Retail Shrinkage: How You Can Control Your Loss On Inventory


Shrinkage in retail is the inventory loss occurring for many reasons, from administrative or internal errors to more darker reasons of shoplifting and employee theft. In 2011, the Global Retail Theft Barometer found that the Indian retail industry faced the highest loss from shrinkage in the world. Shrinkage can be one of the biggest contributors to the loss in profit. Whether shrinkage occurs due to criminal or non-criminal intent, every retailer should be able to quantify the losses they are facing, and learn about what steps can be taken to mitigate them.

Shrinkage can broken down into three categories -

  • Customer Theft

Customers stealing items, or changing barcodes, and carry out other such fraudulent activities.

  • Employee Theft

Employees can abuse discounts, transfer merchandise without authorization, and manipulate the cash in the register.

  • Administrative Errors

Incorrect pricing, inefficient record keeping, and other such errors can lead to considerable reduction in profits over the long run.

Shrinkage can mess up the entire supply chain, and it has the potential to be a major cog in the operations of any retailer. Fortunately, technology and automation have evolved and given methods using which shrinkage can be effectively monitored and controlled.

Tackling Customer Theft

The most straightforward way to reduce customer theft is by having CCTV cameras around the store and ensure that there is staff monitoring each part of the store. However, customers can still change or swap barcodes for items. Such activities can be caught at the POS terminal. For example, Retail Pro gives retailers the option to store upto 10 product images, so that the cashier at the checkout counter can verify if the barcode scanned matches the item being billed.

Tackling Employee Theft

Employee theft can, for the most part, be curbed by upgrading the POS system in use. Listed here are some features that Retail Pro provides to deter employee fraud -

  1. Receipts are tracked on the employee generating them. Any cancellation of receipts can require authorization from the store manager.
  2. Permissions can be assigned to employees to only provide access to the parts of the POS, like creating sales orders, that they need.
  3. Any adjustments to inventory are tracked through adjustment memos with preset reasons as set by the store head.
  4. The date and time of cash register open and close can be tracked. Reconciliation of cash register can be done through “Blind Close” which hides information from cashiers so that they don’t manipulate entries.
  5. Permissions to give discounts can be provided only to select employees along with a limit on the maximum percentage of discount that be given. Any percentage greater than permitted will require store manager’s permission.

Tackling Administrative Theft

Using a centralized repository for all information related to inventory, promotions, customers and employees can create a powerful audit trail for all transactions. Having such an system can itself reduce many administrative errors. It also reduces the churn occurring from information being split across multiple sources.

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. Contact us to know more about how Retail Pro can help you.

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