How to Deal with Shrinkage in Walmart

Running Head: HOW TO DEAL WITH SHRINKAGE
How to deal with shrinkage in Walmart
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HOW TO DEAL WITH SHRINKAGE 2
Introduction
Retail shrinkage is an insignificant reduction in inventory due to manmade errors. These
shortages range from external to internal theft especially at the register and shoplifting which are
all contacted with the help of the business employees. The employees take advantage of the
unsuspecting bosses and act in the manner that if there is no close monitoring, the business can
collapse. Despite technological advancements that have brought along ways in which businesses
are conducted, the retail shrinkage still remains one of the major issues facing business in the 21st
century. Beck (2017) connotes that this issue attributes to loss of approximately $40 billion
annually. In 2016 retail shrinkage coasted retailers who absorb the issue as a price to pay in order
to succeed $49 billion. The five main causes of shrinkage are shoplifting which alone contributes
38% and it occurs when customers swap prices of commodities with the aim of saving
themselves money or at times hiding commodities under their clothes. Employee theft which
follows closely at 34.5%, register errors at 16%, vendor fraud at 7% and other unknown causes
attributing to 6% of shrinkage. These factors contributing to shrinkage then pause a serious profit
challenge to the business therefore growth is hampered (Bensoussan, Çakanyıldırım, Li &Sethi,
2013). This happens because even though shrinkage might have occurred and the employees are
fully aware, the wages still have to be paid and the bills remain to be cleared so as to keep the
business running.
Thesis this report will therefore concentrate on how to eradicate or minimize shrinkage
through employees training.
Many businesses across the globe have put up technologically advanced security but it
has not yet fully managed to eradicate the causes of shrinkage (Fan, Chang, Gu, Yi & Deng,

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2014). Among the technologically advanced methods being employed to minimize shrinkage are
use of CCTV cameras which do capture many of the details mostly but are not manned therefore
they only serve to instill fear on thieves but not actually dealing with the issue. Internal audits
have also made it possible for retail businesses to conduct audits at specified time intervals an
aspect that has reduced shrinkage. The layout of retail stores has also been modified to a unique
way in a bid to ensure the employees who man the premises are able to see a wider open space
(Zhou &Piramuthu, 2017). Human resource has also be put up in most of the businesses to
reduce shrinkage. For instance loss prevention specialists are employed to man the business
systems so as to ensure there is no comprise on the systems. This has been possible since the
specialists are able to detect any malfunction that is made in an attempt to hack the systems. In
some instances passwords are entrusted to these specialists only such that each and every cashier
will be answerable in case the business he/she presents amounts less than the required.
Shoplifting
Employees can be able to detect this cause of shrinkage through understanding its impact
to the business and the various methods used (Markey, 2015). According to the National retails
security survey, shoplifting contributes to about 38% of all losses in the retail market and it is
ranked the major shrinkage cause. It occurs when customers steal from the stores through various
methods. First, customers can swap the prices of commodities with the help of the employees.
For instance a customer can swap the price of a complete suit with that of a dress an aspect that
directly leads to lose of money and reduction of the inventory at the end of the year when stalk
taking is being contacted (Leonard, 2015). Secondly improper monitoring of the implanted
CCTV cameras gives the thieves chances to sneak commodities inside their clothes more
especially during winter seasons when people are heavily clothed. Thirdly customers can slip

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smaller items inside bigger items which when presented to the cashiers who do not conduct a
search on the items, end up charging for a single item while there are more than two or three
items. For instance watches, necklaces, smaller books, rings and underwear clothes can be
slipped into a bought jacket and only the jacket is paid for (Security investment behind fall in
retail shrinkage. (2013). Despite the advanced technology shoplifting has not yet been fully
handled since in most retail shops these gadgets have no one to monitor. Though shoplifting has
reduced, only a small percentage of thieves who fear have stoppedstealing. Employees should
therefore be vigilant to counter any suspicious characters and ensure before they pass goods over
the barcode they have investigated whether the items are multiple.
Employee’s theft
It is ranked in the second position as a cause of shrinkage and it is contributing to
approximately 34.5%. This is because employees are not screened when entering the premises
and when leaving (Avery, Mckay, & Hunter, 2012). Employers avoid doing it since it displays
lose of trust and also affects the morale of the employees an aspect that leads to most of them
taking advantage. To counter attack and reduce employee associated theft, they should be trained
on how to deal with suspicious colleagues. The supervisors should be very keen to ensure no
employee leaves the work station with items they did not report with. Warning letters should be
drafted for those who are found guilty and if the vice persists they can be replaced. This will help
to minimize the number of thieves hence a significant reduction of shrinkage. The outcomes of
theft should also be made clear so that in case an individual is caught, they will not blame the
employers for not highlighting the rules and regulations (Mishra & Prasad, 2016). The cash
drawers should be manned from a single system to ensure the amount in the drawer is equivalent
to the worth of the goods sold. If the amount is found to be less or excess then the cashier should