5 Effective Ways to Reduce Shrinkage Retail
“Retail shrinkage” denotes preventable losses caused by human error or deliberate efforts, such as theft or fraud. In the US, shrinkage is a $61.7 billion problem.
“The 2020 National Retail Security Survey found shrinkage at an all-time high, accounting for 1.62% of a retailer’s bottom line, costing the industry $61.7 billion. Almost twice as many businesses reported shrink rates of 3% or higher compared to previous years.”
These losses are two-fold — as the organization lose the capital invested to attain the goods as well as the potential revenue that would be generated through the sales of the goods.
Types of shrinkage
There are many causes of shrinkage. The top reported causes are (not in any particular order):
- Cyber-related incidents e.g. data breaches
- Shoplifting or theft, whether by a lone person, an organized retail crime, or employees themselves
- Return fraud
- Gift card scams
- Human error during administrative processes or packing
Loss prevention is a very real, ongoing challenge for retailers. Many are now shifting to AI technologies for more powerful strategies that not only prevents losses but can also provide a better, more reliable customer experience, both online and offline.
Some AI-powered solutions for you to consider include:
Cross-check your shelves in real-time against planned planograms. Ensure that items are placed in the correct locations, reducing the possibility of losses due to misplaced items. Beyond loss prevention benefits, this solution makes inventory count much faster and more efficient. When items go out of stock, set notifications for employees they can quickly replenish the shelves.
Beyond the typical camera surveillance, teach your cameras to detect a predetermined set of actions that are deemed “suspicious”, such as the customer…
- Looking sideways
- Taking small steps
- Putting items inside their bag or clothing
Once these actions are detected, the AI systems connected to the cameras can notify employees so they can promptly investigate and respond.
Restricted Zone Monitoring
Similar to theft detection, cameras can be taught to recognize staff uniforms or badges, automatically differentiating between staff and customers.
Restricted areas such as the back office, vault or supply room can be equipped with this technology to prevent an unauthorized person from entering.
Human-Assist Cameras for Packing & Quality Control
Optimize product lines with human-assist cameras that can recognize:
- Misapplied or incorrect labels
- Missing caps, lids or open containers
- Incorrect items being packed
- Defect goods
Human-assist cameras will not only prevent losses due to human error, but also ensure that the correct items are received in good condition by the customer.
In extreme cases of theft or public disturbance, cameras can assist law enforcement to identify wanted persons when they enter store premises.
For the last two decades, LP (Loss Prevention) Magazine has established itself as the leader in loss prevention news and education.
Last month, we sat down with LP Magazine and industry-leading manufacturer of security hardware Cisco Meraki to openly discuss retail’s dire shrinkage issue and the latest technologies that can mitigate this issue.