“Shrink” has become the retail industry’s nomenclature for when inventory, register tills or bookkeeping accounts don’t add up. It’s the catchall term that describes loss of product or cash, and that costs retail businesses, including convenience stores, billions of dollars every year.
According to the 2020 National Retail Security Survey (NRSS), the average shrink rate for the entire retail channel hit 1.62% in 2019, with nearly one in five stores reporting rates as high as 3% or more.
There are multiple reasons why a c-store incurs shrink. Of course, theft continues to be the number one culprit, but it’s not always from criminals demanding the cash register contents in a classic sense of a robbery. In fact, good-old shoplifting accounts for the largest source of shrinkage —more than one-third of the annual loss, per Shopify.
Unfortunately, employee theft is another major source of shrink. While it’s possible workers may pocket items or skim cash from the register drawer when no one is looking, loss is just as likely to occur when they forget or neglect to ring up personal purchases. It also happens when associates give themselves, friends or family unauthorized discounts. That seemingly generous gesture comes at the expense of the store’s bottom line.
Inventory loss also boosts shrink rates. Certainly, mismanagement of inventory controls can add up, but sometimes the shrink occurs from vendors shortchanging stores. For example, a delivery ends up a few cases shy of what’s invoiced so the c-store ends up paying more for less.
Plus, not all shrink results from deceit. Administrative and accounting miscalculations dip into profits, too. Then there are just the random losses that can’t be specifically correlated with an action, but somehow the books don’t total up as expected.
Shrink Prevention Strategies
While robbers may confiscate a chunk of cash on any given day, most shrink occurs over time with a few cents or dollars here and there. Those small gaps can be easily overlooked, which is why c-store owners and operators invest in various loss-prevention systems. Prominently placed surveillance cameras not only capture customer activity, but alert potential thieves that they’re being recorded. According to the NRSS, retailers increased their use of burglar alarms, digital video recorders, and live customer-visible CCTV devices in 2019.
Security experts suggest complementing electronics with clearly visible signs informing individuals of the cameras’ presence and the store’s commitment to prosecute shoplifters. Businesses can reduce shrink rates by installing inventory management and point-of-sale data mining programs to track merchandise and sales, thereby minimizing opportunity for human error.
Perhaps the most effective tool to stop shrink, however, is a well-trained staff that knows how to spot and address shoplifting and verify inventory and invoices. Also well-defined policies regarding employee purchase protocols, official discounts, and disciplinary actions for violations create expectations and foster support, which can lead to less loss.