n Acta Criminologica: Southern African Journal of Criminology - A security risk management approach to stock shrinkage in the retail sector : a preliminary review

Special Edition 2
  • ISSN : 1012-8093



A very important asset that drives a retail operation is its stock (goods for sale / manufactured product), and as such, it is one of the assets that needs to be the best protected. Failure to prevent unnecessary losses in merchandise stock will not only lead to a decrease in overall profit but also to an increase in overall costs in order to replace stock and to investigate these losses (indirect costs). A retail operation running at a high level of loss will be forced to compensate for this by increasing their prices with the result being that it is rendered uncompetitive with other retail operations, with the consequent loss of customers (Jones, 1997: 1). Shrinkage or the loss of stock (merchandise) due to internal or external factors is a much debated issue within the retail environment. The reason for this is that there are discrepancies surrounding definitions of what exactly stock shrinkage encompasses and who the culprits of this crime are (employees or customers / clients). There are also different opinions of where the responsibility of curbing shrinkage lies. When considering these issues it becomes understandable why shrinkage continues to be a drain on resources and why many companies write it off as something that has to be budgeted for because of the perception that nothing can be done to curb it. The purpose, then, of this article is to present a synopsis of stock shrinkage, namely : how it can be defined; process failures, inter-company fraud, internal and external theft and a lack of cooperation between role-players as some of the factors leading to a higher shrinkage percentage; as well as the impact of shrinkage on a company. Lastly, an attempt is made to explain how an understanding of the phenomenon of 'hot products' and 'hot spots' in the supply chain can lead to the creation of more effective prevention / reduction strategies. In order to do this, a preliminary review of international literature, particularly that from Europe and America, since a paucity of literature exists within South Africa regarding this issue, was undertaken.

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