[{"@context":"https:\/\/schema.org\/","@type":"BlogPosting","@id":"https:\/\/www.the-future-of-commerce.com\/2023\/12\/13\/reducing-shrinkage-in-retail\/#BlogPosting","mainEntityOfPage":"https:\/\/www.the-future-of-commerce.com\/2023\/12\/13\/reducing-shrinkage-in-retail\/","headline":"Reducing shrinkage in retail: Getting to the root causes","name":"Reducing shrinkage in retail: Getting to the root causes","description":"Shrinkage in retail hurts CX, employee morale + productivity, and brand reputation. Retailers must take a holistic approach to tackle it.","datePublished":"2023-12-13","dateModified":"2024-03-12","author":{"@type":"Person","@id":"https:\/\/www.the-future-of-commerce.com\/contributor\/fabrice-haiat\/#Person","name":"Fabrice Haiat","url":"https:\/\/www.the-future-of-commerce.com\/contributor\/fabrice-haiat\/","identifier":786,"image":{"@type":"ImageObject","@id":"https:\/\/secure.gravatar.com\/avatar\/40566eab52eca76fff732302591c9c2c88e8737cdcf37cfaf12d7501e49039ef?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/40566eab52eca76fff732302591c9c2c88e8737cdcf37cfaf12d7501e49039ef?s=96&d=mm&r=g","height":96,"width":96}},"publisher":{"@type":"Organization","name":"The Future of Commerce","logo":{"@type":"ImageObject","@id":"https:\/\/www.the-future-of-commerce.com\/wp-content\/uploads\/2023\/01\/logo-foc-schema-app-1.png","url":"https:\/\/www.the-future-of-commerce.com\/wp-content\/uploads\/2023\/01\/logo-foc-schema-app-1.png","width":172,"height":60}},"image":{"@type":"ImageObject","@id":"https:\/\/www.the-future-of-commerce.com\/wp-content\/uploads\/2023\/12\/shrinkage-in-retail-FTR-1-1.jpg","url":"https:\/\/www.the-future-of-commerce.com\/wp-content\/uploads\/2023\/12\/shrinkage-in-retail-FTR-1-1.jpg","height":375,"width":1200},"url":"https:\/\/www.the-future-of-commerce.com\/2023\/12\/13\/reducing-shrinkage-in-retail\/","about":["B2C Commerce",{"@type":"Thing","@id":"https:\/\/www.the-future-of-commerce.com\/commerce\/","name":"Commerce","sameAs":["https:\/\/en.wikipedia.org\/wiki\/Commerce","http:\/\/www.wikidata.org\/entity\/Q26643"]},{"@type":"Thing","@id":"https:\/\/www.the-future-of-commerce.com\/customer-experience\/customer-experience-general\/","name":"Customer Experience","sameAs":["https:\/\/en.wikipedia.org\/wiki\/Customer_experience","http:\/\/www.wikidata.org\/entity\/Q984142"]},"Retail Industry","Retail Trends, Data, News"],"wordCount":988,"keywords":["Customer Experience Management","Digital Retail","Employee Experience Management","Inventory Management","Operations management","Retail","Retail Trends","SAP Partners"],"articleBody":"According to the National Retail Federation, shrinkage\u00a0cost U.S. retailers $94.5 billion in 2022. That\u2019s a staggering amount of money \u2014 but the reality is that shrinkage doesn\u2019t just put a dent in retailers\u2019 bottom line. It also has a powerful negative impact on customer experience, employee morale and productivity, and even a retailer\u2019s reputation.It\u2019s estimated that shoplifting, fraudulent returns, and other external factors account for 35% to 45% of direct losses from shrinkage in retail, while another 30% to 40% is due to internal factors such as employee theft or discount abuse.Startlingly, the entire remainder \u2014 between 15% and 25%, potentially reflecting almost $24 billion a year in direct losses \u2014 is due to operational errors such as pricing errors, administrative mistakes, and inventory inaccuracies.Reasonably enough, many companies pay more attention to the first two causal factors, but that often leads them to neglect the role of inefficiencies and other operational issues in driving shrinkage. That\u2019s a problem, because operational factors are especially important when it comes to the indirect, knock-on impacts.How shrinkage hurts retailersHigh rates of retail shrinkage inflict a double blow: degrading the customer experience and tarnishing brand image.When products go missing, customers encounter out-of-stock situations more frequently, forcing them to take their business elsewhere. Such occurrences not only erode sales, but also harm the company’s reputation.Meanwhile, muscular anti-theft measures \u2014 such as security tags, store detectives, and bag searches \u2014 can deter theft, but they also alienate customers. With rates of retail theft on the rise, store leaders are increasingly turning to locked product displays \u2014 a move designed to thwart shoplifters, but one that hurts brand image and spoils the shopping experience.To safeguard their reputation, retailers must adopt a more streamlined approach to shrinkage without losing their customers\u2019 trust.Shrinkage also inevitably leads to suspicion and finger-pointing among employees, even if the problems are actually due to external factors.Security measures to beat shrinkage can prove unpleasant and burdensome for employees, and the time taken to deal with the problem \u2014 or new loss-prevention procedures \u2014 detract from the time employees could otherwise be spending serving customers and driving sales.To tackle shrinkage effectively, retailers need to mitigate not just their direct financial losses, but also the downstream impact of shrinkage on customers, employees, and their brand. That requires a holistic loss prevention strategy that effectively addresses all three causes of shrinkage \u2014 external theft, internal fraud, and operational errors.      