Customer Footfall Analysis
February 12, 2025
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In the previous article, we have already understood the concept of shrinkage. We now know how shrinkage is calculated and are also aware of the financial impact that it has on retailers.
It is a known fact that shrinkage cannot be reduced to zero. It has to be brought under control. Retailers have been streamlining their operations and have started extensively using technology in order to bring shrinkage under control.
In this article, we will have a closer look at the causes of shrinkage. This is because it would not be possible to control shrinkage without truly understanding the root cause.
Shoplifting has also seen an upward trend in the recent past. This is happening despite the fact that retailers have been implementing technological solutions in order to prevent such theft. It also needs to be understood that a lot of the times shoplifters aren’t working alone. Instead, they operate as a gang which often colludes with employees.
Retailers can organize their stores better, use better surveillance systems and train their employees to reduce the quantum of shoplifting.
Employee theft can take a number of forms. On the one end, there is an extreme case of employees stealing merchandise from warehouses or other storage units. On the other hand, there is a relatively mild case of employees misusing their employee discount or failing to properly check the inventory being sold to their friends or family.
Skimming of the cash drawer is also fairly common and is usually done in small amounts. Retailers need to have stronger background checks in order to ensure that they hire the right personnel along with better surveillance of the employee-only areas of the store.
Employee theft may seem like a small problem but retailers across United States have reported losing close to $50 billion per annum only because of employee theft.
Vendor fraud generally takes place in the form of incorrectly delivered inventory. However, they could also involve tampering of checks and other payments. Retailers have been able to successfully mitigate the risks of vendor fraud by increasing the use of technology. The usage of barcoding and electronic payments have enabled retailers to reduce the quantum of vendor fraud.
Return fraud has been evolving over the years. It is difficult for retailers to curb this type of fraud since they want to provide a fair return policy for genuine customers. Retailers have created stricter and more intelligent return policies. Also, retailers have started asking for some form of identification while issuing returns. This helps them to track the alleged fraudster in case a fraud is detected in the future.
Also, there are other situations wherein retail staff accidently markdown and give discounts on the wrong products. Such administrative errors are accidental by their very nature. Retailers need to put in place a process to prevent these administrative errors from taking place.
There are many vendors who may not accept unexpired products back. As a result, retailers have no option to return those products and may have to bear the financial liability. This problem can be completely resolved by implementing an automated system which creates return orders for stock which is nearing the expiration date.
The growing menace of shrinkage in the retail sector has to be acknowledged before a resolution is sought out. It is for this reason that it is necessary to carefully study the root cause of the problem.
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