Retail shrinkage at two selected stores.
Dengetsha, Mekonnen Redahegn.
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Self-service may increase customer satisfaction. But by allowing customers to be in close contact with goods before they purchase, exposes the retailer to possible shrinkage in the form of dishonest customers and staff. Suppliers contribute to the shrinkage problem by under-supplying or falsifying invoices. Errors in the capture of inventory information on the part of management and employees are further contributors to possible shrinkage. The combination of these three factors contributes to the phenomenon of 'retail shrinkage' and is directly responsible for eroding the profits of retailers. At present the South African retail market is highly competitive. It is almost saturated and retailers depend on sales volume and lower profit margins to remain in business. To increase profitability, South African retailers are pursuing re-branding and foreign market expansion strategies. This is aggravated by a higher shrinkage rate which in turn increases prices. Robust Shrinkage reduction leads to lower prices, better availability and safer shopping for consumers, greater sales and guaranteed shelf space for manufacturers and reduced losses and increased profitability for retailers. How this can be achieved is the challenging question for retailers. Bearing this in mind, this research is carried in two selected stores, from Woolworths and Checkers. The findings reveal that the above listed shrinkage problems are of great concern to the stores and they have put in place various loss reduction solutions. In this situation the list of solutions is diverse and 'prescribing' a solution is not the main concern. The challenge is how to systematically identify critical and solution seeking causes. From this research it was clear that neither of the two stores has a systematic Shrinkage related data gathering, recording and analysis tools. They are not collaborating with other firms in similar businesses. And worst of all they do not have a strategy to reduce loss because they do not seem to consider loss reduction as a core business activity. Finally, a strategic or policy deployment approach to loss reduction is recommended for the two stores. This includes shrinkage awareness, planning, shrinkage cause analysis, implementation and evaluation. Based on the strategic approach, specific solutions to the specific problems at the two stores are also provided.