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What is Shrink and How Does it Happen?

Sep 06, 2021
Reading time: 2 minutes 30 seconds
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Whether it’s merchandise, food, fuel, lottery or other inventory, having to write off inventory can be disheartening and frustrating, especially if you can’t figure the root cause. Although a grab-and-run theft leaves no mystery as to the reason, internal theft can go unnoticed for months between your inventory counts.

So How Does Shrink Occur?

  • Internal theft
  • External theft
  • Spoilage
  • Misplacement
  • Erroneous register rings
  • Short deliveries

Any number or combination of those factors can cause shrink, so let’s explore each cause in depth.

Internal Theft, Inside Jobs

There are many ways for retail employees to steal inventory from a convenience store. They may do this during their shift or while the business is closed. Convenience store employees might:

  • Hide merchandise or other goods in their clothes (pockets, shoes), a handbag or backpack and take it out at lunch break, smoke break or at the end of their shift.
  • Consume inventory in the store, including scratcher lottery tickets.
  • Remove inventory from the building in the trash and retrieve it later.
  • Provide items free to co-workers, family members or friends.
  • Ring up a “no sale” on a cash register while still transacting the sale, pocketing the money and shorting inventory.
  • Ring up a low-priced item up on the register but hand over a more expensive item to the customer.

External Theft, Shoplifting and Organized Crime

External threats can include employees working externally with gangs or the gangs may work on their own to steal goods. Some of the top methods used by shoplifters and organized crime are:

  • Grab and run.
  • Concealment using the restroom.
  • Creating distractions and concealing the item(s), sometimes planned and sometimes opportunistic.
  • Using a booster bag, false bottomed boxes and specially rigged bags to conceal the item(s).
  • Fraudulently returning items, either by trying to return a stolen item without a receipt or by buying a legitimate item and stealing the same items, duplicating the receipt, and using the duplicate receipt to return the stolen item.

Popular items stolen by gangs? In the NRF 2021 report*, these are the top 12 items stolen:

  • Designer clothes
  • Laundry detergent
  • Designer handbags
  • Allergy medicine
  • Razors
  • High-end liquor
  • Denim pants
  • Pain relievers
  • Infant formula
  • Teeth whitening strips
  • Energy drinks
  • Deodorant

Spoilage

Items such as fresh produce, milk and other short shelf-life products need to be managed and reduced for sale to ensure they scan out before the expiration date. Although many people associate inventory cycle counts with high-risk items such as cigarettes, cycle counts are also useful for risk related to spoilage.

Misplacement

Can you really lose track of inventory at a convenience store? If items aren’t received correctly or moved from one location to another, it can be easy to lose track of stock, causing it to be written off.

Poor Product Scanning

Your store’s scan rate can help ensure that your inventory is sold and accounted for correctly. Not scanning items correctly creates issues when reconciling your physical to book inventory. See the short video below for additional information and how poor scanning leads to overstocks and understocks.

Short Deliveries

Whether intentional or not, shorted deliveries from your supplier or manufacturer cause your books to be out of balance with the store’s physical inventory unless you reconcile (count) the received items against the delivery (order) receipt and then file a discrepancy with the supplier or manufacturer.

Interested in learning more about how Loss Prevention Analytics can help you keep track of threats to inventory?

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Reference: https://cdn.nrf.com/sites/default/files/2021-08/2021%20National%20Retail%20Security%20Survey%20updated.pdf