CENTERVILLE, Ohio -- Retail shrink tapered off slightly last year, dropping from 2.09% of annual sales in 1993 to 1.99% in 1994, according to a new survey focusing specifically on supermarkets.
When broken out by store type, a higher rate of shrink, 2.26% of annual sales, was reported by conventional supermarkets in 1994. On average, those formats experienced a total loss of $221,028 per store due to shrink.
Superstores, defined as larger format stores that also sell nongrocery items like apparel and furniture, reported average shrink of 1.47%. Average loss per store was $311,640.
The report, "1994 National Supermarket Shrink Survey," was based on responses from 203 companies representing more than 4,000 stores. It was compiled by the National Supermarket Research Group, a division of LAM Consulting here, and Business Marketing International, a Cincinnati market research and consulting firm.
In addition to tracking sources of shrink, such as employee theft, the report quantifies the relative effectiveness of loss prevention systems and procedures.
"The impact of any one program or technology on shrink control must always be judged within the cumulative effect of all programs being used, and the level of consistent implementation they receive," said Larry A. Miller, president of LAM Consulting.
Companies that have introduced several loss prevention programs, for example, reported shrink was less than 0.81% of annual sales.
"It seems reasonable [then] to expect that a typical company would be able to reduce overall
shrink by as much as half, from the 1.99% average reported by all companies, to 1.0%," wrote the report's authors.
"For the typical store, this would add almost $100,000 to the bottom line," the report continued.
While multifaceted shrink control programs have proven most effective, retailers continue to focus loss prevention efforts on employee theft, which represented 51% of retail losses in 1994, down from 1993's 56% figure.
The report attributes reduced employee theft to companies' increased use of loss awareness prevention training. More than three-quarters of respondents said they stepped up such programs in 1994.
In addition, automated technologies such as cashier performance monitoring and computerized direct-store-delivery systems contributed to lower employee theft.
Meanwhile, losses due to shoplifting inched up slightly, accounting for 25% of 1994 sales compared with 24% in 1993. On average, stores reported 1.45 shoplifting incidents per month and the average value of products recovered was $18.17.
Other sources of shrink in 1994 include vendor receiving errors and dishonesty, 9%; retail pricing errors, 6%; damaged goods, 5%, and accounting department errors, 4%, according to the report.
To reduce losses due to vendor errors and to gain better systems control, retailers added automated DSD systems in 1994, when 55% reported having such systems, compared with 39% of respondents in 1993.
Stores with automated DSD averaged a lower rate of shrink, 1.63% of sales, than those with a manual system, 2.54%. Further, 66% of reported incidents of error were in the vendor's favor, retailers said.
Cashier performance monitoring also was credited with reducing shrink. Sixty-five percent of companies reported using some form of automated cashier monitoring and their overall shrink averaged 1.54%, compared with a 2.59% rate of shrink at stores without such a system.
The National Supermarket Shrink Survey, now in its sixth year, was sponsored by the National Grocers Association, Reston, Va.; AT&T Global Information Solutions, Dayton, Ohio; RJR Reynolds Tobacco, Winston-Salem, N.C.; Sensormatic Electronics, Deerfield Beach, Fla.; Bass, Dayton, Ohio; Trax Software here, and Store Systems Consulting & Marketing, Lawrence, Kan.
