The Long and Short on Shrinkage
This month we want to talk about something that’s feared (not loved) in retail and we want to tackle this topic head on. SHRINKAGE! Don’t shrink away from it, time to jump in.
We are not referring to your suddenly too small clothes, but all those missing items in your store.
Shrinkage is a term used in retail to signify the loss of product. This can be items that are stolen, misplaced, taken or not accounted for correctly when received. Shrinkage affects a retailer’s inventory and therefore has the ability to affect a whole lot more than just a store owner’s mood.
Shrinkage is typically associated with two types of risk:
- Geographic risk (where the store is located)
- Merchandise risk (what is offered in-store)
But we do not expect that you are going to change your store location or your assortment to combat this dreaded “shrinkage”.
Let’s Stay Positive
Shrinkage is simply a cost of doing business in retail. For years, people have been trying to come up with ways to zero out shrinkage, and we think they should spend their time focusing on more actionable things.
- Take on shrinkage indirectly by having an empowered staff. They should be alert, welcoming, friendly and aware. An engaged staff member that is actively present in-store makes it harder for someone to walk away with something.
- When possible, always have more than one person working in the store at a time. If someone goes out back, there is still an employee on the floor and not an open store for the taking. Less temptation = less shrinkage.
- Keep your store well lit, inside and out. This is for security overall but also acts as a deterrent!
- Your store is not airport security and is certainly not a prison so don’t treat your customers like they have just set the metal detectors off. Breathe. This is going to be OK. The last thing you want to do is offend your customer.
- Stop profiling!!! Not only is this [in general] wrong, but profiling is seriously hurting your business. A real life example? Sure! (And Scout’s Honor- this is a true story.) A couple of weeks ago, a very well off man walked into a furniture store ready to buy everything he needed to outfit his new penthouse. He had just come from moving stuff and looked a little gruff. He hadn’t taken his razor out yet and his jeans were looking tattered. This male walked around and then out of the store when he got the feeling he was unwelcome, as no one greeted him, or offered to assist him. Little did those employees know that this man was ready and willing to spend ANY amount of money to deck out his new digs. Their loss. Literally. Their hundred thousand dollar loss. So…stop profiling! Treat everyone equally.
- Don’t be sloppy about receiving your goods. CHECK to make sure vendors are shipping you what you asked for. Count! Know if you are getting short shipped, and ask for a discount in return. If you ordered 100 blue button downs, you should receive 100 blue button downs. Not 96. Not 90 blue button downs and 10 orange button downs. 100 blue button downs.
- Know your numbers. Take inventories. Yes, multiple inventories! Know your actual cost of goods sold. Don’t get creative or complicate your numbers. Know your [real] numbers.
- Accept that shrinkage is something you are going to have to live with. We’re not saying you should be OK with huge shrinkage numbers but compare your shrinkage to that of the national average, by classification. Are you around the same place? GREAT! High five yourself and let’s keep moving.
We know you each have an opinion on shrinkage, and we want to hear it. Send us your thoughts and lets grow (opposite of shrink) this conversation.