Retail shrinkage is described as anything that attributes an unwanted loss of inventory, including breakage, wastage, theft, admin error and vendor fraud. This ultimately leads to a loss of revenue, as the retailer can no longer sell this product. It is an ongoing problem that has resulted in a loss of over $100bn worldwide, with a $10bn+ deficit in the UK alone.
The convenient nature of modern supermarkets has only served to increase this loss of revenue, with self-scanners increasing retail shrinkage figures from 30-70%. With more self-service technological advances aimed at streamlining the shopping process being developed every year, the figures will likely only increase.
What can Retailers do to Reduce Retail Shrinkage?
As retail shrinkage is such a drain on money and stock, up to 2% of revenue in some cases, supermarkets have taken steps to combat it. One solution is to employ extra security staff. However, this is by far the most expensive solution, as trained staff who work long hours cost many thousands of pounds a year. Additionally, this solution only serves to reduce shrinkage by crime. It cannot reduce the loss of damage, waste, admin error or vendor fraud.
Another solution employed by supermarkets is extensive stock taking, these efforts are another costly endeavour, it takes as many as 20 staff members working six-hour overnight shifts to log every item of stock in the supermarket. This solution goes somewhat towards combatting the effects of admin error and wastage, by logging each item and checking it against predicted results.
Retailers must be vigilant over inventory stores as if left unchecked, they would likely run out of items that are being routinely lost or stolen. As items only leave the inventory if they are logged by staff as broken or leave legitimately through a sale. Many supermarkets do not account for stolen goods in their stock take as these are notoriously hard to track. Leaving the retailer with a deficit when ordering new stock.
Retailers are encouraged to develop their own personalised shrinkage action plan, as each retailer is different. A standard solution would not be as effective. To do this, they must understand what causes retail shrinkage in their store. This can include, evaluating employee behaviour and ensuring the staff are not taking advantage of any gaps in the system. It can also include, monitoring which items are being routinely stolen and evaluating what options are available to correct this. However, this is hard to do, employees inclined to commit theft are often hard to detect, as they know the system and can work it.
Theft prevention is just one of the ways retailers can cut loss in their store, by ensuring company policies are prevalent and clearly visible to dissuade potential shoplifters. Another is customer service; it is the biggest concern for shoplifters to be watched stealing. A well placed shop assistant offering attentive service can raise a red flag with a shoplifter and they will cease their illegal activities immediately. As crime is one of the biggest contributors to retail shrinkage, up to £4.8million in 2019 was reported. Effective theft prevention goes a long way to reducing the effects of lost revenue.
How can Hark’s Technology Reduce Shrinkage?
Our Loss Prevention solution provides object identification to deliver loss data on a granular product level, whilst simultaneously offering estate-wide checkout analysis. We are helping stores to gain more accurate figures on shrinkage in real-time.
The solution uses state of the art hardware and cameras to identify theft and predict patterns in behaviour over time. The detection picks up objects entering the basket on the shop floor and recognises when it hasn’t been scanned at self-checkouts, giving staff insight so they can activate an action plan to stop this.
The network of cameras in stores are often under used by security staff and the data is currently being wasted. Our machine learning algorithms process the untapped data to devise insight into habits and patterns in the store, allowing retailers to stop routines that lead to retail shrinkage. Such as which items are being stolen more frequently in each store. The system can also spot patterns that can be cross-referenced estate wide, identifying if there are spikes in theft within certain stores. For example, it can identify if there is a higher shrinkage rate of Bose speakers due to theft in one branch compared to the rest of the stores, helping the retailer to implement more informed changes to minimise shrinkage in the future.
Get in touch with our team today to discuss how our solution can help reduce retail shrinkage in your store with our loss prevention solution.