integrating systems enable visibility into your retail operations in our e-book “The Digital Store Platform: Better data for survival in a customer-centric world.”
With a crystal-clear view of your flow of goods, any inaccuracies will emerge and help you to discover patterns of loss that are worth investigating. For example, perhaps a certain warehouse or distribution center tends to always be a few boxes short with their shipments. Your retail inventory management system will provide clues that will help you get to the bottom of the problem.
Establish Clear Processes
Check, re-check and triple-check. Ensure that your operations employees have a clear understanding of how to manage all of the facets (and paperwork) that constitute the heart of your retail business. That means verifying each and every purchase order, double-checking receipts for accuracy, confirming packing lists and consistently going the extra mile to prevent even the smallest detail from slipping through the cracks.
Even more important, however, is the “separation of church and state.” No one person should be responsible for both sides of a task. The person receiving invoices for instance, should not also be responsible for paying them. This creates opportunities for dishonesty so take steps to remove any potential for this kind of shrinkage.
Keep an Eye on Employees
There are many things you can do to combat employee theft. Beyond the steps you likely went through during the hiring process, such as a thorough background check to weed out candidates with a prior history of sticky fingers, you have myriad options for preventing against retail shrinkage committed by your workforce. Communicating your stance on retail shrinkage to your employees is important. Sometimes reducing or eliminating employee theft can be as simple as just communicating that you’re monitoring inventory and transactions. No one likes playing “Big Brother” but being upfront about retail shrinkage is a necessary aspect of effectively running your business and can give associates pause if they even vaguely considered swiping some merchandise.
Identify and Reduce Your Shinkage Risk Factors
Because valuable dollars are lost in inventory issues, consider your particular risk factors and how to reduce them. For example, high inventory levels typically yield considerable product losses, such as the obsolescence as previously mentioned. Consider a scenario in which you’re overstocked in flip phones … and then the smartphone is invented, rendering your stockpile of little to no value. Right-sizing your inventory ensures more efficient sell-through to avoid unprofitable overstocks.
Also leverage regular auditing to ensure what your retail inventory management system says you have is what is physically available. Audits are a great tool to uncover problems with your inventory so you can set about realigning your inventory management.
Retail shrinkage may never completely disappear but with the right strategy, your business can “shrink” the problem and run more efficiently.
To learn more about how integrating systems to gain visibility into your retail operations, download our e-book “The Digital Store Platform: Better data for survival in a customer-centric world.”