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Retail Theft and Shortage


Impact of shortage and the difference between Markdown and Shortage Management of a retail supply chain is one of the key elements that a retailer should consider to get the right amount of products onto the shelves in a cost-effective manner. ...Read More


~Posted on Mar 2018

Retail Theft and Shortage

Impact of shortage and the difference between Mar...

Impact of shortage and the difference between Markdown and Shortage

Management of a retail supply chain is one of the key elements that a retailer should consider to get the right amount of products onto the shelves in a cost-effective manner. Retail merchandise shortage usually occurs due to erroneous bookkeeping, customer and employee theft and damage of the merchandise/inventory. In most cases, shortage reduces profits, raised prices, reduced wages, implements tighter security and placing more focus on loss prevention. All these activities attributed by shortage make retailers to operate at a higher cost. For instance, heightening security depends on the nature of the retail shop. Ensuring security can lead to extra costs of hiring uniformed security guards and experienced bookkeepers to monitor stock in and stock outs. Besides the retail operating at a higher cost, heightening security can also lead to mistrust between employees and management (Dunne, Lusch & Carver, 2013).

The issue of shortage also leads to reduced wages. Usually, retailers pay their employees lesser amounts during product shortage period because they are operating at reduced profits. Offering low salaries and holding the line on wage increases makes it more difficult for retailers to retain high-quality employees. Additionally, a report by the National Supermarket Research Group, retailers operates in low-profit margins to remain competitive during the shortage period, and the reduced profits have adverse effects on the full business operability (Horan, 1997).

The main difference between markdown and shortage is that markdowns are used to push sales of particular merchandise at a price lower than the marked price, while shortage is used to identify inventories or merchandise that a retailer records as being on the shelf but it’s not actually on hand or it has been damaged.

About Customer profiling and have retailers crossed the line?

Today, most retailers have become more aggressive in loss prevention strategies, which aim at taking no chances in restricting suspicious customers, even if it means intercepting innocent individuals. The move by these stores has done much worse than good. Most customers who are intercepted at a particular store feel intimidated and swear not to shop at the warehouse again. Customer profiling has also raised racial concerns. Most African Americans and Latinos feel that they are being denied the right to shop at their preferable stores. Most victimized African Americans and Latinos suspected of profiling are cleared by police without charges due to lack of evidence. According to Goodman (2013), none of the client profiling accusations brought forward was accused of any crime by the police.

Impact of employee theft

Most retailers use the black listing as a way of keeping employees from stealing merchandise. Although some employees might be legally responsible for stealing merchandise, some the employees will confess to theft crimes without understanding the impact of their confession.  However, it’s advisable for companies and retailers to ensure their employee's details are scanned and verified to ensure they have good morals and don’t have a previous theft record. According to Clifford & Silver-Greenberg, 2013), beyond scanning employees, some retailers victimize their employees even when they have done nothing wrong. Blacklisting won’t solve the problem as employees might not give valid information during employment. However, Singh (2011), argue that retailers should instead plan for reduction. Retailers should minimize vendor theft and employee theft by planning purchase, planning for cost reductions through involving markdowns. Additionally, cases of employee theft should be provable and justifiable. Relying on an employee history of work and behavior might not help that much. Employees should be taught on accountability and judge them according to where they go wrong (Horan, 1997). 

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