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# [TRENCHES] Thursday, March 13, 2014 - Mixed Signals

LegionPerseus VeilRegistered User, Moderator, Penny Arcade Staff, Vanilla Staff vanilla
edited March 2014

## Math

Anonymous

I used to work at the major game/pawn/retailer shop, and I learned something interesting about the way they operate.  A metric quite common among retailers is the ‘shrink rate.’  I’m not sure how other stores calculate it, but at Gamestop it’s something like this:

(money made on stuff sold / (money lost on stuff (lost | stolen | handed out) *100)) = shrinkrate

Think of the ramifications of that.  If your store does well, you can give stuff away and it’s all gravy.  Given that every store loses track of a few things here and there, if your store stagnates, you obviously have thieves on your staff.

I worked as a ‘game adviser’ in a store in a mall that had been undergoing renovations for what seemed like years and there were two other much larger stores within about a mile radius.  We didn’t sell very much outside of Christmas.  I recall a dry spell where the weekly equation frequently read somewhere in the ballpark of (500/(50*100)). This would give us the rate of 10%.

The funny thing is what happens with this information.  The immediate assumption with a high shrink rate, is that someone on staff is stealing from the store.  It wasn’t too long before they brought in a regional inventory control manager to interrogate the staff, calling everyone’s character into question, and generally trying to weed out the thug.  However, the only people who weren’t clean, and/or attending the local Baptist university were the managers.

After scouring the staff, they decided the only thing worth mentioning was that the assistant manager (the only person who gave a shit) had used his discount card for customers, which he bought and paid for, to help make some sales.  Interestingly enough, since he was a pretty good salesman, the amount he wound up saving people was disproportionate to the store’s total volume.

They fired him.

I have a real job now, and I just went back a few weeks ago to visit. The store has been replaced by a local clothing retailer.

Geth on

## Posts

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Registered User regular
This just in, abusing discount systems is against the rules at all retailers. This also just in, shrink rate matters.

Also, ALSO, the reason it went out of business probably isn't because they fired the manager for abusing discounts, it's because it apparently had such shitty sales to begin with.

What is this I don't even.
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Registered User regular
According to that shrink formula, the assistant manager was just doing his part to keep shrink low.

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Registered User regular
Giving fraudulent discounts to customers is part of the fundamental definition of theft, which is a major part of shrink.

What is this I don't even.
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on my way to work in a suit and a tie Ahhhh...come on fucking guyRegistered User regular
edited March 2014
The assistant manager got fired for skeeving rewards points.
Also, since you have to "buy" a discount card, and he was giving away discounts, he was increasing shrink.

Front line retail clerks have no idea what sort of metrics corporate has at their disposal or cares about. The employee handbook "This is what shrink is" is simply a broad strokes explanation.

Deebaser on
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changed Registered User regular
I am not an accountant, but wouldn't that formula be more along the lines of loss/sales? Sales/(loss*100) seems volatile and backwards where higher rates are represented by increasingly tiny numbers.

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Registered User regular
I am not an accountant, but wouldn't that formula be more along the lines of loss/sales? Sales/(loss*100) seems volatile and backwards where higher rates are represented by increasingly tiny numbers.
Yeah, I think the formula is wrong. The shrink percentage should be the amount lost divided by the total. So it should be 50 / 500 = 10%, but if the loss was higher, the percentage would increase, while if the revenue increases, the percentage would decrease. I think the "* 100" was some fudging to get the example to work.

The formula was probably a bit more complex, since they seem to also calculate anticipated revenue vs actual revenue based on the items sold. So the discount card cut into their anticipated revenue. At most other stores, the loss from the discount card was probably made up by additional sales (people with the discount cards likely bought from the store more often) as well as the initial fee from the card.

And yes, the Assistant Manager was abusing the discount card. It could've been to his advantage if the card in question gave rewards based on amount purchased, so it might not've been a completely altruistic "save the customer money." The AM should've instead been pushing people to buy a discount card themselves, especially if they could save money by doing so on that purchase.

