Every sector has its inherent challenges, and for retailers, a major one is shrinkage. Caused by a variety of factors that prevent stores from selling their merchandise — such as employee theft, return activity, shoplifting and more — shrinkage costs retailers a combined $94.5 billion in 2021 alone, according to the National Retail Federation.
In addition to adversely affecting the industry’s profitability, shrinkage also compromises the overall supply chain, leading to instability in product availability and higher costs both for companies as well as for consumers.
To a certain extent, shrinkage is inevitable, but there are some things you can do to reduce its prevalence. Here are a few suggestions that can be effective:
1. Offer store credit
The vast majority of customers who need to return an item do so for legitimate purposes, such as clothing that doesn’t fit or is defective. But with return fraud becoming more common place, you may need to be more selective with regard to money back guarantees. Thus, you may want to consider offering store credit for items being returned in lieu of full refunds. This way, the money a customer paid for merchandise remains with the company.
2. Be more mindful about labels
With a quick tug, snip or snap, pricing and branding labels can be easily removable, which make clothing, shoes, handbags and other merchandise seamless to steal with nothing for the security system to flag. You may want to consider placing more heavy-duty RFID tags on merchandise. Not only are they difficult to remove, but these tags have sensors that are identifiable for security systems to detect should a shoplifter attempt to steal an item that has one attached.
3. Check receipts
Virtually every paying customer departs the store with something different but one thing they should all have is a paper receipt. Consider placing one or several store greeters at the entrances and exits of the store. Depending on how big of a problem theft is for your location, a store greeter can serve as your last line of defense to shoplifting by their corroborating whether customers paid for their purchases.
4. Install surveillance cameras
Strategically placing security cameras around your facility can both detect shoplifting activity and serve as a deterrent. If people know that they’re being watched, they’ll likely be less inclined to take something if there’s proof catching them in the act.
5. Create incentives for employees
Just as shrinkage is a multifaceted problem — caused by everything from misplacing items during shipment to mishandling during receiving, leading to breakage — it requires a multifaceted solution. One part of that fix is by equipping your employees with some shrinkage reduction best practices. In addition to providing them with tips, make it worth their while through employee incentives. Set a shrinkage reduction goal for your company or for each employee. Achieving that goal is something to worth celebrating and inspires your staff to be extra diligent.