Do you know what your shrinkage is?

Why is this important? Firstly, let's start by talking about what shrinkage is, because it's not just customer theft.

In its most simplified form, shrinkage is the difference between what you should have and what you do have. Whilst customer theft is a big part of that, and certainly the most high profile, so is staff theft (yes, it happens), short supplied stock, goods sold incorrectly, goods priced incorrectly, goods not received into stock correctly and so on. In fact, it's not uncommon for the largest part of your business's shrinkage to be down to internal rather than external factors. 

Which brings us to the importance of knowing what your shrinkage is: without measuring it, you can't constructively manage it.

Any business which relies on the movement of physical stock will experience shrinkage to some degree. However, without regular comprehensive stocktakes, it is very difficult to measure the extent of that shrinkage. Financial, or computer generated, stocktakes are useful in telling you what you should have, but without comparing that to a physical check, your shrinkage remains unknown.

I'm a great advocate of the annual stocktake; bringing in extra staff, shutting the store and checking everything - EVERYTHING - in one session. As much as this requires a great deal of planning and effort, as well as the cost of extra staff (how many staff is down to how quickly you want it done), it's outweighed by the benefits to your business:

• Having a clean database;
• Accurately measuring shrinkage;
• The ability to produce a report of all discrepancies;
• Being able to assess areas of particular risk;
• Discovering those items which should be gaining repeat sales but which have dropped off the system through loss;
• Calculating an accurate, rather than an estimated, cost price for stock.

Whether the cause is theft related or a matter of human error, it is within your control to minimise the extent of your loss. Unusual occurrences or patterns may be an indication of a larger issue.

Which department are being targeted?

You'll almost certainly find that some product is more prone to theft than others, and the results may surprise you. If this is the case, you may need to move sections around or reconsider your display options. In some cases, if the theft issue is particularly challenging, you may need to consider whether you stock the product or range at all.

Are certain areas of your store particularly prone to theft?

It may be that the location rather than the product is the problem. This is something you may notice as a pattern having done several stocktakes. If so, consider new lighting, redesigning the layout, or perhaps even removing and replacing units.

Does your discrepancy report show odd margins or quantities?

Your problem may be in the back office in goods receiving or data entry. It may extend to the accuracy of sales being put through the register or the way customer orders or laybys are handled.

The preparation for a stocktake can also highlight potential problems: are completed customer orders still showing as outstanding; are laybys being cleared promptly; stock accumulating in non-sale areas, such as behind shelving, in back rooms, under counters etc.

Look at a stocktake as an opportunity to gain an accurate snapshot of what's happening in your business, and you'll find numerous ways to improve both the efficiency and effectiveness of how you operate. There are so many benefits to running regular stocktakes that you'll wonder why it took you so long to start.