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3 Tactics to Tackle Retail Shrinkage

Dave Lunn TellermateRetail shrinkage is on the up. More businesses are losing both cash and inventory to the hands of thieves. But, rather surprisingly, in the U.S. at least it’s employee theft, not shoplifting, that is the biggest cause of retail shrink. Below, we’ve put together 3 tips to help reduce shrink in your business.

The 2015 Global Retail Theft Barometer reports that shrink is a growing problem for retailers costing $123.4bn annually. For the U.S. in particular, employee theft is the leading cause of retail shrinkage. It comes a close second for a number of other countries too. In total, dishonest employees cost their businesses $48bn last year, and it’s growing.

Retail Shrinkage

For UK retailers, the numbers are less disheartening. Shrinkage decreased to 0.89% in the 2014/15 period, lower than both the Global average, and the European average. Similarly, the UK’s spend on loss prevention falls way below the global average. Meaning that UK retailers are protecting more of their profits.

But, although UK employees are less likely to steal from their employers than their American cousins; employee theft is still the third biggest cause of retail shrinkage in the UK internal theft accounted for 25% of all retail shrinkage in the UK in 2014/2015. The biggest causes were administrative and non-crime loss (40%) and shoplifting (26%). But these numbers vary wildly by industry. Clothing retailers in particular have a huge problem with theft. For apparel retailers, both shoplifting and employee theft tied as the biggest cause of shrinkage, each accounting for 40% of losses.

It’s a tricky subject. And one that often gets covered up. Traditionally businesses are reluctant to acknowledge that they even have a problem with employee theft. It’s not good for morale, brand or investors. As such, the true extent of shrinkage caused by employee theft is likely to be even higher than the statistics show. But whatever the exact numbers, one thing is clear. As businesses continue to lose profits to internal theft – it’s an important issue to tackle.

So here at Tellermate, we’ve put together a few ways that businesses can tackle shrink from employee theft:

  1. Invest in loss prevention: Of course, the obvious solution for reducing shrinkage is to step up security. Last year retailers spent an average of just 0.65% of revenues on loss prevention solutions – less than the previous year. Solutions such as CCTV, In-store Security Guards and EAS tagging are all proven to be effective in tackling both shoplifters and employee theft. When it comes to protecting stock, CCTV in back offices and warehouses, and staff search policies can also deter inventory theft by employees. But, this isn’t a complete solution – especially when the very people who are stealing the most are the ones who know exactly how your security works – and more importantly, how to bypass it.
  2. Implement a strict cash management process: While inventory loss is a big cause of shrinkage, so too is cash theft. At Tellermate of course, we deal in cash. And we know the value of a quick, easy and fully traceable cash management process to both staff and retailers. Ensure you have strict regulations here, both in terms of following up losses, and maintaining a clear audit trail. Your cash management process should also discourage bad habits, such as using slush funds or encouraging staff to make up shortfalls. These not only make it easier for losses to occur, but harder for them to be investigated.
  3. Ensure you have the right technology: While a good cash management strategy is important, so too is the technology to help implement it. A strict process, backed up by an intelligent cash management technology means that employees in particular, will have less opportunity to steal. Invest in technologies such as cash counting machines, intelligent cash drawers and safes that provide a fully traceable account of multiple tills and operators. These will give you better view of, and control over any cash loss. Similarly, investing in a technology that relieves the burden on employees and lets them complete their cash handling process quickly and easily is also likely to reduce shrink. Let’s face it, an employee who isn’t forced to stay late at the end of every shift to cash up may be less inclined to steal in the first place of course, there is no one catch-all solution. Thieves, dishonest staff and human error all play a part in the increasing amount of shrink that retailers are experiencing. But for employee theft in particular, a few simple steps can dramatically reduce both the opportunity and the desire to steal. The key to overcoming this problem is simple. Have a strong loss prevention and cash management strategy. Invest in processes and technologies. And have a rigid and effective process that works with, and not against your staff.

Want to learn more about reducing cash loss in your business? Download the Ebook on slush funds, and how to determine if internal theft is going under the radar in your stores.

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