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What smaller retailers can learn about loss prevention

One of the biggest challenges the UK retail industry currently has to face is shrinkage. While sales are steadily growing - they increased by 3.9 per cent year-on-year in January, according to the British Retail Consortium (BRC) - stores are still facing losses from the old enemy of theft.

Shoplifting and more serious retail theft is becoming more and more of a problem. While the number of incidents is falling, their cost to businesses is rising as more valuable items are targeted. In 2014, the cost of crime to the UK retail sector was £603 million, a rise of 18 per cent compared to the year before.

However, this figure does not take into account a number of other factors that have a much greater impact on smaller retailers. Each theft is not equal; stealing an item from one store can cause significant issues, while another might be able to absorb the loss easily.

Large companies are also less vulnerable to other forms of shrinkage as well. They are able to afford devices such as security systems and other loss-prevention methods that many smaller stores do not believe are an option. However, learning from these larger businesses can be extremely useful for small retailers. Here are some of the best lessons to take away:

Make sure your policies are in writing

Many small retailers only employ a handful of people and operate relatively informally, meaning they don't have many policies in place regarding things like pricing, inventory and employee conduct. It may seem like these things are fairly low priority, but in actual fact having policies like these in place can significantly reduce shrinkage.

Many retailers lose money because of relatively minor errors, such as incorrectly pricing items or miscalculating their inventory. Having policies in place dictating how these processes should be carried out - as most large businesses do - can reduce the small errors that can end up costing a company a lot of money.

Larger businesses also have policies regarding how to deal with damaged merchandise, especially if a customer comes to the tills demanding a discount on it. Your employees should know exactly how much, if any, money they can knock off it. Aim for a small amount such as ten per cent to disincentivise people from damaging your products deliberately.

Prevent employee theft

It's not nice to think about, but there is a chance some of your employees might be stealing from you. This might seem unlikely, but bear in mind that six per cent of all retail crime by value was caused by employees. The cost of each incident is much higher than a normal theft, averaging out at £1,031 in 2013-14.

There are a number of ways you can discourage this, but the best is through deterrents. Clear security systems - such as CCTV cameras - in the area of the tills will not only make it easier for you to spot any wrongdoing, it will also put your employees off trying to steal from you as they know they will be caught on film.

Catch shoplifters

Of course, customer theft is still the main type of retail crime, accounting for 81 per cent of all incidents in 2014. On average, each incident costs businesses £241, but this is much worse for smaller businesses.

Retailers that order items in large volumes are more likely to be able to get significant bulk discounts on their merchandise. Ordering many products at once also reduces transportation costs. However, smaller retailers usually find it too expensive or impractical to opt for these methods. The end result is that theft has much more of an impact on smaller firms than large ones.

Cutting down on customer theft could require a security upgrade. This is an investment that many small retailers do not feel comfortable making, but it is well worth the cost. Products could be tagged with RF, RFID or ink-based devices to raise an alarm if they are removed from the premises, for example.

Cutting down on customer theft is one of the best ways to reduce shrinkage, so it is important for small businesses to look to larger retailers for examples of how best to tackle this issue. For more details on this topic, see our infographic "What Smaller Retailers Can Learn About Loss Prevention".

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