Shrinkage at the store is mostly due to an unlikely suspect - it's unlikely that a criminal is responsible
In the dynamic world of retail, the importance of minimizing inventory loss, commonly known as shrink, has never been more critical. A variety of factors contribute to this issue, ranging from theft to administrative errors, and the industry is responding with a shift towards technology and improved operational efficiency.
The use of tech designed to detect crime or criminal intent has broadened, with platforms like Verensics being employed by retailers for more than just security purposes. Their employee questionnaire-based system allows retailers to share information gleaned from questionnaires, thereby connecting various dots between teams in store operations, human resources, loss prevention, and elsewhere.
This move towards technology is reflected in the significant increase in U.S. retailers' investment in store intelligence technologies. According to Coresight, this investment has skyrocketed over 150% for the next year, with more than a third of retailers planning to invest at least $500,000, and each company dedicating an average of over $415,000.
The silos of risk mitigation, store operations, and supply chain are breaking down, as noted by loss prevention consultant Brand Elverston. Numerous technologies in the space today are helping to break down the divisions between the loss prevention and operating teams.
The COVID-19 pandemic has also highlighted the importance of operational integrity. Eliminating non-essential employees who weren't coming into work led to shrink ballooning, according to Elverston. The data collected by tech platforms like Verensics is being used more and more for operational integrity issues.
Mistakes related to promotions, pricing, and out-of-stocks have been the biggest challenges for retailers this year. However, technologies are helping retailers overcome these challenges, providing them with the data and visibility needed to optimize their operations.
Loss prevention teams are no longer just seen as crime fighters, but rather as protectors of profits and margins. In fact, overcoming inefficiencies in store operations could save U.S. retailers in certain sectors up to $162.7 billion.
However, organized retail crime is receiving attention from policymakers and retail industry groups, but the impact on inventory loss is considered overstated. Understaffing in retail stores leads to significant inventory loss, according to some loss prevention experts.
To minimize these losses, retailers can enhance security measures, improve inventory management, train employees thoroughly, review and update store policies, and optimize handling and storage. By addressing theft, human error, and procedural weaknesses, retailers can reduce inventory shrinkage and protect their profits.
In conclusion, the retail industry is embracing technology and operational efficiency as key strategies for loss prevention. The future of retail loss prevention lies in a comprehensive approach that combines security measures, inventory management, employee training, policy review, and optimized handling and storage.
[1] Retail Dive. (2021, March 24). Retailers' top challenges in 2021: A new era of operational resilience. Retrieved from https://www.retaildive.com/news/retailers-top-challenges-in-2021-a-new-era-of-operational-resilience/616427/
[2] National Retail Federation. (2020, June 17). NRF announces it will no longer report on shrink trends in the industry. Retrieved from https://nrf.com/media-center/press-releases/nrf-announces-it-will-no-longer-report-shrink-trends-industry
[3] Everseen. (2021, February). The State of Retail Loss Prevention 2021. Retrieved from https://www.everseen.com/resources/loss-prevention-research/the-state-of-retail-loss-prevention-2021
[4] ThinkLP. (2021, March 12). The Great Recession's Impact on Retail Theft. Retrieved from https://thinklp.com/blog/the-great-recessions-impact-on-retail-theft/
[5] Brand Elverston, Elverston Consulting. (2021, February 24). The Impact of COVID-19 on Retail Shrink. Retrieved from https://elverstonconsulting.com/impact-of-covid-19-on-retail-shrink/
- The implementation of technology, such as platforms like Verensics, is expanding to encompass areas beyond security, even reaching into human resources and operations to improve efficiency.
- With the surge in U.S. retail investment in store intelligence technologies, a majority of retailers are planning to invest substantial amounts, average $415,000 per company.
- The separation between loss prevention teams and store operations is gradually being abolished, with technology playing a key role in breaking down these divisions.
- As a result of the COVID-19 pandemic, the importance of operational integrity in retail has been emphasized, and data collected by tech platforms like Verensics is increasingly used for these issues.
- Mistakes related to promotions, pricing, and stock outages have been significant challenges for retailers this year, but technology offers solutions by providing retailers with essential data and visibility.
- Instead of solely focusing on crime, loss prevention teams are now considered crucial for protecting profits and margins in the retail sector, with potential savings of up to $162.7 billion in certain industries.
- Organized retail crime receives attention from policymakers, but according to some loss prevention experts, understaffing leads to more significant inventory loss than originally thought.
- Adopting a holistic approach utilizing security measures, inventory management, employee training, policy review, and optimized handling and storage can help retailers minimize losses and protect their profits.
