Retail businesses of all sizes need to have a plan regarding retail loss prevention. Inventory shrinkage, or loss of inventory due to shoplifting, employee theft or vendor fraud, cause over $34 billion in losses every year, according to a 2019 National Retail Federation survey.
Here are some loss-prevention tips for small business owners.
Loss prevention is when a business owner takes active steps to stop product loss and potentially boost profit.
Keeping track of inventory is very important, as it can help track loss when it happens, not afterwards. Inventory management should be a central part of your business plan. But this is focused on tracking loss, not preventing it.
Retail loss prevention occurs at the store level. You need to understand how losses occur and how to prevent that loss from happening. The three most common types of retail inventory loss are shoplifting, employee theft, and vendor error/fraud.
One of the most common causes of inventory shrinkage is shoplifting; stealing an item from a store without anyone knowing about it. Usually, these items are taken for personal use, rather than resale. Sometimes, articles of exceptional value will be fenced or pawned.
Shoplifting is usually a crime of opportunity. That means it happens when a person sees an opportunity to commit a crime and decides to take it. Increase the chances of catching someone in the act, and you reduce the chances of the crime occurring.
You should always post signs stating that you will prosecute shoplifters. Make sure these signs are prominently displayed and list the consequences. If you have security cameras or security guards, post signs stating that as well.
There are several ways to reduce the chances of shoplifting.
Another common cause of inventory shrinkage is employee theft. Whether it is money or items, theft is still theft. It is vital to let your employees know that you will be checking the inventory yourself from time to time. By doing this, you are aware of their actions and lessen the opportunity for them to steal.
Much like shoplifting, employee theft is a crime of opportunity. When employees are unsupervised, then opportunities arise. Some of the methods for preventing shoplifting can also work to stop employee theft. Cameras and dedicated security guards can keep an eye on your employees as well.
When vendors stock your shelves themselves, there is a greater opportunity for vendor fraud or error. Your small business will take the loss whether the loss is deliberate or simply a mistake.
A manageable alternative to avoid this is performing item fulfilment yourself. But, some vendors require that their employees are involved in stocking. If this is the case, do delivery audits and check against what the vendor claims to have delivered.
If needed, have an employee accompany the vendor employee and do inventory alongside them. This practice may be a good idea, even if there has been no loss. Chiefly, it gives the impression that your company is watching can keep vendors from trying anything.
For small businesses, the margin between profit and loss can be minimal. Any inventory shrinkage should be cause for concern, and loss prevention should always be on the minds of