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Cutting Costs Through Shrink Reduction

shrink-reduction

Achieving significant and lasting cost savings by changing the way retailers approach the persistent problems of shrink and concealed losses.

For an industry where company margins typically hover between 1% and 2%, shrink remains a critical opportunity to enhance company performance and improve the bottom line. While most retailers have tried a variety of tactics to reduce shrink’s monthly toll on profitability, for many it remains a frustrating game of trial and error: some efforts reduce shrink at the cost of losing margin while other techniques compromise sales. After failing to tackle the problem, many managers conclude – wrongly – that high shrink and concealed losses are simply a cost of doing business.

Many shrink reduction efforts fail because they fall victim to four common errors:

  •     > Lack of a fact-based, data-driven approach
  •     > Not identifying the real problem
  •     > Taking an undisciplined approach to solving the issue
  •     > Creating an unsustainable approach that fails to maintain a culture of shrink reduction

At SSA & Company, our work with the retail industry has taught us that by avoiding these mistakes, shrink can be significantly reduced without lowering sales. We have developed an approach to shrink reduction that leverages an analytical toolkit and deep retail expertise. This approach has been proven from our experiences on hundreds of shrink reduction projects.

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