Shrink is a part of the business no one likes to talk about. However, shrink plays a huge part in every retailer’s business. Shrink can take many forms, but here are the four most common. They are employee theft, shoplifting, vendor theft and paperwork errors.

Many small retailers only worry about shoplifting, but the other three accounts for about 2/3 of all shrink. We will discuss steps to help reduce your shrink.

Employee theft accounts for almost half of all shrink. Many business owners refuse to consider their employees could be stealing from them. Employee theft can take many forms such as taking cash/ merchandise, passing merchandise, and giving unauthorized discounts to name a few.

The key to controlling employee theft is to reduce the opportunity to steal. You should explain clearly to your employees if they are dishonest what the consequences will be. Here are a few suggestions.

1. You must keep the back door controlled. If it is unlocked, it is easy for employees to put merchandise outside. They could have friends or family pick it up. Also, the employee could hide the merchandise in the trash to recover after work.
2. You need to do regular inventories of high theft items.
3. You need to show up unannounced. This is especially true if you have many younger employees. They are much more likely to be involved with theft.
4. You should have your store be mystery shopped. This can see how your service is plus spot potential employee theft issues. It could be done by someone you know or through a company that specializes in mystery shops.
5. Make sure all employees give receipts. You could offer the customer something free such as $5, if the employee does not give a receipt. This makes it harder for an employee just to pocket the money. If your register keeps track of no sales, this could be a clue of a problem. Excessive no sales are either an education issue or a theft issue.
6. You should do unannounced cash counts. Vary the times and check the register total against what you are supposed to have. Also, see if you noticed anything unusual near the register area or inside the till. This could include employees have a paper with a bunch of numbers, coins or some other object in an unusual place, or part of the money unorganized.
7. You need to explain your policies to all employees’ especially new hires. You should mention that you trust all of your employees, but you have safeguards in place to protect the store assets. It would be a good suggestion to mention just a couple to let the employees know you are serious about protecting the store assets.
8. Employee’s bags and purses should be checked when leaving. Management should show their bags or purse to another employee.
9. You must have policies in place for ringing up of family or friends. Also, your discount policy needs to be clear to all employees. The most common theft is passing merchandise to family or friends or giving unauthorized discounts. For example, your $20 item may be sold for a $1. If you have a way employees can change the price of an item, you must have some way to at least spot check for potential problems.
10. You could have a tips hot line for employees to report potential shrink. Yes, on many occasions it would be used to report bogus claims about other employees. However, if work correctly, the valid claims could save you hundreds or even thousands of dollars.
11. Keep an eye on customers who are just hanging around employees. Also, if certain customers only seek certain employees could be a sign also.
12. You need to track your employee purchases. Very few purchases or excessive could be potential trouble spots with employee theft. If they never buy, it could be they are just taking merchandise. If they are buying a lot, where is the money coming from?

Shoplifting also causes shrink. Here are some suggestions to control it

1. You should greet every customer. It is great for customer service. Also, shoplifters do not want to be noticed.
2. Put high theft items where they are easier to watch.
3. Look for customers splitting up and one trying to keep you busy.
4. Keep your store neat and organized. Shoplifters like to leave empty packages in unorganized areas.
5. Keep an eye out for a customer watching the employees more than shopping.
6. Shoplifters like to go to blind spots. You may want to install some mirrors to make it easier to see the entire store.
7. Have signs made that shoplifters will be prosecuted to the full extent of the law. If you have the reputation of being soft on shoplifting, you will always have a major problem.
8. Look for nervous shoppers.
9. If shoppers come in your store often and seldom buy anything. Most shoplifters do buy a few items and just help themselves to others.

Vendor Theft is another area that accounts for shrink. Your could use the following suggestions to control it

1. Check all orders for shortages. It is best a good employee or management be responsible for this.
2. Make vendors break down boxes before leaving the store.
3. Don’t hand a signed invoice to the vendor until they are done. This will help with the previous two suggestions.

Excessive shrink can cause your business to fail. Shrink cannot be eliminated, but it can be reduced. Following our suggestions is a good way to ensure that you take more money to the bank than your employees, shoppers or vendors.