Inventory loss (also known as inventory shrinkage or shrink) can cost your company significant losses. The UK, fortunately, doesn’t suffer from the same shocking numbers as America (see Forbes), but ultimately a loss is still a loss. In 2014/15 shrinkage in the UK had decreased to 0.89%, one of the lowest rates in Europe and even globally. The spend on loss prevention in the UK is also lower than the Global average. This isn’t to say that shrinkage isn’t an issue, as the statistics show it does still exist, and so the need to reduce inventory loss is still important.
3 of the main culprits of inventory loss are:
- Shoplifting accounts for around 26% of inventory losses.
- Administrative and non-crime losses. (e.g. simple mistakes when record-keeping, pricing or with paperwork) can total up to large losses for your company. Innocent administrative inaccuracies add up over time. These losses amount to around 40% of inventory shrinkage.
- Employee theft. Those working in your shop often are given the easiest access and also the least amount of monitoring. This makes it relatively easy to swipe a product, for those who are tempted. Being privy to discount codes and being in charge of refunds can also have an effect on losses to your business. Employee theft comes in at around 25% of all retail shrinkage.
Of course, the factors above also vary depending on your retail sector. For example, if you’re a clothing store you’ll have a much larger problem with theft. For apparel retailers, both shoplifting and employee theft tied as the biggest cause of shrinkage, each accounting for 40% of losses.
So How Can You Reduce Inventory Loss? Here are 3 Essential Solutions for Reducing Shrinkage
Your choice of technology will play a massive role here: stock control through a software solution that provides inventory automation and management will remove administration slips. Having a standardised and repeated procedure will firstly make your job easier and secondly introduce an accurate movement of the stock.
Solutions such as Touch Retail’s EPOS system can provide you with “live stock and sales updating throughout your business”. Inventory adjustments are invariably easier with software that focuses solely on managing inventory versus a standard accounting software package.
Security cameras and mirrors throughout your premises can help you spot suspicious behaviour. Keeping tabs on any individuals behaving suspiciously in your store.
A tidy store will help – it’s easy to identify whether something has gone missing from the shop floor if there is an empty space where the product used to be. If your store is disorganised and untidy, however, it may be more of a challenge noticing whether something has disappeared. Once you have realised it will likely be too late. Keeping your products organised, fully stocked and facing outwards can help you to easily identify when someone has “swiped” a product off the shelves.
Some may choose to utilise simple signage that warns against shoplifting, giving shoplifters a moment to pause for thought. Putting these signs near the front door or high up (where shoplifters will most likely check for security cameras) can be a good move.
Managing your inventory shrink through internal controls begins during the hiring process. Conducting an extensive background and reference check on your interviewees, then educating them on your policies and attitude towards employee theft will help with reducing employee theft. The discounts that your staff are privy to can be used to their advantage. For example, a customer may buy an item for £2,000.
During the checkout process, a cashier could secretly apply a 20% discount while the customer, unaware, pays the full amount – enabling the cashier to pocket £400. Another way in which this could be achieved sees the original transaction going through as normal, but the sales assistant later refunding the transaction and re-processing it at £1,600. Either way, you’re going to suffer a loss.
To reduce inventory loss from staff, you may want to put a threshold on discount values. Ensure that discounts over a certain level require additional authorisation. It is also advisable to randomly review sales transactions too, with a view to discovering potential scams and discouraging staff from being tempted into trying anything.
Retailers who are most fruitful in preventing inventory shrinkage are those who remain consistent and maintain a well-structured programme. Ensure you take action and utilise the methods you feel are most relevant to your store.
Loss-prevention is a core tenant of successful retailing – hopefully, you can use some of the advice in this article to help effectively reduce inventory loss.