Knowledge Insights:
Reducing Shrinkage in the
retail
industry
By Anders Krohn, Daniel Tipping, Chutian Huang, Mingfui Chai and Camilla Rees
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Knowledge Insights:
Reducing shrinkage in the
retail industry
Shrinkage refers to the loss of product between the point
of manufacture and the point of sale. In 2011, the global scale
of retail shrinkage was $119 billion and would continue to
rise. On the other hand, the cost of preventing shrinkage
in that year was equivalent to $66.27 per individual.
This project analyzes the causes of shrinkage and develops
effective prevention methods.
OSG Thought: Knowledge Insights are OSGs thought
leadership publications and articles focused on our case
experience and research.
Contributors:
Anders Krohn (project leader), Chutian Huang, Ming fui Chai, and
Camilla Rees (consultants).
For more information, please visit www.oxfordstrategygroup.com
or contact us at info@oxfordstrategygroup.com
OSG Thought.
Shrinkage Prevention
Background
The
total
shrink
percentage
can
be
as
high
as
1.58%
of
sales.
In
other
words,
for
every
$100
of
products
carried
by
a
retailer,
$1.58
is
lost
due
to
employee
theB,
shopliBing,
and
other
causes.
This
report
invesCgates
the
causes
of
shrinkage
in
the
retail
industry
and
subsequently
develop
economical
strategies
to
minimize
shrinkage.
Understanding
Shrinkage
Categoriza-on
Professional
Non-professional
Employee
theB
Data
issues
Academic Framework
Shrinkage preven-on
Psychology
(eg
emoConal
Time
category
distress)
Economics
(eg
cost-benet
Developing
analysis)
shrinkage
Technology
focuses
on
deploying
RFID
chips
SoB
approach
based
on
academic
analysis
includes
monetary
incenCves,
shopliBer
rehabilitaCon
amongst
others
Shrinkage prevention
Understanding
Various
Types
of
Shrinkage
StaCsCcs
have
shown
that
on
a
global
scale,
external
shrinkage
including
customer
theB
is
less
of
a
factor
than
internal
shrinkage,
such
as
employee
theB
and
data
issues.
The
raCo
between
losses
from
external
and
internal
shrinkage
is
roughly
about
4:6,
stressing
equal,
if
not
more
aUenCon,
in
the
prevenCon
in
the
internal
shrinkage.
Whilst
advanced
technology
like
RFID
and
EAS
can
tackle
external
theB
problems
and
data
issues,
soB
methods
tend
to
be
more
eecCve
when
dealing
with
employee
theB.
Innova-ve
Academic
Approach
in
Solving
Shrinkage
Implementa-on
of
Preven-on
Strategies
PrevenCon
methods
were
explored
in
dierent
countries
such
as
China,
and
with
the
aid
of
Global
Retail
The-
Barometer,
more
insigh_ul
research
was
done
to
compare
prevenCon
methods
between
countries
with
high
rate
of
shrinkage
and
those
with
low
rates.
References
INTERESTING
FACTS
RFID,
the
chip
that
uses
mainly
radio
frequency
technology,
covers
18%
of
the
products
in
M&S.
1200
Women
versus
4000
Men
went
to
jail
for
shopli-ing
in
the
UK
OSG Thought.
OSG Thought is the Knowledge Development arm of
the Oxford Strategy Group that focuses on research &
publication of OSGs leading insights and analysis on
business & strategy.
For more information, please visit
www.oxfordstrategygroup.com
or contact us at info@oxfordstrategygroup.com