Did you know that retailers in 2014 lost a staggering $44 billion in inventory shrinkage?

As the losses continue to climb each year, inventory managers are scrambling to find a solution. Whether you sell the latest fashion or have a store full of electronics, the last thing you want is your precious inventory disappearing!

But what exactly is inventory shrinkage in retail? Is there anything stores can do to prevent such devastating losses?

In this post, we’ll consider what inventory shrinkage means and ways you (a savvy retailer) can prevent it.

What Is Inventory Shrinkage?

First of all, let’s define the issue at hand.

Inventory shrinkage refers to a discrepancy between your accounting records (sales receipts, purchase orders) and your physical inventory. When you take your inventory count, the numbers just don’t add up.

What accounts for the loss? In some cases, it could be errors in paperwork or purchasing or damaged products.

Most of the time, though, inventory shrinkage is a direct result of theft–whether from customers or your employees.

How to Prevent Inventory Shrinkage

What’s an inventory manager to do? Here are three expert tips that can help.

1. Educate Your Employees

The subject of shoplifting isn’t always covered during orientation–or at all–in a retail setting.

Have you trained your employees how to spot a shoplifter? Do you have a protocol in place should a customer be caught trying to steal an item?

Keep all valuable items in a locked case or behind a secure counter. And while you’re at it, learn how to spot a potential thief among your employees too.

2. Brighten and Rearrange Your Store

Dark corners and no security is an open invitation to a potential thief. 

You may not be able to stop 100% of losses, but you can take steps to make your store less attractive to shoplifters. Design an open layout so you (and your staff) can easily keep an eye on your stock.

Install bright lighting everywhere, along with security mirrors and shoplifting signs. Want to take it a step further? Install a video surveillance system–even a fake one will act as a major deterrent!

Another helpful tip? Place your register or checkout counter near the front of the store (not the back) to prevent hit-and-run thefts.

3. Start a Double-Check System

Even the most careful managers and employees will make mistakes occasionally.

When it comes to shipping, receiving, and stocking, don’t place full responsibility on one person. Make sure every employee is trained in properly handling inventory to prevent damage and breakage.

Also, have more than one person sign off on invoices or when accepting orders. An extra set of eyes can prevent paperwork errors and help to minimize inventory shrinkage.

Final Thoughts

As you can see, inventory shrinkage is no small matter.

It’s something every retailer (including you) needs to address to tighten your bottom line and increase the profitability of your business.

Now that you know how to address lost inventory, what about other common scams? Click here to learn clever ways to avoid being scammed.