Retailers often think of protecting product from theft only after it is on their shelves. But the first opportunity to reduce shrink arises when a retail merchant is negotiating to purchase product from a supplier. For example, one case that I worked on involved a high-level retailer negotiating to purchase expensive perfume products. The retailer had previously purchased these products in cardboard boxes that were easy to open. The company liked that packaging because customers could access the product to test the scent. But thieves were taking advantage of the easy access to open the boxes, take the fragrance, and return the box to the shelf. Shrink was becoming so severe that it was eroding the retailer’s profit margin.
To combat the problem, I negotiated a new packaging strategy with the supplier. The packaging included new security tape installed on the lid of the package. The entire item was shrink-wrapped, making it much more difficult for thieves to open the box and remove the contents when the boxes ultimately made it to the store shelf.
The retailer then increased the number of testers used in the store, allowing customers to smell the product without needing to open the box. Theft of the fragrances decreased, as did the amount of product unfit for sale because a previous customer had used it.
That’s just one example of how a comprehensive loss prevention strategy that addresses the problem throughout the product lifecycle can benefit the store’s bottom line without sacrificing customer service.
A product’s retail life begins long before it hits the store shelves. It starts during the product identification and selection process and moves through purchasing to delivery, where product becomes inventory, and then to the shelf, where it becomes merchandise. Each of these stages has its own unique challenges relating to shrink. Let’s look at some of the steps that can be taken to reduce shrink in four critical stages of the product lifecycle: purchasing, packaging, receiving, and merchandising.