When you buy stock and inventory you’ll be doing so with the expectation it will be sold. But what happens if an item is lost, stolen or misplaced leading to it not making the shelves or perhaps even the store?
It is estimated that the average UK retail business will lose as much as 2% of its stock to a range of causes and this can account for as much as 21% of profit margins, so what happens to these items and what are the most common causes of loss?
Shoplifting
Shoplifting cost UK retailers a staggering £613 million last year, with more than 750,000 incidents of in-store theft reported (that’s more than one every minute!). These figures represent the highest levels since records began with the average cost per incident also rising to £325.
Employee theft
Unfortunately, theft is not always limited to gangs and would-be-thieves. A recent survey conducted by RetailSearch found that employee theft accounted for the same percentage of stock loss as shoplifting for large retailers with multiple stores.
This trend also extended to smaller outfits, where an average of £1 in every £5 of stock loss can be attributed to employees stealing from their employers.
Returns and refunds
The Financial Times indicate that returns currently cost UK retailers £60 billion per year. This is a figure that is consistently rising in recent times due to increases in online sales, which account for £20 billion of the returns made in the past year. Fashion stores have the highest rates of return (25% of all items), whilst homeware and electrical goods are at the lower end of the spectrum (10% of all items returned).
Distribution
We will have all lost something in the post at some point, so when you’re a retailer and you’ve got large amounts of stock travelling around the country or continent it’s almost inevitable that some will either be lost, damaged or mislaid. If this leads to further transit requirements, then the cost can be felt twice for retailers; once in the lost stock and then through soaring petrol and diesel prices.
Inexperienced or untrained staff
When compared with others, the retail sector has a high staff turnover rate, with more than 25% of those surveyed in the industry currently contemplating a job change in the near future. If you consider that more than half of employees work part-time and a third are under the age of 25 it’s not surprising to find that a common cause of stock loss is through inexperienced or untrained staff making mistakes.
Pricing and paperwork mistakes
The retail industry moves fast and so do its prices. Black Friday is now worth more than £2.5 billion to the UK economy, but whilst sales can lead to items flying off the shelves, if they’re not priced correctly then it can lead to stock and potential profit losses, and incorrect stock labelling is another common cause of stock loss within the retail sector each year.
How can stocktaking help to remedy these issues?
Stocktaking puts you in control of your stock. It helps you to understand what you’ve got, where it is and where it’s gone missing. When it comes to stock loss, identifying where items and products are being lost from your process and to what scale means that you can make effective decisions on how to fix and remedy the problem.
As we mentioned, the average retailer will be suffering stock losses of 2%, so can you afford to find out where yours is going?
For more information on how our experienced stocktaking team can help your business please give us a call on +44 (0)1637 874609 and we’ll be happy to answer any questions you may have.