It's funny that the tale takes the pains to refer to an anonymous "major game/pawn/retailer shop" in the first sentence, then in sentence three just straight up says it was Gamestop.

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Registered User regular
edited March 2014
That formula makes no sense. Is a high shrink rate better? Because the less stuff you have stolen or lost, the higher your shrink rate is going to be.

Edit: It's also a little odd how the tale starts with the usual dance around the actual company name we know and love, then two sentences later just says "Gamestop."

Edit again: Or rather everything that marsilies already posted.

forty on
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Registered User regular
There's a shit ton of ways to calculate shrink, but honestly the way I'm most used to is just calculating the difference between inventory physically at the location and inventory on the books.

His story is kinda weird, because he obviously didn't fully understand what was going on. Sounds like they didn't bring in an outside property auditor until after some red flags went up, and that pretty much always results in discovering even more loss.

However, his formula makes sense if they weren't just calculating value of inventory, but actually measuring the profit margins on the inventory too. If all your expensive shit keeps disappearing and you only sell low margin items you've got problems.

What is this I don't even.
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Registered User regular
I wonder which character we know secretly knocked off rhymeblade to make a quick buck on casuals.

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Heaviside LayerRegistered User regular
Darkewolfe wrote: »
There's a shit ton of ways to calculate shrink, but honestly the way I'm most used to is just calculating the difference between inventory physically at the location and inventory on the books.

His story is kinda weird, because he obviously didn't fully understand what was going on. Sounds like they didn't bring in an outside property auditor until after some red flags went up, and that pretty much always results in discovering even more loss.

However, his formula makes sense if they weren't just calculating value of inventory, but actually measuring the profit margins on the inventory too. If all your expensive shit keeps disappearing and you only sell low margin items you've got problems.
And does Gamestop seriously count their entire inventory every week? Even if it's a small store, I have trouble believing that. As you said, this guy clearly only grasped part of the situation, so his writing in smugly just seems rather silly.

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Registered User regular
I like how the story is called Math but its math is fundamentally broken. How did this pass muster? It's clearly fake.

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Registered User regular
I wonder which character we know secretly knocked off rhymeblade to make a quick buck on casuals.

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Registered User regular
Gaslight wrote: »
I wonder which character we know secretly knocked off rhymeblade to make a quick buck on casuals.

Dno. I think Gwen would be too obvious, so I'm more inclined to suspect one of the weirdo devs.

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Registered User regular
Gaslight wrote: »
I wonder which character we know secretly knocked off rhymeblade to make a quick buck on casuals.

Dno. I think Gwen would be too obvious, so I'm more inclined to suspect one of the weirdo devs.

http://trenchescomic.com/comic/post/game-changer

It's pretty damn obvious It's Gwen. Too obvious? I guess that's a matter of opinion.

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Registered User regular
Gaslight wrote: »
Gaslight wrote: »
I wonder which character we know secretly knocked off rhymeblade to make a quick buck on casuals.

Dno. I think Gwen would be too obvious, so I'm more inclined to suspect one of the weirdo devs.

http://trenchescomic.com/comic/post/game-changer

It's pretty damn obvious It's Gwen. Too obvious? I guess that's a matter of opinion.

Hmm, forgot about that one. Guess it's that cutthroat b**** again.

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Registered User new member
... I'm pretty sure I was at the office recovering from an all-nighter (raiding or something) when I wrote this. And they didn't really post it 'till about two years after I submitted it, which was about another 2 years after it happened.

It's so pathetic I don't know weather to be flattered that they posted it, or embarrassed at how morbid it sounds.

Anyway, the formula was definitely fudged. The ONLY point I was trying to make with it was that I distinctly recall shrink being a function of sales such that the lower the store's volume, the higher the shrink rate.

I only found the employee firing ironic because, like I said, he was the only one at that point that really had his heart in the job. He left the office in tears where any of the rest of us would have likely enjoyed the vacation before we finished our degrees and started our careers. Less of a comment on GameStop in general, and more so of the regional management.