Addressing Retail Shrink

Virginia Alcoholic Beverage Control Authority (ABC) is undertaking a multipronged approach to address retail and internal theft in its distribution center and network of 399 stores. These changes include law enforcement initiatives, additional audits, enhanced staff training and other tactics to best serve customers and reduce the impact of crime in our communities.

“Virginia ABC must maintain a safe and enjoyable experience for our customers and teammates, while finding ways to deter and detect theft,” said Virginia ABC CEO Travis Hill.

What is retail shrink?

The National Retail Federation’s (NRF) 2022 survey found that retail shrink — loss of inventory through process control failures, theft and damages – is a growing trend across America’s retail industry.

The NRF describes the items most frequently targeted for theft as CRAVED: concealable, removable, available, valuable, enjoyable and disposable. These categories include alcoholic beverages, explaining the enticement for theft from Virginia ABC stores.

Virginia ABC’s shrink numbers are low compared to the overall retail market. The NRF reports a 1.4% average retail shrink for fiscal year 2021, while Virginia ABC saw 0.2% that year. Shrink declined in fiscal year 2022 and is on track to remain low in FY23.

Virginia ABC is enhancing how it tracks retail shrink and manages inventory. These include more-frequent inventories, additional audit visits to stores and better categorization of shrink sources. 

Year Total Shrink Gross Alcohol Sales Percent of Sales

* Based on physical inventory count at March 31, 2023

Favorable Inventory Results

This spring, Virginia ABC conducted inventories of our distribution center and 394 stores. Both results compare favorably to industry expectations for shrink. The inventory showed 237 stores with an overage and 158 stores with a shortage. Total net retail shrink was -0.114% of sales. The distribution center inventory, which involved counting more than one million cases and 42,000 individual bottles, identified an overage of 160 cases and shortage of 96 bottles. At its conclusion, 99.987% of the distribution center’s inventory was physically accounted for.

Deterring, Detecting Theft at Retail Stores

Virginia ABC is reviewing and implementing changes at its retail stores to better deter and detect theft. These include emphasizing staff interaction with customers, minimizing the quantity of high - theft products that are placed on shelves at any one time, moving products for maximum visibility by staff members, lowering inventory levels at stores and adding additional in-store staff.

Internal theft is another segment of retail shrink. Virginia ABC is enhancing the number of audit visits to stores, which declined during the COVID-19 pandemic, and reviewing internal inventory processes. Virginia ABC also identified a point-of-sale system vulnerability, which led to a review of more than 1,100 transactions at 134 stores. Seven stores experienced theft. Three employees at one store were charged and ordered to pay restitution, while six stores remain under investigation.

Valued Local Law Enforcement Partnerships

Virginia ABC values its relationships with local law enforcement. Staff are trained to gather actionable information to generate usable suspect information and leads. Virginia ABC is installing additional cameras and confirming effective placement, as well as encouraging interaction between staff and patrol officers serving their communities.

Virginia ABC’s Bureau of Law Enforcement is primarily tasked with licensing and regulating ABC licensees. Agents support local law enforcement through meetings, data sharing and operations. Seventeen joint operations were conducted between January and April: eight operations in Chesapeake, four  in Virginia Beach, three  in Richmond and one  in both Portsmouth and Newport News. Four operations led to arrests.

Enhancing Loss Prevention

As part of this proactive approach, Virginia ABC has budgeted for a dedicated loss prevention function with two staff members in FY24.  These new teammates will focus on establishing a loss prevention strategy, developing processes and initiating continuous monitoring activities to safeguard assets and improve loss prevention. 

Additional information about Virginia ABC’s plan to address retail shrink is available in this document. 

Per the Code of Virginia, ABC’s profits from in-store and online retail sales provide funding for designated state programs and services. For FY22, ABC contributed a total of $622.8 million ($243.6 million from retail sales) to the commonwealth.

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The Virginia Alcoholic Beverage Control Authority (ABC) is a major source of revenue for the commonwealth, contributing more than $2.7 billion to the general fund in the last five years. Virginia ABC currently operates 399 state stores and provides alcohol education and prevention programs for people of all ages. Its Bureau of Law Enforcement oversees approximately 19,000 ABC licensed establishments. Now marking its 88th year, ABC remains committed to progress and innovation in carrying out its vision of bringing good spirits and excellent service to Virginia.

Web: www.abc.virginia.gov  Facebook: @VirginiaABC and @SpiritedVirginia  Instagram: @spiritedvirginia  Twitter: @VirginiaABC LinkedIn: https://www.linkedin.com/company/virginiaabc