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January 18, 2011

Is E-commerce Lowering Your Shrinkage?

by jparker

An industry colleague recently asked me if, perhaps, retailers might be lowering shrinkage rates, in part, by the growth of their e-commerce business.  It is not really a question that had come to my mind, but I think it is an interesting topic for discussion.  I’ve outlined his thought process below and would be interested in hearing some responses from our readers.

Most retailers have now branched into e-commerce, some in a significant way and others are just testing the water, and e-commerce transactions represent about 4% of retail sales in the U.S. according to recent government figures.  While e-commerce certainly has to deal with fraud, most e-commerce business is set up in such a manner that there is very little, if any, shrinkage in a traditional sense.  Retail organizations typically account for fraud, such as credit card fraud, on a separate line in their P&L.

Therefore, if e-commerce sales are being including in total company sales and yet they contribute little, if any, shrinkage dollars, does that understate shrinkage – at least in terms of comparison to historical data?  Could this be part of the drop we are seeing in shrinkage in the National Retail Security Survey results of the past couple of years?

What are your thoughts?

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