In today’s retail marketplace, brick-and-mortar businesses face many challenges when it comes to staying in the black. With the rise of online shopping and other competitive factors, retailers must take all necessary actions to maximize revenue, while at the same time reduce their exposure to loss from theft, error, and other factors. While retail shrinkage encompasses a wide range of variables, cash is certainly one factor that must be addressed to combat rising shrinkage rates. Retailers that deal with large amounts of cash will face the risks and associated costs of doing so, many of which involve cash loss or theft. Unless addressed appropriately, these factors can negatively contribute to the store’s overall shrinkage rate.
What Is Shrinkage and what are the Statistics?
“Shrinkage” is often used to describe businesses losing inventory or cash due to factors such as theft, error, fraud, and accidental damage. Not only does shrinkage impact profits for a retailer, it can also cause businesses to spend more on security. Unfortunately, such added costs are often passed on to consumers.
In 2016, shrinkage cost United States retailers $48.9 billion, or 1.44 percent of retail sales. Even yet, this number continues to rise. 56 percent of retailers reported that shrinkage is getting worse.
What Causes Shrinkage?
Nearly 43 percent of losses from shrinkage can be attributed to employee theft. At over 37 percent, shoplifting takes the second-place spot. Coming in at third are administrative losses at nearly 11 percent of total shrinkage, while fraud from vendors and suppliers accounts for almost nine percent of reported shrinkage.
It’s clear from these statistics that an increased loss prevention budget may not be the optimal solution to address risking shrinkage rates. Furthermore, increased security may not decrease administrative and fraud shrinkage. For retailers that handle cash, an automated solution might be worth considering.
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