Effects of physical stock loss on the financial performance of retail enterprises

Abstract

Background: Small, medium and micro retail enterprises (SMMEs) in South Africa are regarded as having a high failure rate. The reason behind the failure can be ascribed to a wide variety of issues. Stock shrinkage is one of the challenges contributing towards the failure of businesses particularly if not safeguarded.Aim: The study aimed to investigate the effects of stock shrinkage as a cause of physical stock loss on the financial performance of retail SMMEs in the City of Tshwane.Setting: The sample of the study was drawn from retail SMME owners, managers and owner-managers.Method: A quantitative research approach in the form of a questionnaire was adopted and a non-probability, convenience sampling method was employed. Regression analysis was conducted using IBM SPSS (version 27) to test the hypotheses.Results: Stock spoilage and internal theft are the strongest predictors of profitability and sales volume loss.Conclusion: It is concluded that stock shrinkage as a cause of physical stock loss relates to the financial performance of retail SMMEs. However, not all physical stock loss variables carry the same weight in terms of their contribution to retail financial losses.Contribution: The study contributes to retail SMMEs and stock shrinkage literature by identifying the causes of stock shrinkage as a result of physical stock loss. It further sheds light on high predictor variables of physical stock loss which can threaten the financial sustainability of businesses.