290: Segmenting Shrink To Uncover The Real Challenge

Shrink in retail isn’t just about hoping the number resolves itself; it’s about understanding the intricate web of causes that lead to loss. While shrink has perennially been a concern for retailers, recent escalations in retail crime and aggressive incidents have thrust it into the spotlight with renewed urgency. In this episode, Oliver Banks explores and segments the nuanced causes of shrink, from theft and shoplifting to internal errors and process failures. Listen in to uncover insights on the true nature of shrink and prepare yourself with the knowledge needed to address these challenges effectively in your retail operations.

Listen to this episode to:

• Learn to segment different types of theft to understand their specific impacts on shrink.
• Discover the importance of analysing upstream supply chain activities to identify hidden shrink contributors.
• Understand the effects of inadequate reporting and lax compliance on shrink issues.
• Gain insights into interpreting shrink data to address underlying performance issues effectively.

 

 

Episode summary: Exploring the four contributors to shrink

In this episode of the Retail Transformation Show, host and retail consultant Oliver Banks delves into the critical issue of shrinkage in retail, a multifaceted problem that significantly impacts business performance. Shrinkage refers to the unknown loss of stock, stemming from various root causes beyond simple theft. Shrink is categorised into four main areas, each contributing differently to the overall shrinkage problem.

Theft: Oliver explores the complexity of theft, differentiating between intentional and unintentional acts, as well as detected versus undetected incidents. He discusses both organized and opportunistic theft, emphasizing the profound effects these activities have on staff and customers, from emotional and mental distress to physical threats.

Poor Reporting of Stock Movements: Inaccuracies in how stock exits are reported can lead to significant discrepancies in inventory management. Oliver highlights how these reporting failures obscure the true picture of stock levels, complicating efforts to address shrinkage effectively.

Delivery Inaccuracies: There are mismatches in the delivery process, such as miscounting items delivered which also contribute to shrinkage. These inaccuracies can go unnoticed, gradually accumulating to impact overall stock integrity and accuracy.

Errors in Stock Control: Lastly, it’s also vital to address general errors within the operating model and stock control processes, including operational mishaps and procedural non-compliance.

To combat these challenges, you’ll need a robust approach involving detailed process reviews, retraining programs, and clear communication strategies. Oliver recommends collaborating with suppliers and ensuring rigorous data analysis to pinpoint problem areas and implement effective corrective measures. By understanding and managing these four key areas of shrink—Theft, Poor Reporting, Delivery Inaccuracies, and Errors—retailers can develop targeted strategies to minimize losses and optimize overall business performance.

Concluding the episode, Oliver encourages listeners to take proactive steps in addressing each category of shrink to transform their retail operations and enhance their resilience against stock losses. This episode serves as a comprehensive guide for retailers looking to understand and tackle the complexities of shrinkage effectively.

Clarify your operating model with OB&Co

Oliver helps organizations and individuals to drive effective transformation. This includes defining operating models across the business as a way of standardising the approaches to getting the right work done effectively and efficiently. He also works with individuals to help advise and act as a thinking partner to rapidly drive personal growth.

Speak to Oliver about the Accelerator service for hands-on support to get things done. Or ask about the Navigator service to develop capabilities.

📧 Email on oliver.banks@obandco.uk

🔗 Connect with Oliver Banks on LinkedIn and send a message.

Additional podcast episodes to listen to next

Reconsider how RFID technology has developed and how it can boost stock integrity and minimise unknown loss. Listen to RFID expert Uwe Hennig in episode 151: How RFID Is Changing Retail.

In tough trading conditions, we chase short-term targets with a tempting path of quick fixes and instant rewards. But do we pause to consider the long-term game? Combatting the shrink challenge could rapidly evolve into a long term mistake. Learn more about how to approach this tough situation in episode 274: Short Term Gains, Long Term Pains (part 1) and episode 275: (part 2).