Shrinkage in Retail

Shrinkage in Retail


What is Shrinkage?

Shrinkage in retail is loss of either inventory, cash or profits due to shoplifting, employee theft, return fraud or administrative errors. According to Retail Ireland, 82% of Irish retailers have suffered from shoplifting, with 39% experiencing theft of stock by employees and 36% experiencing refund fraud. With these figures it’s obvious that shrinkage is a major problem in the retail industry that must be addressed.


Retail Theft

Retail theft, in the form of shoplifting, is a common issue that brick and mortar stores face. In fact, incidents of shoplifting in UK supermarkets rose by nearly 8% between 2014 and 2017, according to figures gathered by the Press Association (PA). There is no fool proof way to eliminate shoplifting, but there are a number of things you can do to significantly reduce it. Layout and organisation can help you to quickly identify when shoplifting is or has occurred. Carefully considering the layout of your shop can ensure theft opportunities are low and visibility is high. However, if prevention is the goal, customer service and CCTV are your best resources. For a more in depth look at how to prevent shoplifting check out our article on it here.


Customer Service

Promoting good customer service can actually act as a deterrent for shoplifters. It’s important to have enough staff to cover all areas of your shop and properly trained staff are a key asset in efforts to prevent shoplifting. Understaffing can act as a green light to shoplifters, as they see that there is no one around to catch them. Why not read our article on ‘How Customer Service Can Stop Retail Theft’ for some tips on how to use your employees to best effect?



CCTV is another major deterrent to shoplifters. Also it helps you to catch them afterwards. It can identify the shoplifter to the Gardaí and act as evidence of the theft. While CCTV can be expensive, it has numerous benefits. CCTV can now act as not only a security tool, but also as a marketing tool. Some IP cameras can tell you which areas of your store attract the most attention, allowing you to optimise sales by placing deals or difficult-to-sell products in these areas. Even standard CCTV will make your store much more secure. It monitors your store 24/7 and insurance companies may even reduce your premiums if you have it installed.


Employee Theft Prevention

One of the biggest causes of loss is actually internal theft. No one wants to believe their employees would steal from them, and in most cases your employees are genuine, hard-working individuals. But employees can know your store even better than you do and internal theft does sometimes happen. According to Retail Ireland, employee theft accounts for over a third of the total shoplifting currently happening. However, there are a number of things you can do to aid in employee theft prevention. CCTV and your Point of Sale (POS) system are key elements of this prevention. For how to use this technology for prevention and for other tips, check out ‘Employee Theft Prevention’.


Dealing with Employee Theft

If you catch an employee stealing from your store, it’s only natural to feel betrayed. However, whatever your personal feelings, it’s important to follow the proper employment disciplinary procedures. The last thing you want is to end up paying a settlement to someone (who has already cost you a lot) because of a claim of unfair dismissal. When dealing with employee theft you must use fair procedures to avoid this claim. There are a number of elements to be considered and implemented in order to ensure that the processes and any subsequent dismissal is fair. ‘Dealing With Employee Theft’ talks you through some of these elements.  


Return Fraud

Return fraud is tricky because it can be hard to catch and can also take many different forms. It ranges from returning used or even stolen merchandise to staff doing fake returns in exchange for cash or gift cards. The only way to really combat this is to have a strict return and exchange policy. 


Administrative Errors

Simple administrative mistakes can also cause large amounts of loss to your bottom line. These mistakes can take the form of mislabelling, incorrect specials or discounts and accounting errors; any of which can lead to the customer paying less and you losing more. While these mistakes are usually accidental, you can still do a couple of things to help prevent them. Employee training should be your first tactic for addressing this problem. If your employees are trained properly, they are less likely to make mistakes. Ensure staff fully understands how to complete return procedures, label products, count stock and do pricing. A good Point of Sale (POS) system can also help to reduce the opportunity for human error and monitor transactions as they happen.



Knowing what to do doesn’t necessarily mean that you have the funds available to achieve this. If you need a finance boost to buy CCTV, rearrange your shop or any other security measures that you might want to take; GRID’s business loan is a great option.  GRID’s loan allows you to access up to €100,000 and its flexible repayments means that it doesn’t put a stretch on your cash flow. The repayments work by taking a small percentage of your credit/debit card takings meaning that if you’re earning less, you’re also repaying less. Tackling shrinkage in retail is important for every shop and should be addressed urgently. Another benefit to GRID's finance option is that it can be approved in just 24 hours so you’re not waiting weeks for a decision on your loan and you can focus on putting the money to work on the security of your business. 


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