5 Simple Ways to Reduce Shrinkage by 50% in your Business in the next 30 days
In business, the word shrinkage is a dirty and misunderstood word, with some business owners not knowing how it is affecting their business.
In this article I will cover:
- What is shrinkage and how it affects your business?
- What is the Biggest cause of Shrinkage?
- How can shrinkage be reduced, saving you money and giving you peace of mind?
What is shrinkage and how it affects your business?
There are thousands of websites out there describing Shrinkage.
My taking on it, is how much money you are losing each year due to products being stolen, lost or damaged.
What is the biggest cause of Shrinkage
External theft also known as shoplifting is the biggest culprit, resulting in 34.6% of total shrinkage or £1,993mn in real money in 2019 alone. These crimes are typically committed by street gangs or drug users who seem fearless and target items they know they can steal and later return for a full refund or just sell on for a small profit.
These criminals know that the police will not get involved if the goods are worth less than £200, meaning they will not have to attend court if caught by store security, making more people willing to take the chance.
Some retail management already affected feel that because shoplifting is classed as a low-level crime, the police will not respond unless their staff are in physical danger.
Security workers around the country claim on many occasions they have been asked by police to do more deterrent work and less reporting, which then affect the yearly shrinkage figures.
Another way retailers are losing out is to organised crime. Career criminals target warehouses and delivery vehicles by stealing to order. This can include cash, merchandise or even customers personal data. These criminals often use the threat of violence to get what they want.
About 28.2% of losses are caused by organised crime, which was a total of £562mn in 2019.
Too Much Trust
Many business owners have installed self-service technologies that a customer can use and self-scan the items they want. Unfortunately, some people take this opportunity to “forget to scan” certain items because they don’t have someone checking them. It’s not actually known what the shrinkage is caused by this forgetful action because sometimes the scanner will scan a product a number of times which operates in favour of the retailer.
As with self-scanning, it is hard to deduct the exact amount lost each year. Research respondents estimate it as about £1,305mn which is around 22.1%. Some of this loss is down to human error, such as not giving the right change or mis-scanning items but it’s also down to a small amount of staff members giving fake refunds to family or purposely damaging items and selling them to their friends.
Warehouse and Supplier Fraud
This costs retailers £915mn (18.0%) in 2019. Suppliers and warehouses losing or damaging products happen all the time, however in some cases it’s done on purpose with the retailer not finding out for weeks or months later. Make sure the warehouse you use has a low shrinkage allowance in their contracts. The allowance is how much of your inventory can go missing before they have to reimburse you for it. Shrinkage allowances often range between 2% and 10%.
We are all human and everyone makes mistakes, however, administrative mistakes cost businesses 25.3% or £1,202mn of shrinkage in 2019. This error is known as “error against planned sales” can be caused by several reasons. Incorrect mark-up price and products sent to the wrong shop being the main two. Businesses are constantly looking for ways to reduce these types of errors thus hopefully reducing losses.
How can shrinkage be reduced, saving you money and giving you peace of mind?
They say “too many cooks spoil the broth” but that’s not the case in security. The more eyes on the ground, the better. But I’m not talking about employing more thick-necked doormen that will probably just scare the customers, I mean educate your current staff.
I can’t tell you how many shops I’ve been in that have left me to my own devices once I’ve said “No thanks, I’m just looking.”, off they pop, back behind the till, to continue scrolling or tweeting.
Change the way your staff greet customers, engage them with longer questions than “Do you need any help?” Use “Hello, what are you looking to buy today?” or something similar. You want the potential shoplifter to look at you and know the staff are aware of their surroundings. You have to remember that shoplifters like to blend in and not be noticed.
You may get the same response “No thanks, I’m just looking” and if you do, that’s ok. Just reply, “ok, I’ll be just over there when you need me”. Make sure you point when you say this as any normal shopper will look in that direction whereas a shoplifter may not.
Just the presence of “on the ball” staff, is enough to put off a shoplifter, thus reducing external shrinkage.
Depending on your business, a visible RFID tag works a treat. RFID readers on the doors will trigger and notify staff when an item is stolen so it’s a great deterrent for both would-be thieves and dodgy staff members. Simply knowing items are tracked can increase staff accountability and reduce internal shrinkage
This helps to reduce losses in 3 ways
- Security staff can quickly detain the thief and recover the item.
- The item can be quickly replaced on the shelve for future customers.
- The data received from the RFID reader can be used to see which items are targeted therefore increasing security measures to protect those items.
Make sure all self-scanning equipment is working correctly. In a microwave world where people get bored in seconds, people don’t want to or will not wait, which can lead to items not being scanned.
Spot checks for self-scanning
Talking of self-scanning. Put up signs telling customers that anyone self-scanning may be required to be checked by staff. That will put off any chancers.
Upgrade your CCTV to an Intelligent Surveillance System
A CCTV system is a good way to reduce both internal and external shrinkage. Having that third eye in the sky, with RFID tags and great staff can reduce loss by in some cases 50%.
The trouble is there are so many businesses out there with CCTV that can’t be used because of faulty cameras or bad locations. The other problem with CCTV systems is they are used AFTER something has been stolen
Look at upgrading your CCTV system with a modern intelligent surveillance system that will give you more idea what is happening within your business.
It does this with artificial intelligence, watching and analysing video without any input from you or staff and can send real-time notifications to staff members on the floor.
Artificial Intelligence can provide:
- Face Match: Upload a shoplifters face and be sent a notification if that person enters your business.
- Powerful Insights: Intelligent features include, Motion-Triggered Alerts, Heat-maps & Object Counting, Vehicle & People Filters, Fast Search & Detection.
These are just a few things intelligent surveillance is capable of doing.
For more information on intelligent surveillance and how it could help you in your business or home contact firstname.lastname@example.org