Section 28 Shrinkage factors

February 7th, 2013 Leave a comment Go to comments
WINNERS = Products which either by themselves or in their individual packaging are larger than the pocket opening on most clothing, wider than the opening of the average purse, and longer than the average lunch box.

Most first-time product developers have a tendency to believe that there is no difference between whether their product is sold or stolen.  They believe that either way the product has disappeared from the shelves, and that is good for them.  Certainly, this is a one-sided view.

The truth is, most retailers avoid re-ordering merchandise that is displayed in bulk and “disappears” or “grows legs” easily.  Merchants call this loss of inventory from various forms of theft, “shrinkage factors.”

Riordan’s law states:

  1. The shrinkage factor increases in direct proportion to the distance of the display from the cash register.
  2. The shrinkage factor increases in direct proportion to the price of the product.
  3. The shrinkage factor increases as the size of the product decreases.
  4. The shrinkage factor increases in direct proportion to the fad value of the item, even if the item is inexpensive.
  5. The shrinkage factor increases in direct proportion to the product’s ability to be resold.
  6. The retailers disdain for the easily-stolen product increases geometrically in proportion to the cost of the product.
  7. The amount of the re-orders you will receive for a given product decreases as the store buyer’s disdain for the product increases.

A few examples of products prone to shrinkage are “bulk products” found on store counters such as key chains, mini flashlights, rings, watch batteries, etc.

Another good example of the shrinkage factor’s effect on a product is the problem with the theft of compact discs from music stores.  Many compact discs come packed in a large see-through type package which is designed to deter theft through its sheer size alone.  Lately, environmentalists have been complaining to music store owners about the size of the packaging containing compact disks, because they generate thousands of tons of trash each year which must be dealt with.  The disk manufacturers are not desirous of spending all that money on a large package just to display the disk, they are simply trying to make it harder for “currency-free collectors” to pilfer their stock.  Even though the compact disks are slightly larger than the pocket of a pair of jeans, the disks are valuable enough that shrinkage is a real problem.  (see rule 2 above

Depending on the type of product you are selling, you may have to compromise between making the package large enough to make it harder to steal yet small enough to allow it to have an acceptable “footprint” when it comes to shelf space and disposal.



  1. No comments yet.
  1. No trackbacks yet.
You must be logged in to post a comment.