Shrinkage in retail stores
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India has the highest retail shrinkage rate in the world at 2.7% according to a global study. Shrinkage refers to the loss of inventory and is the difference between recorded inventory and actual inventory. The main causes of retail theft in India are employee theft, shoplifting, vendor fraud, and administrative errors. Preventing shrinkage is important to reduce loss of profits and costs associated with security investments. Retailers can prevent shrinkage by increasing source-tagging, leveraging internal data, using loss prevention solutions, employee training, and awareness programs.
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Shrinkage in retail stores
- 1. RETAIL MANAGEMENT PRESENTATION SHRINKAGE IN RETAIL STORES MMS (17-19) Welingkar Institute Of Management
- 2. WHAT IS SHRINKAGE ? 2 ▰ Shrinkage is a term used to describe loss of inventory. ▰ It’s the difference between recorded inventory on a company's balance sheet and its actual inventory. ▰ Shrinkage rate is expressed as a percentage based on the value of lost inventory divided by sales during the same period. Shrinkage Rate = Lost Inventory / Sales ▰ Keeping shrinkage rate low is critical to success in business.
- 3. CAUSES OF RETAIL THEFT IN INDIA 3 ▰ Employee theft ▰ Shoplifting ▰ Vendor fraud ▰ Administrative error ▰ Paperwork errors ▰ Supplier fraud ▰ Loss & Damage
- 4. INDIAN RETAIL HAS THE HIGHEST RATE OF SHRINKAGE AT 2.7%. 4As per a study by “Global Retail Theft Barometer” 48% 27% 25% SHOPLIFTING EMPLOYEE THEFT OTHER
- 5. Global Sources of Shrinkage (2014–2015) 5
- 7. Global Sources of Shrinkage (2014–2015) 7
- 8. NEGATIVE IMPACT OF SHRINKAGE 8 ▰ The largest impact of shrinkage is loss of profits. ▰ Shrinkage works to decrease a company's consumer base, causing them to look elsewhere for similar goods. ▰ Retailers have to invest heavily in security which can increase company costs.
- 10. PREVENTING SHRINKAGE 10 ▰ Increasing the use of source-tagging as it helps in reduction of in-store labor and ensures consistent tagging compliance ▰ Leveraging internal data more effectively to better understand shrink performance metrics at the SKU, category, and store levels ▰ Using a mix of loss prevention solutions; EAS, fixtures, CCTV, manual screening, etc. should work hand-in-hand ▰ Investing in employee training to prevent theft from stores
- 12. PREVENTING SHRINKAGE 12 ▰ Establishing awareness programs to make people aware both internally (training) and externally (signage) of techniques and solutions used by retailers to prevent theft ▰ Increasing vigilance during holiday and sales periods when there is high footfall in stores and an increased difficulty in deploying loss-prevention solutions ▰ Conducting pre-employment background screenings of potential employees to decrease dishonest employee theft
- 13. 13 THANK YOU!
Editor's Notes
- most incidents of employee theft occur at point of sale (POS) cases of stolen inventory at locations such as warehouses
- an annual survey conducted by the Centre for Retail Research in Nottingham, UK As per a study by “Global Retail Theft Barometer”, retail shrinkage in India continues to rank the world’s highest at 2.7%. In 2010, more than Rs 9,295.9 crore were lost to shoplifting and theft by Indian retail sector.
- an annual survey conducted by the Centre for Retail Research in Nottingham, UK As per a study by “Global Retail Theft Barometer”, retail shrinkage in India continues to rank the world’s highest at 2.7%. In 2010, more than Rs 9,295.9 crore were lost to shoplifting and theft by Indian retail sector.
- Small and easy to conceal items such as spirits, mobile accessories, batteries, fashion accessories, and razor blades, as well as high-value items with high resale value, such as tablets, were most vulnerable
- This is especially negative in retail environments, where businesses operate on low margins and high volumes, meaning that retailers have to sell a large amount of product to make a profit. If a retailer loses inventory through shrinkage, it is hit twice over; it cannot recoup the cost of the inventory itself, and it also cannot sell the inventory and make revenue, which trickles down to decrease the bottom line. Shrinkage is a fact of life, and many businesses try to cover these potential losses by increasing the price of a product to account for small losses in inventory. These prices are passed on to the consumer, who is required to bear the burden for theft and inefficiencies that might cause a loss of product. If a consumer is price sensitive Finally, shrinkage can increase company costs in other areas. Retailers, for example, have to invest heavily in security, whether that investment is in security guards, technology or other essentials. These costs work to further reduce profits, or to increase prices if the expenses are passed on to the consumer.
- Retailers are using many procedures, such as pre-employment background checks of potential employees and POS exception-based reporting, to combat dishonest employee theft A detailed understanding of the source of shrinkage helps implement the right solution Radio-frequency identification (RFID) uses electromagnetic fields to automatically identify and track tags attached to objects. Electronic article surveillance (EAS) is a technological method for the prevention of shoplifting from the retail stores or pilferage of books from libraries. Special tags are fixed to merchandise or books. These tags are removed or deactivated by the clerks when the item is properly bought or checked out. At the exits of the store, a detection system sounds an alarm or otherwise alerts the staff when it senses active tags. For high-value goods that are to be manipulated by the patrons, wired alarm clips may be used instead of tags.
- Retailers are using many procedures, such as pre-employment background checks of potential employees and POS exception-based reporting, to combat dishonest employee theft A detailed understanding of the source of shrinkage helps implement the right solution Radio-frequency identification (RFID) uses electromagnetic fields to automatically identify and track tags attached to objects. Electronic article surveillance (EAS) is a technological method for the prevention of shoplifting from the retail stores or pilferage of books from libraries. Special tags are fixed to merchandise or books. These tags are removed or deactivated by the clerks when the item is properly bought or checked out. At the exits of the store, a detection system sounds an alarm or otherwise alerts the staff when it senses active tags. For high-value goods that are to be manipulated by the patrons, wired alarm clips may be used instead of tags. A spider wrap is a handy security device that you can wrap around products to prevent theft. If tampered with, spider wraps sound an alarm.
- Retailers are using many procedures, such as pre-employment background checks of potential employees and POS exception-based reporting, to combat dishonest employee theft If employees are motivated, fairly paid and empowered, they are less likely to feel compelled to steal. Approaching them to ask if they need help and checking in periodically helps prevent them from feeling comfortable enough to steal. An open floor plan where service associates can see much of the store from central locations helps as well.