Primary Sources of Retail Loss

Posted on March 9th, 2020

Primary Sources of Retail Loss

Primary Sources of Retail Loss

Inventory shrinkage costs in the United States costs the retail industry over $46 billion each year. This includes internal theft, shoplifting, fraud, and even organized retail crime that is happening. Ultimately, this can have a negative effect on business profit margins and also puts employees and customers alike in danger.

Today we will go over the primary sources of retail loss and ways to help prevent this shrinkage in the future.

Common Errors Resulting in Retail Shrinkage

There are three top causes or errors we will be looking at today when it comes to retail loss. They are administrative errors, employee theft, and shoplifting. The higher your shrink rate, the lower your profits will be. So, it is important to understand each of these and how it can affect your bottom line.

Administrative Errors

This can include pricing errors, improper record and bookkeeping, and cash counting mistakes. All of these errors can begin to add up over time and can cause significant shrinkage. To help cut down on these errors, you can consider automating your systems.

Automated systems allow for greater insights, can maintain more accurate accounts and records, and can increase accountability. Cash counters and sorters are also two ways you can help cut down on shrinkage and reduce errors during cash handling as well.

Employee Theft

Every business owner wants to believe that their employees are trustworthy, but this isn't always going to be the case. Employee theft actually accounts for almost half of all retail shrinkage. They may abuse their discount, take cash out of the register, steal products, or abuse the refund process. If you begin to notice shortages, take a closer look at your employee schedules, and compare it to when things begin to go missing.

You can also implement a policy stating that there needs to be a witness for all discounts, refunds, and voids, and bag checks by a security camera can be implemented for all employees at the end of their shift. All of these can go a long way in deterring employee theft.

You should also take the hiring process seriously as well. Do your due diligence and vet each person before you employ them. Checking references may be what you need to do to help reduce your chances of employee theft.


Customer theft is another primary cause of shrinkage for those in the retail industry. This kind of loss is what leads to billions of dollars added up annually. Customers steal items, switch out price tags, and fake their returns. To deter shoplifting, you should have high high-quality security cameras installed around the establishment. This helps deter customer theft as well as employee theft.

Security cameras should be installed in very strategic areas around the property, including at all cash register and cash handling areas, loading areas, stockrooms, and even around the dumpster area. Employees should also pay more attention to each customer that walks in because this can also help deter theft.

If you would like more information on shrinkage and how you can deter these losses at your own business, contact Supercircuits today. They can walk you through all of your retail security options so you can make the effort of securing your business and cutting down on your total losses.

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