Retailers are working together to stop “five-finger discounts” from ruining their businesses.
Inventory shrinkage, a fancy term meaning theft, is a huge problem for retailers. Over $90 million worth of inventory disappears from warehouses and store shelves across the country every single day. What is most disappointing is that an estimated 44 percent of shrinkage is perpetrated by employees.
To deal with this issue, several companies have proposed an innovative solution, retailers are starting using Shared data to reduce employee theft: a shared database of problem employees. Retailers pay fees for the right to subscribe to this database and also agree to share information on employees caught stealing to the database provider. Before hiring an employee to work at a store, subscribing companies can research the employee’s name in the database, similar to performing a background check. The databases have rich data, including employee confessions admitting to what they have done.
Not everyone thinks this is a good idea. There are questions being raised about the fairness and accuracy of the data. Despite these concerns, most retailers believe that the problem is so pervasive and expensive that an imperfect solution is better than no solution.
It’s shocking to think that such a high percentage of theft is at the hands of staff. For a small business, even a tiny amount of theft can cause significant financial damage. A company operating on a 5 percent net profit margin that experiences $1,000 in shrinkage would need an additional $20,000 in sales to compensate for that theft. Is this a problem at your business?
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