Understanding Shrinkage

Understanding Shrinkage

Matthew Dyball has over 25 years experience in loss prevention working for retailers, security providers and hot product manufacturers in South Africa and abroad. “We need to understand that Security Guards and anti-theft gadgets will not solve shrinkage, you need a balanced approach to break the shrinkage life cycle”.

Most retailers wrongly focus on external theft (the bogeyman of shrinkage) and spend 80% of their budget chasing 20% of the problem. The opportunity for malicious shrinkage can be removed if we start first by addressing the causes of non malicious shrinkage, improving controls and the adherence of procedures, in other words “good shrinkage results follow good store managers”.

46% of all retail theft can be attributed to internal sources. “Internal theft only includes incidents where the theft of products takes place by someone directly employed by the business (including staff contracted with another company, such as contract guards or cleaners).

An international study showed that an overwhelming 79% of workers admit that they have or would consider stealing from their employers. The real reason people steal is opportunity. When companies make it easy through lack of control, an atmosphere of theft is created. In fact, employee’s steal to the extent that management permits it. There’s no shortcut to prevent it, you have to remove the opportunity, create awareness and achieve their support.

The Global Theft Barometer indicates that products most vulnerable to malicious shrinkage are razor blades / shaving products, cosmetics / face creams, infant formula, alcohol, DVD’s and CD’s. The acronym “CRAVED” best explains the characteristics of why these products (hot products) are more likely to be stolen:-

Concealable (easy to hide when being stolen)

Removable (easy to remove)

Available (easily accessible)

Valuable (either personally to the thief, or to others who may wish to purchase it)

Enjoyable (the product is enjoyable to own or consume)

Disposable (a ready market for the stolen item exists)

The ability to dispose of the stolen item is the critical variable in explaining why some products are more likely to be stolen than others.

We must understand that shrinkage transcends departmental and company boundaries, it’s not just shoplifting, it’s not all stores and it’s not all products. The 80/20 principle applies (not all products cause shrink i.e. 20% of products cause 80% shrink).

Loss prevention should be looked at in a holistic manner. “Managers need to identify the real problem areas instead of simply having a knee-jerk reaction to losses by pointing the finger solely at shoplifting.

We need to focus on compliance and identify end-to-end solutions. “We also need to bear in mind, that shrinkage causes defensive merchandising, which causes OOS (out of stocks) and reduced sales, which ultimately frustrates the shopper. Whilst designing and recommending loss prevention strategies to retailers, the shopper must always be the first consideration. The last thing you want to do is annoy shoppers with overzealous and intrusive security measures whilst trying to deter shoplifters.

MATTHEW DYBALL is the Managing Director of Lodge Security an international loss prevention company based in Johannesburg. A native of the U.K. but raised in Johannesburg, he began his career with the South African Police Service. He has worked with retailers and international manufactures for the last twenty five years developing solutions to reduce shrinkage and improve product availability. During this time, he spent eight years working at Proctor & Gamble and was in charge of On Shelf Availability and Category Management for the Sub-Sahara Africa region. . He can be reached at +27 82 786 2606 or via email at matthew@lodgesecurity.co.za