Understanding and Combating Retail Shrinkage

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Combating retail shrinkage is an ongoing challenge for many businesses. If you manage inventory, you know that shrinkage can occur for a variety of reasons–and that managing it is a critical part of protecting your profits. Fortunately, StockIQ can help combat many of the challenges associated with retail shrinkage and make it easier for you to track your inventory.

What is Retail Shrinkage?

Retail shrinkage includes any type of loss that occurs because of missing money or inventory because the inventory that should be on hand isn’t or has suffered damage in such a way that prevents it from being sold. Retail shrinkage may occur more often in companies that keep a great deal of stock on hand. On average, businesses lose between 1.4% to 2% of their sales in shrinkage. For businesses both big and small, that can mean a serious challenge to your profit margins.

How Does Retail Shrinkage Occur?

Retail shrinkage can occur for a variety of reasons. 


When you think of retail shrinkage, theft may be the first challenge that comes to mind. If you stock big-ticket items, especially a large number of them, theft can pose serious problems for your business, especially if you do not have a system in place that will help you keep track of the products you sell. Both external or customer theft and internal theft, which occurs when a member of your team commits an act of theft that results in loss to the company, can pose significant challenges. 


When your inventory becomes damaged, it can be impossible to sell it. Damaged items may include goods that have taken actual physical damage or goods like groceries that have spoiled while waiting to be purchased. Unfortunately, damage may cut substantially into your overall profits if you do not have an inventory management system in place that helps prevent spoiled goods. 

Bookkeeping Errors

Bookkeeping errors can lead to serious challenges when it comes to retail shrinkage. Your inventory tracking system must keep up with what items you have already stored and what items you need to purchase. If you fail to properly track the inventory you have in your storage area or on your shelves, you may end up mistakenly purchasing more product that you don’t need–and ultimately, that may mean that you must sell it at a discount to recoup some of the funds you’ve already spent. Furthermore, bookkeeping errors can lead to a variety of other challenges, including failure to keep up with order minimums to maintain relationships with your suppliers.

Combatting Retail Shrinkage

Managing your inventory is a critical part of avoiding overall shrinkage and ensuring that you can meet your goals. With StockIQ, you can improve your overall inventory management and combat retail shrinkage. 

Know What You Have on the Shelves

With StockIQ, you can keep track of what you have on the shelves at any given time–with overall increased accuracy. Not only can this help you keep up the inventory you already have on hand versus the inventory you need to order, but it can also  help you identify any potential problems before they become more serious. For example, if you notice that items are starting to disappear or that you have less inventory in stock than your system claims, it could indicate that you have a thief on your hands–and that you need to address the problem quickly so that you do not continue to lose valuable inventory. 

Balance Your Inventory

Keeping up with where your inventory is can prove critical to ensuring that you have the supplies your customers need. Sometimes, that may mean moving inventory from one place to another to keep up with customer demand. Other times, you may need to bring in more inventory in response to higher customer demand. With StockIQ, you can easily balance your inventory and keep up with where your items are–which can help you avoid much of the damage to your products. 

Keep Up with When You Last Ordered–and When You Need to Move Inventory

Sometimes, you may need to keep up with the date by which your inventory needs to be sold, particularly if you deal in perishable goods. The more perishable the goods, such as food, the more critical it can prove to keep up with deadlines for moving that inventory. If you have inventory getting close to your sale-by date, you may need to discount some of those products or use them as part of a promotion–and StockIQ can help alert you to potential expiration dates or sale-by dates ahead of time. Furthermore, it can help you more effectively manage your overall inventory so that you damage out fewer items. 

Track Your Container Loading

Damage during shipping can cause a great deal of retail shrinkage. Under-loaded containers and trucks may prove more likely to damage your inventory, since items may have a greater likelihood of rattling around in the back of a truck or on a ship. With StockIQ, however, you can keep up your container loading practices, whether you’re bringing in items from overseas or filling a truck. Not only can we help make sure that you aren’t shipping air, we can provide you with the tools necessary to ensure that you can track container loading practices and institute best practices to help maintain the integrity of your items. 

Prepare Ahead for Holidays and Major Events

During holiday seasons or specific times of the year, you may need to have more inventory on hand to handle customer demands. With StockIQ, you can easily keep up with the demand of your customers, adjust your orders accordingly, and transition quickly back to your regular order schedule, which means you’ll be less likely to have to get rid of excess inventory or lose it to damage because it sat in the warehouse for too long. You may also want to make alterations due to increased lead times or other major events–and we make that simple.

Keeping up with inventory management is an ongoing challenge. StockIQ can help. Contact us today to learn more about our platforms and how we can help you decrease retail shrinkage.

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