How to Reduce Shrinkage in Retail
When you are looking over audits, paperwork and receipts, you may feel your stomach drop if the numbers are not adding up. Shrinkage is a problem that many businesses suffer from every year.
If you’re searching for ways to keep your inventory and sales numbers in line, follow our guide to prevent shrinkage in retail.
Causes for Inventory Shrinkage
There are three leading causes of inventory shrinkage:
- External theft: External theft is when a customer steals your products. This form of theft accounts for 36.5% of retail shrinkage. Shoplifters who succeeded at one retail store are also likely to steal from other store locations.
- Internal theft: Internal theft is when an employee deliberately steals your products. This is the second most common cause of shrinkage — some experts say 43% of retail shrinkage comes from internal theft, but others estimate it’s closer to 50%.
- Administrative errors: Less common than the first two, administrative errors are when an office makes mistakes that quickly cause shrinkage. From misinformed pricing to incorrectly filed paperwork that isn’t reviewed, numerous mistakes can occur when processing and filing product and service information.
6 Tips for Shrinkage Control for Your Multichannel Business
Here are six tips your multichannel business can apply to your locations to secure products and protect profits.
1. Train Store Employees
You should train store employees to identify and handle a shoplifting situation. That way, employees’ trained eyes can prevent fewer stolen items. Your team members should also learn about fraud. Employees who know the consequences of stealing are less likely to take anything from your business.
2. Train Administrative Workers
Train administrative workers on how to process and file product and business information correctly. You should update this training as your business and paperwork grow.
3. Audit Regularly
Auditing is when a person or team examines a business’s financial information. Many companies do this annually, but you should regularly audit if you want to reduce your retail business’s shrinkage.
4. Appoint a Double-Checker
Even if you have trained your administrative staff and audit regularly, there’s always a chance of paperwork errors. Appointing or employing someone who scans paperwork before filing it can reduce shrinkage caused by administrative error.
5. Keep Your Retail Stores Neat
It’s easier to identify a missing product when your staff members maintain a clean store. Try to keep products organized and stacked nicely. A strong product management system allows your team to keep tabs on purchased and missing items.
6. Upgrade Your Inventory Management Practices
The old ways of running inventories and warehouses worked, but with continual advancements in technology, these old ways are weak and vulnerable. Updating your management system and learning new ways to account for your products will help you better control and monitor inventory activity.
Learn How to Control Shrinkage in Your Store With Finale Inventory
Controlling shrinkage is one of the many solutions to improving your retail store management. If your inventory feels overwhelming, Finale Inventory can help. Our company has spent years perfecting our cloud-based inventory system to help make running your retail store effortless. With world-class customer service and a plan customized to your business, you’ll feel more secure than ever before.