Retail shrinkage: Are locks the best way to stop shoplifting?                To curtail retail shrinkage, stores are placing products in locked cabinets, but alternative security measures that don't hurt CX exist.      Loss prevention strategy: A holistic approach to reducing shrinkage in retailFortunately, new digital workplace technologies bring this kind of joined-up loss prevention strategy within reach. While most strategies seek to arrest shrinkage at the point of loss \u2014 by clamping down on criminal or fraudulent behavior \u2014 bringing digital workplace tech into the mix lets retailers take a true end-to-end approach.With integrated detection and mitigation strategies that touch all areas of the value chain, store leaders can achieve a higher level of safety and security compliance, track incidents more accurately, and adopt a more forensic, data-driven approach.This holistic strategy provides four key benefits for retailers when it comes to shrinkage in retail:A single source of truth. Digital technology enables retailers to build a single source of truth for inventory tracking worldwide. With end-to-end visibility from the time inventory arrives at a store to the moment it leaves with a customer, retailers gain unified operational control and transparency. This global view of inventory and operations is key to minimizing retail shrinkage across all channels.Smarter data analytics. Based on the data flowing into and through their digital workplace infrastructure, retailers can use advanced analytics to spot patterns and anomalies that might indicate operational shortcomings or problems such as theft and fraud. With these insights, retailers can create targeted strategies to nip problems in the bud without unduly impacting employees or customers.Ongoing training and education. By providing training and fostering employee development, companies can give them the knowledge and skills needed to halt shrinkage. Moreover, retailers can make employees true partners in the push for loss prevention \u2014 while also engaging them to effectively support customers and drive reputational gains, limiting the harm done when shrinkage does occur.Continuous improvement and collaboration. A digital workplace strategy helps retailers to improve on an ongoing basis. While product tags or security cameras can drive a one-off reduction in losses, a workplace strategy gives retailers the tools to continually review, audit, and adjust their processes \u2014 while also leveraging feedback from employees to identify weaknesses and develop better solutions.      Omnichannel inventory management: 7 strategies for retail success                Retailers today must manage stock across multiple channels. Learn about inventory management strategies that boost revenue and increase customer satisfaction.      Motivated, empowered employees\u00a0\u2192 less shrinkageThe key thread running through this approach is that when you bring a digital workplace solution into the mix, you\u2019re choosing to simultaneously trust and empower your employees, while also investing in a better experience for your customers.That\u2019s a dramatic upgrade over traditional, punitive loss-prevention strategies, which tend to simultaneously erode the customer experience, and leave employees feeling like they\u2019re under suspicion.We all know that employees who feel frustrated, demoralized, and undervalued are far more likely to overlook theft and fraud, be tempted to commit fraud themselves, or simply get careless and make mistakes \u2013 after all, a positive employee experience has a big impact on business outcomes.Investing in your team and leveraging digital technologies to empower everyone, from management to frontline teams,\u00a0to do their job better is a smart way to manage loss prevention \u2014 and to dramatically curb the impact of shrinkage on retailers.  For retailers, it’s no longer business as usual. Meet the moment head-on, no matter what the moment brings.Get the industry market report for retail\u00a0HERE."},{"@context":"https:\/\/schema.org\/","@type":"BreadcrumbList","itemListElement":[{"@type":"ListItem","position":1,"name":"2023","item":"https:\/\/www.the-future-of-commerce.com\/2023\/#breadcrumbitem"},{"@type":"ListItem","position":2,"name":"12","item":"https:\/\/www.the-future-of-commerce.com\/2023\/\/12\/#breadcrumbitem"},{"@type":"ListItem","position":3,"name":"13","item":"https:\/\/www.the-future-of-commerce.com\/2023\/\/12\/\/13\/#breadcrumbitem"},{"@type":"ListItem","position":4,"name":"Reducing shrinkage in retail: Getting to the root causes","item":"https:\/\/www.the-future-of-commerce.com\/2023\/12\/13\/reducing-shrinkage-in-retail\/#breadcrumbitem"}]}]