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This is an important concept for every retail manager to learn and understand and will have a direct impact on company - and individual – performance. As a result, shrink management strategies require a multifaceted approach in order to successfully manage the process. Managing shrink is a critical aspect of inventory control, which involves the management of the supply, accessibility, storage, and delivery of the company’s goods. This is a much more complicated problem than simply accounting for the theft of merchandise and the direct loss of profits. However, understanding why it is important to control these results and how we can impact company profitability by both improving sales and controlling retail shrinkage is a key aspect of retail success.
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#Retail math calculator how to
Understanding how to calculate shrinkage in retail is important. Sales drive our overall performance, just as they affect every other aspect of the business. While our ultimate goal is to reduce our retail shrink dollars as well as improving our sales performance, this example illustrates the importance that store sales performance carries in maintaining, enhancing or impairing our shrink results. $20,000 Losses / $2,000,000 Total Sales = 1% Retail ShrinkĪlthough we maintained the same shrink dollars, our retail shrink percentage was dramatically improved by increasing our sales performance.
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Using our example above, let’s say that we had $20,000 lost to retail shrink, but we improved our performance to $2 million in sales: Understanding this concept, we can see that by improving our company sales, we will as a result impact our shrinkage numbers. This would result in a retail shrink percentage of 2 percent: This concept is important in understanding the interrelationship between loss prevention and other areas of the business.įor example, let’s say that a store that did $1 million in sales for the year conducted an inventory and discovered that $20,000 was lost to retail shrink. While certainly measured in terms of total dollars lost, retail shrinkage is most often expressed in terms of a percentage to company sales. This is a real and growing problem that affects all of us in a variety of ways. Every year shrink issues cost retail businesses tens of billions of dollars. This can have a significant influence on the bottom line and even on the overall health of the company.
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The impact goes beyond current sales it also affects product replenishment and future sales as well. When merchandise is stolen or otherwise unaccounted for, it not only impacts the company as a result of the missing product, but also skews our inventories in other ways. In addition to theft issues, damage, waste and spoilage are among the concerns that can directly contribute to a company’s losses. Internal losses are the result of incidents that involve store associates and other company employees who take advantage of opportunities to steal from the company.External losses can involve theft by customers (primarily shoplifting), issues involving vendors, or other incidents that pertain to those not working for the company.These incidents typically occur when processing a transaction, receiving merchandise, shipping merchandise, or taking inventory. Operational errors can involve paperwork issues and other operational missteps.However, there are many different causes that may result in retail shrink and lost profitability. Traditionally, the primary causes of retail shrink include operational errors, internal issues, and external losses. Retail shrink can come in many forms and impact a business in different ways.