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7 Ways to Reduce Inventory Shrinkage in Retail

Jul 28, 2022

security camera and LCD surveillance monitor

Inventory shrinkage is a huge problem for retailers, costing them billions of dollars every year. Shrinkage can come from many sources: shoplifting, employee theft, damaged goods, and incorrect inventory counts. In order to reduce inventory shrinkage and protect their profits, business owners need to be aware of the different causes and put in place measures to combat them. 

Here's how to reduce shrinkage in your retail business.

1. Educate Employees about Inventory Shrinkage and Prevention

Your employees are the first line of defense against inventory shrinkage. So, if you want to reduce shrinkage in retail, they need to be aware of the different ways shrinkage can occur and what they can do to prevent it. Invest in their training and ensure employees understand the company's policies on inventory control and how to report any suspicious behavior.

Ensure your employees are aware of these tips on how to reduce inventory shrinkage: 

  • Keep an eye on your stock and don't let it build-up
  • Check inventory counts regularly and compare them to sales records
  • Request receipts for all cash returns
  • Request valid identification when tracking returns
  • Use security tags and other deterrents to prevent shoplifting
  • Keep an updated record of which items are most often stolen
  • Lock up high-value items or put them in secure storage areas

You should also reevaluate employee hiring practices to ensure you're hiring honest and trustworthy employees. Also, improve your workplace culture to discourage dishonest behavior. Regular training on how to reduce shrinkage will help to keep employees informed of the latest theft prevention methods.

2. Implement Security Measures to Deter Theft

Security measures such as video surveillance and CCTV signage can help to deter theft and reduce inventory shrinkage. Install cameras in key open areas of your store, such as the checkout, the entrance and exit, and the stockroom. Make sure your cameras are in good working order and that footage is regularly backed up.

If you have a particularly high-value inventory, consider using security tags or other deterrents to prevent shoplifting. Security tags can be attached to clothing, jewelry, or other small items, and will sound an alarm if they are removed from the store. Anti-theft tags can also be placed on large items such as televisions or computers.

Another great strategy for how to reduce shrinkage is by installing CCTV surveillance signage at strategic points in your store. This will let potential thieves know that they are being monitored and that any theft will be recorded. Invest in a 1080p or 4K Ultra HD security camera system to get the clearest footage.

3. Keep a Close Eye on Inventory Levels

When you want to reduce shrinkage in retail, it's important to keep a close eye on inventory levels and reorder items when necessary. Make sure you have an accurate inventory count and compare it to sales records to ensure you're not overstocked or understocked. If you notice that a certain item is constantly being sold out, it may be time to increase your order quantity.

On the other hand, if you notice that a certain item isn't selling well, you may want to consider discontinuing it. This will help to reduce the amount of stock that is susceptible to damage or theft. Regularly ordering new inventory and culling old inventory will help to keep your stock levels in check and play a role in helping reduce worries about how to reduce inventory shrinkage in your store.

4. Train Employees in Inventory Handling and Storage

If you want to improve your strategies on how to reduce shrinkage, it's important to ensure your employees are handling and storing inventory properly. Employees need to be trained in how to handle inventory with care and how to store it in a safe and secure manner. You should also have an adequate stockroom security system in place. This will help prevent employees from stealing or damaging inventory.

In addition, you should have a system in place for tracking inventory. This will help you to keep track of what items are being sold and what items are being stolen. It will also help you to identify any patterns in theft behavior. A well-run retail store takes a lot of hard work and dedication to every detail, including reducing shrinkage.

5. Evaluate Your Inventory Management System

If you want to know how to reduce shrinkage in your retail store, it's important to evaluate your current inventory management system and make necessary adjustments on the go. Your inventory management system should be able to keep track of stock levels, sales records, and theft trends. Invest in one of the latest inventory management and POS monitoring systems you can afford. 

You should also invest in administrative training to help reduce errors that end up causing losses. Make sure you have a system in place for receiving and processing shipments. This will help to ensure that items are being entered into the system correctly and that no inventory is going unaccounted for.

6. Periodically Audit Inventory

In order to reduce shrinkage in your retail store, it's important to periodically audit inventory to ensure accuracy and consistency. This will help you to identify any errors or discrepancies in the system. It will also help you to catch any theft or damage that may have occurred.

Regularly auditing inventory can be time-consuming, but it's well worth the effort. By taking the time to audit inventory, you're ensuring that your strategies on how to reduce shrinkage are effective and working properly. Remember that to reduce shrinkage in retail, you need to be proactive and constantly adjust your strategies to meet the ever-changing needs of your store.

7. Ensure Proper Retail Store Organization

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Proper retail store organization plays a key role in reducing shrinkage. When items are neatly organized, it makes it difficult for shoplifters to conceal stolen goods. Make sure all items are clearly visible and organized by category. Have aisles that are wide enough for customers to move around comfortably and place security cameras in key areas.

In addition, make sure you have a well-trained staff that is vigilant in watching for any suspicious behavior. Having a well-organized and secure retail store will help to reduce the amount of inventory shrinkage in your business. You don't have to keep worrying about how to reduce inventory shrinkage in your store.

Buy Security Cameras for Your Retail Store

Reducing inventory shrinkage can be a daunting task, but with the right strategies on how to reduce shrinkage in place, you can make significant progress. Implement the tips above and see how they help to improve your bottom line. If you're looking to install a new video surveillance system or upgrade your security cameras, get started at CCTV Security Pros

We can provide you with the right system to help reduce shrinkage and protect your inventory. Shop commercial-grade IP security systems and enjoy unlimited USA-based support, remote mobile viewing via smartphones, tablets, and computers at no monthly fees, free shipping, and a 100% money-back guarantee for 30 days.

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