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How to Eliminate Shrinkage in your Store

Kadence Edmonds
14 Oct 2020

It’s a wild frontier for retailers and any kind of loss is a big deal to small businesses. But one of the biggest problems facing the retail industry is inventory loss.

 How to Fix Retail Shrinkage

Based on a 2019 survey by the National Retail Federation (NRF) in the US, shrink, or loss of inventory related to theft, shoplifting, error, or fraud, is reducing the bottom line by $50.6 billion across the industry. The full report found that whether the loss is happening from a dishonest employee or organised retail criminals, the shrinkage costs retailers about 1.38 percent of sales, on average. This is a big deal to those already running on razor-thin margins.

That’s why it’s beneficial for retailers to identify these issues and implement a strategy to decrease their impact.


Five finger discounts are one of the biggest problems facing brick and mortar stores. Shoplifting accounts for more than $13 billion dollars of damages to US retailers and generally only 1 in 48 are caught, with only 50% of these being turned over to the police.

Concealment is the most common method of theft among shoplifters, so smaller items are particularly vulnerable. Other methods include taking multiple items to the changing room, distracting staff or using the private space to conceal goods. Swapping price tags and pursuing fake refunds are also popular shoplifting methods. So let’s have a look at some ways to combat these theft methods.

Fit-out security cameras

Installing security cameras in your store can serve a dual purpose. Firstly, installing cameras is a proven method for reducing the rate of theft as it acts as a deterrent. But it also allows you to keep an eye on your store whether you’re present or not.

Adhere to a strict returns and refunds policy

Theft through fraudulent refunds and returns is a common shoplifting tactic and one of the main reasons is that it’s hard to pinpoint. This is where you need to make sure your return and refund policy is clear and your staff need to enforce it. If your policy states that customers will not receive a refund without a valid receipt, make sure this procedure is followed to the letter.

Store Organisation

If your store is well-organised, it’s easy to spot if something’s missing. An unorganised messy store can become an easy target for opportunists. If you’re already putting effort into your visual merchandising, this shouldn’t be a problem.

Position your registers thoughtfully

The position of Point of Sale system matters. Having your staff stationed at cash registers near exit points will help with catching shoplifters and decrease the risk of cash register theft.

To avoid the opportunity of shoplifters grabbing cash as well, it’s best to have the till screen locked after every transaction and only accessed by employee codes.

With Epos Now you can either have your till sign out after each transaction, or after a period of inactivity, like 30 second, 1 minute or 2 minutes. 

Employee Theft

Employee theft is one of the most serious problems facing small businesses in the US. According to a study conducted by the National Federation of Independent Business (NFIB), employees account for a whopping 44 percent of theft losses at stores.

The trouble is, employee theft isn’t something retailers think they have to worry about. However, they ought to be concerned as this type of theft can take many forms.

  • Outright stock theft - Skimming - like ringing up fake accounts or skimming straight from the cash drawer -
  • “Sweethearting” - where the employee gives away merchandise to a friend, family member or other employees
  • Tampering with checks and expense reports (fraud)

So what are some of the best ways to stop employee theft in your store?

Introduce an employee screening process

Prevention is better than a cure. Try to weed-out potential employees who are more likely to steal from your business by implementing some kind of screening process during the recruitment stage.


When you have your established team in place, you need to make sure that all members are adequately trained. That way you further minimise the chance of loss happening through mistakes, and even losses related to shoplifting.

Carry out Audits

While monitoring your employees can help, showing that you’re on top of what’s happening in your business is one of the best deterrents. Implement practices like random cash counts as a deterrent to skimming.

Make staff feel valued

Build good relationships with the team by showing genuine interest in their situations and offering perks as a way to say thank you. This will create a better work environment and increase the overall vibe and culture.

Administration errors

Administrative errors are the third most common cause of product loss. These can include anything from accounting errors, to poor inventory management. Errors in paperwork often referred to as ‘paper shrink’ are mostly an unintentional result of an administrative error.

These types of errors still account for more than 20 percent of retail loss. That equates to a large portion that can be avoided if the right systems and processes are implemented.

Some processes that can be implemented to decrease paper shrink include:

Full Employee administrative training

The first step to minimise admin errors is to ensure that staff are trained in the correct practices for all aspects they are involved in. Whether they’re pricing up new stock, receiving orders, or processing a refund, staff that are trained properly are less likely to make the mistakes that end up causing some retail losses.

Inventory Management

The core pillar of any retail business is having a comprehensive POS (Point of Sale) and inventory management system. Combining these two systems will help you track inventory and transactions as they happen, helping avoid errors, and identifying potential fraud and theft.

Poor record-keeping and inventory management cause shrinkage. A solid practice of stock-taking your inventory can greatly reduce shrinkage. Many errors can be uncovered with this practice before the inventory is sold and becomes shrinkage.

Epos Now has a comprehensive built-in inventory management system. Read more on inventory management here.

While avoiding all loss is impossible, implementing these measures can help decrease the total loss.

To find out more about how an Epos Now system as the features you need to eliminate shrinkage and become more profitable, please click here