Shrink is a big problem for small retailers

A new survey reveals many small- and mid-sized retailers face more of a challenge from shrink than their larger peers.

According to the Software Advice 2023 Retail Shrink Survey of 416 small- and medium-sized retailers, 68% of respondents have shrink rates that are currently above the industry standard rate of 1.5%. Shrink as a percentage of sales has increased for more than one-third of respondents.

In addition, close to half (46%) of respondents say external theft has increased in their stores, with the average respondent citing rising external theft operating a portfolio of 20 or more stores.

Given these results, it is unsurprising that almost nine-in-10 (88%) respondents say preventing retail shrink is a top priority. According to Software Advice analysis, the following factors make up almost all retail shrink incidents affecting respondents:

• External theft 41% (shoplifting, robbery, fraudulent returns)
• Damaged inventory 19% (improper accounting of damaged items)
• Vendor fraud 14% (Overbilling, missing items in deliveries, price gouging)
• Employee theft 14%
• Internal errors 11% (Inventory errors and cashier miscounts)

In addition to rising rates of overall shrink, vendor fraud (24%) is also increasing for some respondents. Other shrink factors that are growing for some respondents include employee theft (17%) and internal errors (16%).

Common in-store loss prevention strategies

Loss prevention strategies used by more than one-third of respondents in their stores include:

• Using security cameras (53%)
• Arranging store layout to prevent theft (40%)
• Using inventory management software (39%)
• Installing security sensors (35%)
• Keeping records of known shoplifters (34%)

Employee training

More than four-in-10 respondents have trained employees in the following shrink-fighting measures:

• Greeting all customers entering the store (62%)
• Reporting shoplifting incidents to company (56%)
• Counting the register daily and reporting discrepancies (52%)
• Calling security for active shoplifting incidents (47%)
• Filing police reports for external theft incidents (43%)

Other findings

• The average value of items stolen from respondents is $25
• Forty-five percent of respondents experience external theft at least once a week

[Read more: NRF: Retail shrink inches up 1.6%; ORC-related violence increases]