Shrinkage in Bars: An Age-old Problem in a Modern Environment

hard situation to think on

In 2012 there was an Internet commotion over a New York bar called The Drink Exchange, which served drinks according to their stock market value.

The idea has caught on and spread around the world, although not yet the UK. Behind the fun of punters having to time when they order drinks, and even risking drinking orange daquiris because of its relative affordability- there lies a serious note that the bar industry is catching up with modernity.

Unfortunately, stock market priced drinks are merely a silver lining in the waning bar industry. Every year there is an article highlighting the increasing number of pubs closing, the latest figure was 26 a week. Much of this decline is out of the manager and landlord’s control: that tiresome combination of economic austerity counterpoised by rising rent and beverage prices.

But there is one cost, which is the most tantalising- shrinkage. Shrinkage means the revenue a business loses through wastage or theft. From overpoured drinks, to miscalculated orders, to staff pilfering from the till- these mistakes all add up. Even though the impact has been minimised by EPOS systems and jigger measurements, shrinkage still accounts for 10-20% of a bar’s revenue loss. The reason this issue is so elusive is because it comes down to human error and behaviour, which is very tricky to prevent.

So until we get robot bartenders, shrinkage can never be entirely solved. But it can at least be reduced, by minimising the possibilities for human error. One of the greatest pitfalls in shrinkage is cash transactions. It’s an easy opportunity for staff and patrons alike to sneak some quid into their pocket. Also much of the revenue leaks come from miscalculated orders, especially on busy nights. Even though many bars use fob keys to calculate whether orders match up with sales, it is not so much solving the problem as passing it onto staff.

So the most obvious question is why are bars still using cash? Now with the increasing trends of orders being made and paid for on smartphones, staff no longer need to type in a single number, nor get confused over what to pour. Because when the order comes in, it is already paid for, and clearly written on the screen for them.

Getting rid of the cash step won’t solve the bar dilemma, but it will at least push the industry to a level of modernity where it can actually start addressing the major issues in serious way- as opposed to entering the Drink Exchange and wait for its boat to come in.

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