It’s a simple equation: turnover – losses – expenditure = net profits. In an ideal world, we would remove losses from the equation altogether and our bottom line would, of course, increase. At the end of the day, you’re in business to make money – and with all that hard work you put in, you want something tangible to show for it – so it can be pretty disheartening to know your bottom line is being impacted by someone else’s ill-gotten gains.
There are four very common causes of retail loss:
- Employee theft
- Administrative and human errors
- Returns fraud
Accounting for over 75% of the total cost of retail crime, customer theft cost retailers across the UK £700 million last year, an increase of 32% from 2017. Employee theft also increased by a whopping 129%.
Fortunately, while we can’t eradicate losses completely, there are certainly plenty of steps we can take to help minimise them. First of all, it’s important to understand the root cause of any stock losses in order to establish what action needs to be taken to protect your store.
Stocktaking is the first step and at the heart of identifying your stock losses. From there, it’s what you do with all that data that really matters; it’s no use gathering the information unless you are going to act on it.
Use our top tips below to help put together a loss prevention plan – and bear in mind that the ideal loss prevention plan may differ from one store to another, depending on where the losses are occurring. According to Shopify, “A solid loss prevention plan means more than sticking a few surveillance cameras in the ceiling. Your store(s) needs a top-down, strategic focus on loss prevention if you’re going to have a real effect on shoplifting and inventory losses.”
- Up your security
- Shoplifting policy
Make sure you have a clear plan in place for dealing with shoplifters, and that the procedure has been clearly communicated to all staff.
- Staff engagement
How alert to thieves are your sales staff? Being present and engaging with shoppers is your first line of defence against shoplifters. Make sure your team is well-versed in store security procedures, and encourage them to be proactive in recognising and preventing shoplifting
- Store layout
If your shop floor is disorganised, you’ll find it harder to spot when items are missing and make it easier for shoplifters to take their opportunities unnoticed. Keep clear lines of sight between shelving layouts and avoid dark or enclosed areas that make theft a breeze.
Install anti-theft signage around the store (including the staff areas), warning of prosecution, and highlighting the existence of cameras if appropriate. Research shows that stores with this type of signage is much less likely to be the victim of theft.
If potential thieves believe they could be caught on camera, they are bound to reconsider stealing from you in the first place. Surveillance cameras are getting less expensive all the time. And they don’t necessarily have to be real to help prevent shoplifting. Do consider outsourcing camera monitoring, though, otherwise it may not be as effective in helping to prevent employee theft.
A less costly alternative (or addition) to cameras are mirrors – decorative or security – which can be placed in corners and other less-visible spots to help provide additional sightlines and enable staff to monitor more of the store from one place (for example, if they are stood behind a counter).
- Additional staff
Consider hiring more shop floor or surveillance staff (either highly visible security guards, undercover shoppers, and/or camera monitoring staff.
- Optimise your stock flow
- Managing shelf-life
Short shelf-life goods like perishable groceries and ‘fast fashion’ need to flow through the supply chain efficiently to ensure their timely arrival in store.
To benefit waste as well as sales, consider each store individually to determine ranging, as demand may vary based on geographical variations and customer profile. Optimise case sizes to align stock with demand and reduce waste.
Stock availability planning should be aligned with sales forecasts based on seasonal demand and promotional activity. It’s a good idea to monitor how holidays and events affect stock availability to help inform the stock flow plan for the following year. The weather can also have a major effect on demand for certain groups of products.
- New products
Introducing new products needs to be carefully managed, as it can easily lead to wastage during the bedding-in period while customers become acclimatised to the new product offering.
- Manage your inventory
- Stock control
Implement a robust stock inventory control system. From the moment your stock is delivered, it should be counted. Would you know if your stock delivery was short? Not all stock loss comes via the shop floor.
Regular stocktaking can positively impact waste figures by taking control and preventing surpluses. Use the information and insights from stock counts to identify patterns, high-risk areas and help get to the root causes of any stock loss.
- Minimise human error
- Administrative processes
Mislabelling, accounting errors, miscounting stock and incorrect mark-downs can all translate into losses. Manual stock counts and inventory management are susceptible to human error. Look for tools that can automate stock monitoring throughout the stock flow process and help minimise errors.
- POS system
Use a POS system – preferably one that enables you to set user roles/permissions for each individual, depending on their job description, and will track discrepancies immediately.
- Review your refund procedures
- Returns fraud
This is one of the most common types of retail fraud. Ensure your team follows a strict return and refund policy and is well trained in recognising the signs of fraudulent returns, which can include returning stolen merchandise, using counterfeit receipts or returning purchases made with counterfeit money. If the customer doesn’t have their receipt, only offer them in-store credit instead of cash.
Ultimately, the retailers who are most successful at minimising stock losses are those who not only continue to invest in new surveillance and stocktaking technology, but also take a top-down approach to loss prevention. Communication about loss prevention goals and progress across your business is key, empowering your team to help reduce losses and take joint accountability for success.
To discuss how we can help you maximise your revenue through effective stocktaking, get in touch with us today on 01637 874609