Finding the Origin of Retail Shrinkage

There are numerous wonders in the world which are unknown and unexplainable to mankind, and "shrinkage" is one of them.

What constitutes “shrinkage”? The term is so broad and continues to grow in regards to retail loss. To this day, it’s still a challenge to pinpoint the root cause of “shrink”. However, just like any other mystery in the world, in order to understand it we must take a look at its origin. The start of all shrinkage begins with inventory accuracy.

Every inventory is unique. There are various types of inventories in existence, but they all share one thing in common, ACCURACY! Any changes, big or small, to the level of inventory accuracy can and will affect shrinkage. It will also be a contributing factor when calculating loss. The origin of retail shrinkage goes all the way back to the many facets of your inventory processes:

Understand Your Inventory

How much do you and your team know about your inventory? Keeping the inventory data easy to understand can help drive a closer look into troubled areas. Certain types of inventory may need to be counted more frequently than others, so it’s crucial to understand your inventory needs in order to obtain and retain accuracy. Allowing your team to be aware of the situation can help give extra attention on potential threats that could result in loss.

Prepare Your Inventory

Is it time to switch to a seasonal sale, or a new product launch? An accurate inventory count begins with consistent preparation on the sales floor, backroom, and even the points of distribution. Organise the products accordingly by categories, make sure the displays are neat, items are easy to locate, and the space is clear of any safety hazards. Unorganised inventories are difficult to track and could likely result in costly expenditures to resolve discrepancies.

Manage Your Inventory

Take the time to manage your inventory from the start. The more data you collect from various aspects, the more it can help provide an in-depth look into lost profit opportunity. Also, a standardised inventory management process allows you to stay informed before making decisions that can impact the business and your valued customers.

Analyse Your Inventory

An accurate result doesn’t just end right after the last item is counted! A perfect inventory event continues as it delivers the insights that help you gain more visibility. In order to hit your inventory goals, it’s essential to fully analyse the results, which can help uncover hidden problems, and identify opportunities to reduce shrink and mitigate cost.

The origin of retail shrinkage begins with a strong understanding of your inventory. It can help identify problems, make better business decisions, and reduce loss. Even though the definition of shrinkage continues to be broad and the causes are challenging to pinpoint, at the end of the day, shrink can be perceived as both an opportunity and a risk. Decisions made about your inventory today, will affect the entire supply chain and all the way to your customers’ shopping experience. Now the question is, how much do you know about your inventory?

Discover how we partner with retailers to help drive inventory process improvement, one inventory at a time by clicking here.