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Beyond shoplifting: Sources of retail shrink
Recent headlines are dominated by stories of customer theft and shoplifting, often attributed to rising consumer financial hardship. While these issues are undoubtedly contributing to the growing problem, it’s essential to recognize that shrink’s origins extend far beyond customer shoplifting. Shrink encompasses all types of loss during the conversion of inventory to cash; it occurs up and down the value chain — from freight to distribution to store — and from multiple, trusted stakeholders, including employees, customers and third parties. Given this, the most effective way to answer the complex, multidimensional issue of shrinkage is to diagnose and then remedy its sources.
To form a comprehensive picture of shrink, retailers must first take a step back and take stock of each of the sources and drivers within their organization. Organizations should think about the types of shrink — where it occurs, whether it is caused by internal or external parties, if it’s intentional harm such as fraud or theft, or if it’s unintentional loss such as accidents and errors. Through this exercise, retailers will develop their shrink profile, a way to classify the various types of loss at a granular level that can then provide better insights into underlying causes.