Theft poses a significant threat to stores, not just by eroding the trust between store owners and their customers, but also by negatively impacting the store’s financial performance. To measure the extent and impact of theft, we include it in the store’s shrinkage calculations. This approach helps assess the discrepancy between the store’s theoretical inventory and its actual stock.
What is Shrinkage?
Shrinkage refers to the gap between a store’s theoretical inventory—what it should have based on accounting records—and its actual inventory. Essentially, it reflects the difference between the expected and the actual sales turnover.
While shrinkage rates can vary by industry, they consistently represent a notable loss of revenue for businesses. Theft is responsible for approximately 75% of total shrinkage and can involve both customers and employees. Typically, the stolen items are those that are easily accessible, particularly those without anti-theft measures.
The consequences of shrinkage: Some statistics to better understand it
➢ Shrinkage can constitute up to 3% of a company’s annual turnover, varying by region and sales area. This amounts to several billion euros annually across the retail sector, with department stores being particularly vulnerable to this issue.
➢ Notably, half of all thefts are committed by regular customers—those who frequently visit your store. Identifying these individuals is crucial to preventing theft from becoming a persistent problem and leading to substantial financial losses.
Shrinkage in the retail sector
Shrinkage is particularly prevalent in the retail sector, where it can account for up to 3% of a company’s annual revenue. In these circumstances, traditional theft detection methods—such as security personnel, video surveillance, and security gates—often fall short.
To maximize returns and maintain profitability, it is crucial for retailers to implement effective strategies to minimize or eliminate theft within their stores.