How to Reduce Retail Shrinkage in 2018



One of the biggest snags of retail industry all across the globe is shrinkage. This hidden obstacle causes inventory loss which results in supply chain errors not just in India but on all over the world. Shrinkage is classified into two categories – non-crime losses (errors & mistakes) and crime losses. While shrinkage can be caused by internal administrative errors like pricing mistakes, on a darker side shoplifting, employee theft or any other type of theft can be the cause of such loss of inventory.
In 2011, Global Retail Theft Barometer found that India was world’s biggest shoplifter which means India was facing highest shrinkage caused by shoplifting. Retail advisors claim the shrinkage is still one of the biggest contributors causing a reduction in profit despite the efforts.
For those operating in the retail industry, controlling shrinkage is incredibly important. But to bring retail shrinkage under control, one needs to understand the main reason behind shrinkage. Some of the crucial reasons are:
  • Customer Theft (Shoplifting): Customers steal items, changing price tag or carry out other such incidences which contribute to inventory loss.
  • Employee Theft: People who are working for you in your retail outlet have easy access to every location within the outlet due to least monitoring. Employees are often found swiping products, abusing discounts, refunds or credit cards causing loss of profit.
  • Administrative Errors: Although inefficiencies in record keeping, paperwork, pricing and other such mistakes are considered small, they can cause a great deal of shrinkage to the retail companies. These innocent administrative errors add up over time and cause huge loss of profit.
Shrinkage causes a reduction in profit and hampers the whole supply chain. This is the reason that retail businesses need to reduce shrinkage caused by theft and errors.


Companies and business owners operating in retail sector should do to reduce the loss caused by shrinkage. Here are some tips suggested by renowned retail industry expert at VGNC, a global advisory firm
  • When it comes to reducing the shrinkage caused by employee theft, you need to focus on hiring right set of people for your retail outlets. You need to check their records and references to ensure you are hiring the right person.
  • Staff training can help you to take a strong stand against the employee theft. Training your employees to pay attention to them and running a loss prevention training program can help in reducing such inventory losses. Training helps them to understand theft can bring punishment and create a bad impact on their employment history.
  • If you use a cash drawer or cash box to keep the money on-site, you need to use commercial equipment designed to protect your cash and valuables.
  • You need to build stringent internal policies along with building robust internal communication to tackle issues. Good communication will allow open atmosphere and easy feedback system creating a happy workplace. On the other hand, good policies will encourage ethical behavior.
Although these are some actions that can be taken to reduce shrinkage caused by employee theft, you should feel free to conduct regular and sometimes random audits. Audits will help you to identify suspicious behavior and discrepancies at the earliest. Sudden audits will also help in discouraging employees from attempting a theft.
  • While you can train staff to prevent employee theft, staff in retail outlets can also be trained to identify the signs of a shoplifter.
  • You need to hire an adequate number of staffs. Staff should be trained to welcome all the customers and is available for help. Having an adequate staff will not only support the customers in need of help but also act as a deterrent for the shoplifters.
  • Organising your retail outlet is not only helpful in enhancing the visual aesthetics of your retail outlet but also makes it easier to spot things that are missing.
  • Inventory taking and POS data keeping the shop helps in recording and organizing data of all the items in the shop. Proper recording and maintaining of product data will help in earlier identification of unusual inventory patterns.
  • You need to have a robust surveillance system to discourage customer theft. Checking of visible proof of purchase, CCTV cameras, and other such systems will help in identification of shoplift attempt.
You need to check the items that come back inwards for return or exchange. There are higher chances of finding stolen items through return systems.
  • Proper training of staff to identify mistakes and reduce errors can help you to restrict the shrinkage caused by administrative errors.
  • Regular audits will help you to identify the pricing and other paper errors.
  • Paperwork and pricing must be double checked to ensure that it is correct at all points.
Paperwork and pricing losses can cause most of the shrinkage and can be minimized with little effort. Double signing system for paperwork will help you to ensure that paper works are error free.
In 2018, it is important that you gain a clear picture of what is happening inside your retail outlet. To get a clear picture of all the products and sale, you need to invest in an effective inventory management system.
A retail and inventory advisor can help you to reduce shrinkage and improve your profits. But when you are choosing an advisor, make sure you choose them wisely. An advisor who works with you as a partner rather than a hired professional will help you grow in the retail sector.


Visit us at: http://www.vgnc.in/
or contact us : 9810666554, 7668010101
Email : info@vgnc.in , vgnc@vgnc.in





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