Retail shrinkage is the difference in the value of stock asper the books and the actual stock available in the shop. A survey in 118retail chains in the US states that the country has lost $31 billion andretailers lost 1.7 percent of their total annual sales due to retail shrinkagelast year. The causes of retail shrinkage are mainly employee theft,shoplifting, administrative errors and vendor fraud.
Employee Theft:
Also known as internalshrinkage, this is caused by the employees of the store such as pilfering merchandise,cash, provisions etc. Employee theft and embezzlement of accounts cause almosthalf of the total retail shrinkage. Cashier caused shrinkage occurs in ways ofwrong recording of transactions, forging receipts, misuse of the register orcomputer etc and accounts for almost 61 percent of the total employee causedshrinkage. 95 percent of businesses experience employee theft and 75 percent oftheft goes unnoticed. This problem is a hard nut to crack due to lack ofvisibility of the transaction. CCTV monitoring, good store surveillance andmaintaining good relations with employee will help to restrict this practice.
Shoplifting:
Otherwise called commercialburglary, this is one of the most common crimes. In slang language it isexpressed as five-finger discount in Australia and US, and jacking, chaving,and nicking in UK. Studies show that one out of twelve customers might be ashoplifter. Professional shoplifters are called boosters. Shoplifters requireprivacy. Things should be arranged in such a way so as to avoid blind spotsin the store and thus avoid internal loss. Small and expensive items should bekept behind the counter or locked in a display case. CCTV (Closed Circuit TV) filmingall areas of the store is the most successful way to prevent shoplifting. Installationof physical obstacles such as alarm at the store exits, and closing the backexit of the shop would also prove beneficial.
Administrative Errors:
Administrative and paperwork errors such as mark up and markdown of the prices cause around 15 percent of the retail shrinkage.
New technologies to curtail shrinkage:
RFID and other security products play an outstanding role to combat retail shrinkage and prevent shoplifters from sliding expensive products into their pockets. RFID tags are used in tracing specific product information, even if they are kept in the customers cars. These applications provide a host of services to retailers such as product tracking, mustering, supply chain security etc, in addition to the traditional services of smart card systems and others. They consist of tags with electronic information, and work with an instrument called readers that captures the information and pass it on to the database.
There are two kinds of RFID tags.
- Passive RFID tags which operate without onboard power source, and use radio wave energy to turn the microchip attached with the product.
- Active tags that operate on battery power and send information through a transmitter to the database.
In todays retail technology security is the chief concern. Reducing shrinkage is a profit growth strategy for retailers. Retail shrinkage requires utmost attention and care of the retailers beyond the festive discounts and promotional tactics.
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