Phil Barnard on why you could be losing 20% of your turnover!

Why deprioritising stocktaking could reduce your turnover by 20%


Dramatic title? It might sound pretty extraordinary but please here me out and I’ll explain.

For many retailers “The Stocktake” is a once a year activity. Something to be dreaded and with little purpose other than keeping the accountant happy. Incidentally, it’s often planned in at a time of year when many team members conveniently want to go on holiday.

Despite the fact that modern tech, including the fantastic, and free, XPOS App and Bluetooth scanner make stocktaking much faster and more accurate, it still gets a bad rap. I’m always shocked at the low numbers of our retail customers who carry out stocktaking regularly, so let’s look at why prioritising it really is worth our while.

Stock is the life blood of any retail business. Without it you have nothing to sell. Buying the stock is the first part of the process and maintaining it is the next challenge. This is where stocktaking comes in.

The purpose of the stocktake is to validate the data in your inventory management system. Ensuring accuracy of product data enables retailers to offer the right products for their customers and confirms what items are still available.


What is stock shrinkage?

The difference between the stock that is in the system and the stock that is physically in store (or the warehouse) is called “Stock Shrinkage”. This is the first area of loss for many businesses. According to the most recent National Retail Security Survey (NRSS) from the National Retail Federation (NRF) the shrinkage rate was at an all time high in the financial year 2020, at 1.6% of turnover. However, over 15% of retailers saw shrinkage rates of over 3%. These are the reported rates from retailers that are paying attention: completing stock takes and mitigating against shrinkage.

For retailers not actively stocktaking, they may be seeing shrinkage rates of more than double this – that could mean that 6% of your business is being lost.


What’s the cost to your golf retail business?

According to a recent British Retail Consortium (BRC) survey, 75% of shrinkage was down to theft. Now, the interesting thing to note here, is that only 46.3% of the theft was from shoplifters. Alarmingly 29.5% was from staff theft and 24.2% was supplier or warehouse theft. The latter is an interesting one as the stock is stolen before you receive it – something that’s often missed due to poor stocking-in procedures.

The other 25% of shrinkage comes from damaged good and admin errors.

While this is valid research form the BRC, I am, in now way, suggesting that everyone’s customers and staff are stealing. However, I strongly suspect there are many instances you can think of, when a customer has borrowed, or tried, an item and you aren’t sure if they brought it back. Whatever the situation, the research shows that there are a lot of areas where product is going missing.

"If you can’t take the sale there and then because you don’t have the stock, it’s a lost opportunity."

It might not be obvious in your business but it is going on in many others. Some might not be intentional but a lot is and it’s something that can only be monitored with good stocktaking procedures.


Shrinkage and the average on-course shop

Let’s put some values on what this might be worth to a typical golf business. Based on the BRC and NRF data. If the average on-course store is turning over circa £170,000, they could be loosing 75% of 6% of turnover due to theft … over £7,500 loss a year. That’s straight-off margin and, in most shops, could be worth as much as 15% of profits.


Reducing shrinkage

There area a number of tactics that retailers can employ to reduce shrinkage. Better security is one, including CCTV or product tagging. Team motivation is another – educate the staff and identify it as an issue and get everyone to be more alert. This will help with both internal and external problems.

Finally, and probably the most effective, is better stock management. This includes barcoding, tracking of all items and regular, as well as surprise, stock audits (let’s use that phrase in case ‘stocktakes’ still gives you the shudders!).

If people know you’re paying attention and validating your product investment on a regular basis, this is most certainly going to reduce your risk. The key thing is to move away from a large annual stocktake to a rolling category stocktake on a weekly basis. With the right stocktaking tools, and picking a sensible number of product groups, stocktakes can be done in a matter of minutes. Not only will this help reduce losses, but it will also help with the next reason for lost revenue.


Avoid stock outs!

Another area that will be costing you money due to irregular stocktaking is STOCK OUTS! A stock out is when a sale is lost due to a product not being available for a customer. Depending on the type of retail outlet you run, this can have a more or less significant effect.

"Reducing shrinkage (possible 6% of sales) and stock outs (potentially 14% of sales) will lead to a big positive, namely 20% increased turnover".

An on-course store that has a lot of visitors typically serves customers buying on impulse, or for distress purposes. This is where stock outs can have the biggest impact. If you can’t take the sale there and then because you don’t have the stock, it’s a lost opportunity. Visitors are unlikely to return and, once the distress has passed, consumers will likely buy from their usual retailers. In these situations, spotting the holes is the biggest challenge and where regular stocktakes will provide a big result.

If you’re not spotting where stock is missing and refilling it, you will be losing sales and margin.


According to research completed by Neilsen, 7.4% of sales were lost by retailers in 2021 due to stock outs. This data was collected from stores that were paying attention. For retailers not actively monitoring this, it isn’t unreasonable to consider the this loss could be double. Other data has shown sales from actively replenished lines can increase sales by over 10%.

The main way to prevent stock outs is through active inventory management. This is a combination of regular reporting to warn of potential issues, combined with stocktakes to ensure data is correct. You need to know where the holes are and plug them.


Business Impact

If we look at the benefits of regular stocktaking instead of thinking of them as a chore, there are plenty of opportunities including improving retail performance and covering any associated costs. Reducing shrinkage (possible 6% of sales) and stock outs (potentially 14% of sales) will lead to a big positive, namely 20% of increased turnover.

While these issues are having a significant impact on retail businesses, they are further exacerbated by current supply chain issues. Reduced inventory and longer lead times require retailers to be even more switched on. Replenishing before stock runs out becomes a problem and making sure all those sales can be taken.



Phil Barnard is Founder of XPOS, the UK’s only sales and stock management solution designed for sports, and Partner at Golf Datatech, which provides the golf industry with specialised market insights.