Retail stock loss from theft, administrative errors, vendor fraud, and other causes costs the retail industry billions every year and is one of the biggest challenges facing retailers today.
A stock loss prevention strategy is crucial for protecting profits and maintaining a healthy bottom line for any retail business. In this blog, we outline common causes of stock loss in retail and provide proven strategies on how to prevent stock loss in retail.
What Is Stock Loss in Retail?
Stock loss, often referred to as inventory shrinkage, is a persistent issue plaguing retailers — a relentless, profit-sapping force that can’t be ignored. It refers to the disappearance of products from a store’s inventory through things like theft, fraud, administrative blunders, and all manner of mishaps.
Retail stock loss is calculated by comparing recorded inventory data to what is physically leftover on shelves and in stockrooms.
Common Causes of Stock Loss in Retail Stores
Stock loss can occur through many different avenues in a retail environment. Here are some common causes of retail stock loss:
Shoplifting
Both employee theft and shoplifting by customers account for significant inventory losses. External theft by customers involves concealing merchandise and leaving the store without paying. Internal theft by employees could mean directly stealing products or giving away merchandise to friends or family.
Administrative Errors
Simple human errors like miscounting stock during cycle counts, incorrect pricing in the POS system, or lost shipments misplaced during receiving all contribute to stock loss over time. These errors lead to inventory records being inaccurate compared to what is physically in stock.
Vendor Fraud
Some losses are due to dishonest practices by vendors and suppliers, such as overcharging retailers for items, shipping fewer items than listed on the invoice, or sending inferior quality/damaged merchandise.
Product Damage
Damage to inventory from mishandling by staff, exposure to extreme temperatures or humidity, or products passing their expiration dates reduce salable stock and increase losses.
Receiving Errors
Retail stock loss can occur if there are mistakes during the receiving process of new inventory entering the store. This could involve incorrect counts against purchase orders, or simply receiving items that were not ordered.
Return Fraud
Customers attempting to return used, worn, or even stolen merchandise for refunds contribute to stock loss through return fraud and abuse of return policies.
Checkout Issues
Losses can happen at checkout if cashiers make mistakes or enable sweethearting by passing items to family/friends without ringing them up.
How To Prevent Stock Loss in Retail: 7 Tried-and-Tested Tips
Retailers can take concrete steps to minimise shrinkage and better protect their bottom line. Having a stock loss action plan will help save you cash!
Here are seven proven strategies to prevent retail stock loss:
1. Improve Security
Enhancing your security measures can help prevent retail stock loss. Examples of this are:
- Install surveillance cameras throughout the store, stockrooms, and receiving areas
- Use security tags or sensors on high-value merchandise
- Have security guards in plain clothes monitor the sales floor
- Keep fitting room traffic controlled with attendants
- Limit access to stockrooms and cashier areas to only necessary staff
2. Conduct Regular Audits
Routine cycle counts and inventory audits help identify discrepancies and catch losses early when they are easier to address.
3. Implement Robust Storage
Secure stockrooms and organised product displays, as well as other storage improvements, reduce opportunities for losses. Use lockable cages and storage units in stockrooms and keep items neat and organised by product type.
4. Train Employees
Ensuring staff is properly trained on procedures like returns/exchanges cuts down on human errors. Provide your staff with thorough cash handling and anti-theft training to prevent any errors from occurring. You should also have clear policies/procedures for markdowns, voids, etc.
5. Vet Vendors & Suppliers
Carefully screening vendors and monitoring shipments/invoices prevents supplier fraud and catches discrepancies.
6. Use Inventory Software
Leveraging inventory management software and integrated technology solutions is a powerful way for retailers to gain control over their stock levels. Implementing barcoding and point-of-sale inventory tracking allows you to maintain accurate, real-time data on inventory counts and locations.
7. Analyse Data
Analytics tools can analyse the integrated data you collected with software to identify any suspicious trends, unusual transaction patterns, or outliers that may indicate theft, fraud, or other loss sources.
Store Retail Stock Safely Off-Site With Nesta
While the strategies above can significantly reduce in-store losses, considering off-site storage is another way to prevent shrinkage. At Nesta, we offer business storage solutions that work for you, including options to store retail stock at our facilities.
Benefits of Storing Your Stock With Nesta
Designed with retail challenges in mind, Nesta’s facilities promise more than just space. Our secure warehousing provides the ideal space to safely store overflow inventory until needed.
We offer:
- A network of six prime storage facilities in North and South Dublin
- Round-the-clock CCTV, individually alarmed units, and controlled access
- A wide range of unit sizes
- Adaptable rental terms
Take control of your stock levels and profits. Get a quote from Nesta today to explore outsourced inventory storage solutions.
