According to NRF, “shrink” cost retailers $44 billion last year, or 1.38 percent of total retail sales.
Employee theft has been an issue for clients I deal with and the best advice I can offer to help them mitigate it is: Reporting, reporting, reporting!
Don't assume theft is not happening to you. Employees and shoppers are sneaky.
The importance of reporting cannot be stressed enough. Retailers can easily get caught up in the day-to-day of running their business and, may mistakenly assume internal and external theft is not happening to them.
Employees and shoppers are becoming sneakier and better at finding ways to make expensive inventory walk out the door, unnoticed. Reporting is a must to stop ongoing theft and to deter future theft.
Reporting helps in a three ways:
- It raises awareness: If employees know their company is monitoring point-of-sale transactions closely, they are less likely to steal from you. When sales, refunds, transfers, purchase orders, punches and schedules are part of a regular auditing process, and when action is taken quickly when fraudulent activity is found, those with less-than-honorable intentions are bound to think twice.
One retailer used reporting to discover an employee was inadvertently leaving unsold product in their car.
- It unveils improvement opportunities: Reporting catches current ways theft is taking place, and it also reveals loopholes in the flows a company uses.
For example, one retailer started investigating why it was taking so long for their inventory to move between stores and found one of their employees had been throwing unsold product in the back seat of their car and forgetting them there! While this employee was genuinely not stealing form the business, the retailer put reporting processes and new policies in place to minimize the chances of that happening in the future.
- It produces effective training programs: When companies are armed with the right knowledge, they can put training pieces in place to empower employees to deal with external theft. For example, video surveillance combining point of sale reporting with footage of a retail space can uncover ways employees can deter future occurrences of theft by analyzing what took place during a theft situation. Some companies have found simply having someone at the front of the store to greet customers as they walk in and to check in with them a few minutes later, deters theft and, as an added bonus, it provides a great customer experience!
In another case, a retailer had video footage of a thief walking into their wireless retail store and approaching the lone sales representative. The thief was dressed with a wireless carrier’s t-shirt and claimed to be a part of that carrier’s corporate team, helping to set up a corporate store a few blocks away. He proceeded to tell the rep that they had orders to obtain all (ALL!) of the devices in the store to be used at the new corporate store.
The video footage revealed the rep’s eagerness to make a good impression to this corporate rep and helped take all the devices off the shelves in the store, cleaned out the safe in the back AND the rep was even so gracious as to help the thief load the devices into their car. Employees were taught, from that point forward, that carrier reps would never deal directly with a sales representative and that a district manager would be kept in the loop to initiate that kind of exchange.
Audio/video surveillance helped one retailer discover a recent hold-up was actually staged by an employee.
Another situation was caught on video where an employee staged a hold-up in the back room. The employee knew video footage was being taken, so a friend pretended to hold up the store. When the company reviewed the video footage, they watched the hold-up and found neither of the subjects were talking during the entire hold-up, yet the enactment made it seem like talking was taking place. It showed the robber “yelling” directions at the employee without actually making a sound and, miraculously, the employee understood as he hectically emptied out the safe and all the stock they had. The employee had no idea sound was included as part of the surveillance. Whoops!
Take-home message: The lesson here is that combining an in-depth audit-process with a proactive approach to theft will help a company develop better procedures and training programs to reduce shrinkage in the future.