How to Keep Shrinkage from Ruining Your Retail Business

    Oct 21 2015

    Topics: Retail Shrinkage

    Unfortunately, shrinkage is not an uncommon occurrence in retail. In fact, it’s rampant. Retail stores lose billions of dollars to shrinkage every single year. It destroys businesses. And it can ruin yours, too, if you let it.

    You cannot be complacent when it comes to shrinkage. You can’t think that it won’t happen to you, because it will. And you can’t put off implementing proactive measures against it until it starts to significantly affect your bottom line, because by then it’ll be too late. The fact is that though retail theft is very common in the industry, it doesn’t have to be. You can protect yourself and your bottom line from shrink.

    Keep reading to learn more.


    There are four main categories of shrinkage: your customers, your employees, your suppliers, and administrative errors. Customer and employee theft make up the two more significant categories. Customer theft typically comes in the form of outright shoplifting. Employee theft can come in the form of unauthorized discounts, outright theft of merchandise, skimming money from transactions, and more. Supplier theft typically occurs in small businesses that do not have formal and organized contracts and inventory processes in place and can include overcharges or sending fewer items than you’ve paid for. Administrative errors account for a pretty large percentage of losses and can come from mismanagement of inventory, incorrect pricing, or innocent miscalculations.

    Regardless of how you’re losing money, you should be trying to stop it from happening so you don’t have to eat the losses. Here are some measures you can put in place to protect your retail business from shrinkage.

    Create a Loss Prevention Strategy

    The first step to preventing shrink is to create a loss prevention strategy. This plan will detail all of the ways that you will affect change within your retail store. To be effective, your strategy needs to be delivered by a strong leader with experience who is well versed in the subject and who can communicate a vision for loss prevention that all of your employees will follow. Your strategy should not focus on only one approach, but rather, be holistic and multipronged, containing many different actions to be taken.

    Have the Right Members on Staff

    Honest and trustworthy employees are key to not only reducing employee theft but also reducing customer theft as well. Your employees in the front and back of your retail business need to have your company’s best interest at heart and take an active role in preventing all kinds of theft. Make sure that you take the hiring process seriously and perform background checks before making offers of employment.

    Provide Training

    Providing training opportunities for all of your employees to help them look out for, identify, and prevent instances of shrink can drastically help you reduce your risk. The more knowledgeable your workers are on the subject, the better they’ll be able to help you prevent it.

    Invest in Cash Management Solutions

    Almost every category of shrinkage can be eliminated in a retail store with appropriate cash management solutions. When you automate your processes in the front and back, you can reduce your risk of employee theft as well as discount abuse, inventory theft, and administrative errors that lead to shrinkage. Cash management solutions can curb shrink considerably. When the machines handle all of your cash, customers and employees have fewer opportunities to steal from you due to increased accountability and visibility. Your manager will be free to oversee and manage staff as well as keep an eye out for shoplifters rather than spending time counting cash in the back room.

    Invest in cash recyclers, currency sorters, coin counters, cheque scanners, and counterfeit detectors and you’ll notice your shrink rate drop considerably. Every dollar will be automatically accounted for, every bill and cheque will be checked for fraud, and all of your money will be safe. When you invest in technology, you can eliminate many types of shrink from occurring at your business.

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    Andrea Lombardi

    Andrea Lombardi

    Andrea joined the CashTech team upon its inception in 2003. Learning the business from the ground up, she now utilizes her expertise in account management, planning, and negotiation while managing the daily operations of CashTech’s sales, marketing, and logistics departments. Andrea holds a bachelor’s degree from the University of Western Ontario. She enjoys travelling and has a passion for personal fitness, including obtaining her kettlebell certification. Andrea lives in Toronto with her husband and two young sons.

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    CashTech Currency Products Inc.
    1040 Cardiff Boulevard
    Mississauga ON, L5S 1P3