6 Mistakes to Avoid in YOUR War on Shrink

Larry MillerArticles

1. Get Out of Your Box. Reset, Refocus, Lead and Prepare for Change. Simple rule: you cannot continue doing what you have been doing and get a significantly bigger or better result. Leadership demands a vision of a more profitable future, a bias for action and a general intolerance for “average” or mediocre improvement. To achieve significant profit gains we must refocus and energize resources that will lead to productive change. In order to refocus, let’s take a fresh and measured look at where we are, what our obstacles are, and make a new strategic and tactical plan to get us to a new place. Let’s “diagnose” current practices, compare them to the very best of industry best practices and move the profit ball down the field. It’s time to take a new look at the profit shrink that stands between us and our optimal profit.

2. Stop trying to catch your way to lower shrink. It doesn’t work. “Catching” is simply insignificant. Research shows that only 36% of store shrink results from theft. Further, retailers only catch or stop about 8% of all theft. Excellent awareness and in-store practices can accomplish both (15%) better theft control and (22%) better store profit from operations from shrink control. And, one point cannot be denied: store teams do what they know how to do and what they are expected to do; no more, no less. If you want better shrink reduction and profit performance, you simply must train your teams in better practices proven to get you there. 1,2

3. Avoid “QF” Training. Quick Fix, one-off training most often doesn’t “stick”. QF training makes us feel better because we’re doing something, but quality training must be bigger and better thought out than quick-fix or sporadic in nature and designed to impact beliefs and behaviors, both short and long term. Training must engage and inspire every store team member through curriculum-based, culture-impacting training to join you in your drive for profit through shrink reduction. We must educate, teach, train and pro-actively coach store teams to be able to see the many faces of shrink as profit loss. It’s an “evolution” that makes shrink training bigger than waste or damage or even theft. People are the real solution and cure when they are taught, coached, engaged and motivated properly.

4. Stop Relying on Technology. Technology assists people to
do their job, but technology is not the cure. People using technology, people following best practices and people who understand the business of profit-making are at the beginning and end of the optimal profit equation. Technology can certainly provide quicker and more data, quicker (providing you don’t create a paper-glut) but people have to use that data. Technology can monitor activity and report it and even see it, but I’ve never met a camera or a computer that can tab a shoplifter on the shoulder and ask for your product back. Technology assists. People do.

5. Forget Your Budgets. Budgets are based on anticipated, accepted or expected shrink levels. We build-in historical profit loss because we don’t know what to do to eliminate it. Budgeted profit always builds-in a factor of your historical shrink level. I say: Stop It! In 2012, we can exceed expectations. Let’s calculate your optimal profit margins, determine your best case shrink loss based on your operating conditions and accept no less than optimal profit. This often requires a fresh look, an un-accepting or unbiased eye at your operations and practices and technology utilization.

6. It’s NOT About Shrink. Shift the paradigm. People get stuck thinking too much about shrink and not enough about optimal profit. The 2011 National Supermarket Shrink Survey reports that “average” shrink is 2.70% of retail sales and net profit is 1.47%. Top performing companies report 1.72% shrink and nearly 2.62% net, bottom line profit. If you are “average, your optimal profit (which combines improvements is shrink reduction, labor saving, sales increase and cash flow) has
potentially a 78% upside.

In any shrink reduction initiative or expenditure, we must couple every concept of shrink prevention with all related “profit” opportunities that can be achieved. In truth, loss prevention training should discuss shrink as an obstruction to profit. Shrink is about profit. We have to teach Store Manager’s and teams the business of profit-making and Supervisors must support and reinforce this thinking at every opportunity. What’s needed is a cultural thinking shift to get out of old expectations and into new ones.

By now it should be obvious that I believe in “people”. Even in the toughest of hiring and retention environments, I believe that people are at the essence of retail sales and profit making. Avoiding these 6 mistakes and not allowing yourself to be sold a false hope or ill-founded expectation can and will lead you to higher profit.

When it comes to shrink control and prevention give me a well-trained store manager leading a well trained store team and supported by an excellent and well trained supervisor, and I’ll give you best-in-class shrink control and optimal profit.

 

1 Numbers expressed in parenthesis may vary by company and implementation effectiveness.
2 Numbers expressed not in parenthesis are from the 2011 National Supermarket Shrink Survey.