Keeping shrinkage in check is no mean feat, which is why it's costing retailers up to £4.5 billion in the UK, and almost $100 billion globally, every year. And yet despite this, shrinkage is still incorrectly considered as part of the cost of doing business.
Shrinkage does not necessarily just reflect stock loss. It has become a catch all phrase within the retail industry, covering any and all losses related to retail.
But the majority of it is stock loss, and can typically be attributed to four major sources; shoplifting, employee theft, clerical errors and supplier fraud. Store shrinkage is not typically the result of one event. Rather, it's a combination of smaller, often seemingly insignificant failings across the store.
Being able to see and understand these failings is crucial. Only then can you implement policies and corrective actions in order to combat them.
Turn front-line employees into your eyes and ears
Digital monitoring can enhance the ability of everyone in the operation to keep track and identify issues. With the correct mobile software, employees can quickly and easily perform inspections and audits to provide you with data which is instantly submitted to a central dashboard.
This means it's easier to see what the issues are and correct them, and there's less emphasis on historically time-consuming, manual data collection processes.
To take one real life example, Ben Deeks, Head of Retail Profit Protection at JD Sports, implemented a digital inspection solution and instantly began to see trends which were not apparent before.
The solution allowed JD Sports to perform audits and inspections at a much quicker and more efficient rate, allowing for more regular inspections and, as a result, an increase in store compliance and a decrease in stock loss.
“We can clearly see differences in stock loss between regions, and the compliance data backs that up,” he said.
Utilising the Internet of Things
While still a relatively new concept, the Internet of Things (IoT) has already proven its worth in the retail world.
There are a number of devices which are becoming available, from wearables right through to sensor technology. While the functions of different devices vary, the key component here is connectivity; the ability to instantly and continually monitor key metrics in specific locations.
Sensors in particular are emerging as a revolutionary solution in retail. Inexpensive and simple to implement, they allow retailers to avoid hugely inefficient, manual processes that previously required significant man-hours to achieve.
Food refrigeration, subject to a high level of regulation and hygiene standards, is a good example.
Where once a member of staff would need to periodically record the temperature of all refrigerator units manually with a thermometer, wasting many hours of productivity, you can now continuously monitor all units automatically with the use of sensors.
With systems such as this, you can set it up to be automatically notified if the temperature falls outside of the acceptable range for a certain period of time.
Consistent customer experience counts
While sales and profit are hard, unquestionable metrics, store quality and compliance can be tricky to even quantify, let alone analyse and compare.
By adopting a digital approach similar to that of managing shrinkage and stock loss, you can quickly and efficiently capture this data by empowering front-line employees, who will always be better placed to spot key issues on a continuous basis.
This opens up the door to instant ground level visibility, allowing you to view long-term trends and assign corrective action to the front-line for follow-up. Moreover, you will get a complete sense of which stores you need to concentrate your efforts on.
Ultimately, the end result is higher compliance and a greater level of customer experience.
Bringing together technology and people for best results
If you want to harness digital tools to achieve the best results, then it's important to include the whole team. Accountability must shift from being solely the responsibility of regional and senior management, to something that includes frontline workers and employees.
Technology, embraced by everyone in the organisation, can completely transform what are otherwise challenging, but very interlinked, areas of daily store operations; stock loss and quality control.
Building good habits around digital systems like monitoring sensors and app-based checklists will boost your ability to stem stock loss and shrinkage, and improve the customer experience.
