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Shrinkage Problem? Shrinkage Solutions


You’d think that a small business could be a lot more on top of their inventory and that unlike with big retail that shrinkage wouldn’t be a problem. No matter how big or small you are, one thing is sure – shrinkage happens. According to the National Retail Federation, $13 billion dollars walks out the door either from shoplifting, employee theft, or human error. Here’s some tips to get your problem under control.

What is Shrinkage?

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Shrinkage is defined as excess inventory listed in accounting records that is no longer actually there due to theft, damage and subsequent write downs, miscounting or misplacement, or other issues. Controlling shrinkage should be your top goal, though there is no way to stop all of it. There are, however, a lot of ways to stem the losses caused by shrinkage.

How Can You Stop Shrinkage?

  1. Invest in a modern, tablet based POS system with a bar code label printer and a bar code scanner. Scanning in a price is much more accurate than hand keying, and eliminates the chance of user error. These systems are widely available from traditional companies like NCR or even from eCommerce platforms like Shopify.
  2. Train your salespeople to spot shoplifters. While the professional shoplifters might be able to boost goods with complete nonchalance, most shoplifters appear nervous, or exhibit key behaviors such as watching staff and other customers, leaving and returning to the store repeatedly, or avoiding sales staff.
  3. Have your staff greet all customers, and ask lingering customers if they need help. Having staff members share tips about suspected shoplifters is helpful, and so is keeping a log of suspects. There is no profile of a typical shoplifter, according to the National Association for Shoplifting prevention, and one person in eleven is a shoplifter.
  4. Arrange your store so that there are no secluded areas, and that the lines of sight from the cash wrap and the front of the store to the back are clear. Keep floor displays at about waist height so as not to give shoplifters a hiding place.
  5. While it’s normal for browsers to pick up merchandise and sometimes to carry it around with them, watch where they put it down. Sometimes they will move an item so that it can be easily picked up and concealed by an accomplice.
  6. When showing higher end goods, only have no more than two items out of the display case at a time or have a backup staff member discreetly watching the transaction.
  7. Prominently display “Shoplifters Will Be Prosecuted” signs. While it might not deter the professionals, it will make others think twice.
  8. Watch out for return merchandise scams and deter them by having a very clearly posted returns policy such as “No cash refunds without original receipt.” Or even better, “Sorry, returns are for store credit only.”
  9. Watch your employees. Are your employees satisfied in their work? Do they feel well compensated or are they just there for the check? Engage your employees and listen to their feedback.
  10. Watch out for applicants who have moved around to a lot of different places. While it is a tough job market out there, sometimes a lot of movement can indicate someone who is pulling inside jobs.
  11. Cameras not only watch the foot traffic, but the employees, too.
  12. Watch for an employee who keeps a separate receipt book, or who keeps a calculator next to the register, as they could be entering fraudulent sales.
  13. Pull the register tape at the end of every shift and match up the transactions. Watch out for the “no sales” and the “void transactions.”
  14. Spot check the inventory. If the inventory numbers are lower, and there’s no corresponding sale, it’s time to ask questions.

When you get down to it, having a modern and effective point of sale system is one of the best ways to stop shrinkage from eating you alive. You can set authorization levels for different employees, for example requiring a password authorization to offer a certain level of discount, or requiring a manager’s password to take back returned merchandise.

Know What You Have

You should know what you have in inventory right down to the SKU level, according to Logistics Management, and be able to account for every item and every dollar going into and out of your store. With a POS system plus a barcode label printer and a barcode scanner, you can be well on your way to putting the brakes on that shrinkage. While it might seem like a lot of time and effort, and even be tedious, bringing in a POS to link up with your inventory control and accounting could help to save your online business and business. Don’t be a statistic; keep your business and future safe by taking a proactive stance on stopping loss and shrinkage today.

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