What Is your Retail Shrinkage?

What is your stock shrinkage? How much are you losing in your shop by causes? Many cannot answer this simple question. And if you do not know what to do if how do you know what to do fix it? I very much believe in the value of using data to help improve the management within your organization and this question is one of the most important ones in retail. The good news is with our point of sale software; it would be an easy calculation to find out.

Briefly, stock shrinkage is the difference between what you should have and what you actually do have.

Some major reasons would be if you have decent pos software.

1) Customer theft - The five finger discount

2) Damage - We had one furniture shop that was recording huge numbers of damaged goods somewhere between receiving and customer delivery.

3) Supplier fraud - Which is all too often, for example, a typical example is that a supplier bills you for goods shipped, but for some reason, you did not get all these goods.

4) Staff theft - In my experience this is nearly zero or nearly 100% of the problem.

After you do a stocktake which you should do next month and do your financial returns collect these three figures.

a) The value of the stock you SHOULD HAVE at the end of this financial year. If your point of sale is up to date, print out a stock valuation before starting the stocktake, if it is not, then your accountant will be able to give you an estimate of the (Ending Stock Value).

B) What is the value of your stock you ACTUALLY HAD at the end of this financial year. Your point of sale software will have this figure once you enter in the stocktake figure in the stock valuation report. (Physically Counted Inventory Value)

C) What is your total sales ex non stock items such as agency like lotto, as here we are interested in stock sales only (Sales of stock products)

Please do the following calculation.

Shrinkage% = ((Ending Stock Value)-(Physically Counted Inventory Value))/(Sales) x 100%

As a punt, I would say that it will be about 1.4%, but it does vary a lot. One client of ours reported after doing this calculation that it was less than 0.1%, which is the best figure I have ever seen. Conversely I have seen a shop which a receiver told me he recorded 6%.

Damaged goods (2) above you should be able to estimate and put that part aside. Goods that suffer a major damage problem should be moved to a safer place. I know a gift shop that after calculating the damage rate stopped handling glass products.

For the others as a first guesstimate, assume that (1), (3) and (4) above are equal and calculate them.

Now act!!!