According to the National Retail Federation (NRF) Security Survey 2020, “Shrink is at an all-time high, accounting for 1.62% of a retailer’s bottom line — costing the industry $61.7 billion. It cuts deeply across the industry too, with seven in 10 reporting a shrink rate that exceeds 1%.”

That number has continued to rise since 2017, and if you haven’t taken steps towards reducing your losses, now is the time. Below we examine the top four causes of shrinkage in retail and what you can do to combat it. 

Top 4 Causes of Shrinkage in Retail

Once you learn the four main causes of shrinkage in retail, you can begin to better protect yourself and your business from those losses. 

#1 Shoplifting 

Shoplifting continues to be one of the most significant reasons for shrinkage within the retail industry. For the 2019 fiscal year, the average dollar amount lost per shoplifting incident was $270.06 (Source: NRF Security Survey 2020). Whether the shoplifter is an amateur or is part of an Organized Retail Crime (ORC) group, loss prevention technology can help to reduce theft shrinkage. 

Our past article on the 5 Rules of Loss Prevention can provide you with valuable loss prevention tips to help prevent customer theft.

#2 Employee Theft 

Employee theft is another massive contributor to retail shrinkage. For the 2019 fiscal year, the average dollar amount lost per employee theft was $1,139.32 (Source: NRF Security Survey 2020). Employee theft can include fraudulent returns and neglect scanning items for friends and family. 

Another past article on How to Avoid Loss: Loss Prevention Strategies can help you learn where to spend time and money with loss prevention strategies.

#3 Data Errors 

These errors result from common mistakes (typing a 0 instead of an 8) within your inventory system. These errors will show that merchandise inventory levels are lower (or higher) than expected. These minor errors can lead to high losses due to inaccurate product ordering. 

#4 Vendor Fraud & Errors

This is a smaller reason for shrinkage in retail, although it can still occur. It usually involves a vendor delivering the wrong order quantity, whether from a data error or purposefully not providing the complete order. 

10 Quick Tips to Reduce Shrinkage 

Now that you have a better understanding of the causes of shrinkage in the retail industry, here are some ways you can fight back and reduce your losses.

  • Add a key and asset management system
  • Develop a cycle counting schedule 
  • Educate employees on your loss prevention policies 
  • Implement loss prevention training within the company 
  • Install a POS system 
  • Keep products on open display 
  • Place security cameras throughout the store 
  • Post-anti-theft signage throughout the store
  • Utilize security tags, quad wraps, and safers 
  • Work with a loss prevention solution provider 

Loss Prevention Strategies to Reduce Shrinkage 

At PPS, we guide our customers with excellent, trustworthy advice. In addition, we provide rapid, complete, custom, and technologically advanced loss prevention solutions that deliver the desired outcome every time. 

Learn how we can help reduce your shrinkage and reach your loss prevention goals! Contact us using the online form or by phone at 866-750-5744.