According to the National Retail Federation, shrink (or “shrinkage”) cost retailers, on average approximately one and one-third percent (1.33%) of sales. If your store has $5 million in revenue, that’s $66,500 in earnings wiped out.
Ask for and check references
Want to drastically reduce shrink in your store? For starters, every business must have the following essential tech item: employee screening software. Some small business owners may not want to invest in the cost of doing background checks on potential new hires. After all, they can be expensive and complicated.
According to QuickBooks, if you’re hiring an entry-level hourly worker, a basic social security and criminal record check often suffice. However, some business owners (or managers) fail to consult-or even ask for-references.
A potential candidate may indeed have plenty of relevant experience on his/her resume. But if the potential employee has a history of robbing the till, that’s obviously not good for your business. So make sure you ask for at least three solid references (store owner or manager) and follow through by calling them.
Integrate Security Footage With Your Point of Sale System
Perhaps the thought of installing security cameras and the hardware to monitor the footage seems prohibitively expensive. However, if you integrate video surveillance with your point of sale (POS) system, it’s not as pricey as you’d think. In fact, the combo of CCTV and POS is more cost effective and efficient than stand-alone security technology.
Adding video security prevents customer theft in obvious ways. But it also reduces employee retail shrink by creating a notification in the POS software when, for example, a transaction is made but no sale has been recorded (a customer hands the employee cash for a purchase and the employee doesn’t scan the item).
Is Your Store Fully EMV Functional?
When a customer pays with a chip insert credit card instead of a magnetic stripe swipe, two things occur that make it less likely of losing out on sales. First, the EMV chip cards are encrypted with a unique transaction code for every purchase. This makes it harder for thieves to counterfeit credit cards. (Consequently, transaction chargebacks will be reduced.) And second, chip cards make it less likely for unscrupulous employees to copy credit card information.
Positive Workplace Culture
Employees are less likely to commit theft if they feel they are being valued. To get the most out of your employees, check in with them from time to time. Ask them if they are happy and how, if it all, can operations function more smoothly in the workplace.
Show your employees you’re invested in their happiness by conducting occasional worker satisfaction audits. If you want to take a more hardline approach to reducing shrink, you can also conduct random inventory audits to make sure employees aren’t randomly pocketing merchandise.
Even if you’ve had the same suppliers for years, make sure to always check delivery paperwork. Humans are after all, well, human, and prone to make accounting errors. Make sure you’re not being overcharged for your goods.
Be a Benevolent Big Brother or Sister
If your POS is cloud-based, you can keep a watchful employee on your employees from the comfort of your home or anywhere else with Internet connection. Hopefully, your hires are competent, friendly and trustworthy. You shouldn’t have to spend countless hours monitoring your employees. And if there’s good workplace culture, you probably won’t have to. But as the cynical aphorism goes, trust nobody in business.