By Al McClain
Want an easy way to dramatically grow your profits at retail? It’s as simple as reducing your shrink, according to Larry Miller, president of Trax Retail Solutions, who gave a presentation on the subject at the recent NGA (National Grocers Association) convention.
For many retailers, profit margins are thin enough that controlling shrink can be the difference between being in the black or in the red. And, Miller says that 68 percent of shrink is preventable; 86 percent of supermarkets mask or understate the problem; and the problem is 90 percent dependent on changing employee behavior. (Many of the statistics cited in this discussion are from a recent study of 30 retail companies with 10,400 stores, conducted by Trax and The National Research Group.)
According to Miller, 56 percent of retail shrink is employee-driven, versus 21 percent for shoplifting, and 10 percent due to receiving problems. Only 5 percent is related to pricing errors, 4 percent accounting problems, and 4 percent caused by damage.
In order to get a handle on the biggest part of the problem, Miller advises a comprehensive approach that starts with a pre-hire honesty orientation talk, and includes regular reinforcement, with some key elements:
- ASK employees to be honest
- TEACH what needs to be done and why
- WARN — get a commitment to follow policy
- REMIND — via awareness meetings, etc.
- PROMOTE shrink awareness via in-store signs, etc.
The key seems to be making a company-wide commitment to reducing the problem, using persuasion and education, combined with the plethora of new technology that can be used for reporting and monitoring. As an example of the possibilities, here are some of the statistics that Trax cites:
- Automated cashier monitoring systems can reduce shrink 16 percent by measuring cashiers versus others in the same store, providing clarity of performance
- Integrity/honesty surveys at hire can drop shrink up to 13 percent
- Formal loss prevention training for store employees can reduce shrink 22 percent
- POS data mining software can decrease shrink 6 percent
There are other ideas from Trax, along with whitepapers that detail best-practices, available at http://www.traxretail.com/whitepapers.htm
Moderator’s Comment: What do you see as the keys to reducing shrink?
One idea mentioned that really appeals to me is engaging potential shoplifting customers. The idea is that you train employees to go right up to possible
shoplifters in your store, greet them, and let them know that they are so important; you’ll be attuned to their every move. This is all done in a very positive, friendly way.
If the person is a shoplifter, they will probably go elsewhere. If not, they’ll be appreciative of your personalized approach to customer service. –
Al McClain – Moderator