When you’re challenged with theft, inventory discrepancies, and other shrinkage concerns, finding a quick and cost-effective solution can help to protect your profits. At Product Protection Solutions (PPS), we are here to assist you. We have numerous loss prevention tools available. If you need a solution to fit a specific goal, we will help find you one! 

This article will give you a brief overview of cost-effective solutions on how to reduce shrinkage for your business. 

What Causes Retail Shrinkage?

According to the National Retail Federation’s 2021 National Retail Security Survey (page 4), retailers’ average shrink rate was 1.6% in 2020, and even fewer retailers can keep their shrink rates below 0.5%. 

Before learning some available options, did you know that there are five types of shrinkage in retail?

  • Administrative Errors – This includes accounting inaccuracies, data typos, POS transaction errors, etc.
  • Employee Theft – Dishonest employees who might create fake returns, steal products or cash, etc.  
  • Fraud – There are two main types return fraudulent (someone returning stolen or used merchandise) and vendor fraud (incorrect invoice data).
  • Operational Loss – Typically, this includes unforeseen problems such as product damage or expired items.
  • Shoplifting – The top cause for retail shrinkage and it includes amateur and professional thieves. 

If you want to learn more about retail shrinkage, read our article on Causes of Retail Shrinkage and Ways to Prevent It.

Are You Ready to Learn How to Reduce Shrinkage?

Now that you know more about retail shrinkage, there are various cost-effective methods available. The best way to reduce shrinkage is to start with the type that contributes to your most significant loss. Then as you begin to regain profits from reducing your shrinkage, you can invest in the other methods to significantly reduce your losses. 

5 Cost-Effective Solutions on Reducing Shrinkage 

Here are retail shrinkage solutions for each type of loss, and many of these solutions can be used to reduce loss with other shrink types.

Administrative Errors

Conduct Regular Inventory Counts

This strategy will help to ensure you make business decisions on accurate data. You can complete this in several different ways. 

  • Have an employee conduct cycle counting in-store – Minimal cost
  • Implement smart-shelf technology that can manage the inventory for you – Medium cost 
  • Incorporate EAS RFID security system to track merchandise – Medium to the high cost 
    • If you already have an EAS system in place, contact the manufacturer to see if it can use RFID technology and provide “real-time inventory visibility.”

Employee Theft

Create a Work Culture of Integrity and Initiative 

  • Screen potential employees reviewing references, running criminal record checks, and asking ethical questions – Minimal cost
  • Create a loss prevention training program within the company – Minimal cost
  • Conduct a new employee training – Minimal cost
    • Company security 
    • Consequences of internal and external theft 


Review Returned Merchandise and Vendor Orders

  • Limit returns on items with no receipt, especially on items that cost $50 or more – Minimal cost
  • Keep track of individuals who regularly return items without a receipt – Minimal cost
  • Compare incoming products against the invoice before the shipper leaves – Minimal cost 

Operational Loss 

Minimize Chances of Product Damage 

  • Reduce clutter by monitoring shelves, walkways, and product displays for messes – Minimal cost
  • Keep fragile merchandise in easy to access areas to reduce accidental product damages – Minimal cost 


Remove Opportunities for Theft 

Contact Loss Prevention Experts for Assistance 

At PPS, our team is ready to listen to your needs and help you find a loss solution that fits your goals and budget. We have experience assisting companies with all needs:

  • Creating a loss prevention strategy 
  • Revamping an ineffective strategy 
  • Supplying loss prevention devices  
  • Designing a custom solution 

Contact us online or call 866-750-5744.