Retail theft, or shrinkage, is a combination of shoplifting, employee theft, vendor fraud and administrative error. What you hear the most about is shoplifting and employee theft because that’s where the big losses really take place. Preliminary reports show that in 2010 retailers lost more than $28 billion dollars to shoplifters (including ORC) and employees. That’s a lot of money, so we spend a lot of time talking about those numbers and what we can do to bring them down.
But, what about the lesser known side of retail loss– vendor fraud and administrative error? Last year retailers lost almost $7 billion in these two categories alone. Then there are losses that the retailer can’t put in a category. They fall into the “unknown” group which adds up to another $3 billion dollars. So, when you put it all together retailers lose another $10 billion a year in these “smaller” categories. This type of loss can be elusive. We know it happens, but it is insidious and much harder to pinpoint.
Some retailers are taking another look at these areas of shrink and they are turning to solutions that allow them to get a much better handle on what merchandise and products they have and where. The retail environment has always made tracking products difficult, but barcodes made it easier and now Radio Frequency Identification (RFID) is taking inventory visibility to new levels. Item-level tagging with RFID allows retailers to take inventory in hours when it used to take an army of sales associates days to do the same thing. This means the retailer can take inventory more often and have a far better idea of what merchandise is where.
Knowing where your merchandise is has a variety of benefits including:
- Better customer service – knowing what you have on hand and where it is in the store helps to get it into the hands of the customers and cause fewer out-of-stocks
- Better management of shipments and vendor invoices – reconciling what vendors have delivered as opposed to what they have said they delivered
- Fewer errors – RFID tags do not need line of sight to be read, so it is far more accurate than inventory done by hand or using barcodes
- Better delivery information – More accurate information on what has been transferred from another store or distribution center
- Less lost inventory – RFID tagged items are much less likely to end up lost in a box in the back corner of the store room
Leave a comment
The visibility from RFID gives retailers store intelligence and benefits that go well beyond vendor fraud and administrative error, but if retailers want to tackle theft they first have to know what products they have and where. From there, they can pinpoint causes and take action to limit those losses.