The Partner I didn't know I Had: Theft in Retail

Don’t you just love the traffic in your store during the holiday season? It can get like a feeding frenzy at times. Shoppers everywhere who just can’t wait to give you their money. The atmosphere is electrified and everybody is loving it. In the perfect world, you’re making money head over heels. That winter vacation is getting paid for 2 months in advance and a hot new car is a signature away. Oh, I forgot that construction on the new designer kitchen is going to begin right after you’re back from your week in the Caribbean in late January. All this is going to cost a pretty penny, but you don’t worry about it. Your sales are great; your buying strategy has worked; and all is right with the world…until the NEW YEARS EVE INVENTORY. You finish the inventory and wonder how your inventory can be so far off. You know your sales figures are correct but your on-hand inventory is much lower than it could possibly be. “That can’t be right,” you say. “So let’s count again. Perhaps we missed some items in the warehouse.” But the second count is the same, minus or plus a couple of bucks. What happened? Well my friend, you might as well have left the door unlocked when the store was closed because your “silent partners”, otherwise known as thieves, stole you blind. Now, the question becomes, how are you ever going to pay for the vacation, the hot car, and the designer kitchen? All your profits were stolen while you weren’t looking.

This scenario happens much more often to retailers than you might think. Most retailers think that the bulk of retail theft comes from shoplifting. Shoplifters can be pretty stupid people and often are quite obvious. When I owned home electronics stores, a shoplifter came into one of my stores and put a $1000+ video camcorder under his jacket and proceeded to walk out the door. My store manager, who was rather portly and not very agile, yelled at the dummy to stop. Of course, the guy ran out the door and was pursued by two of my very loyal customers. My customers, in hot pursuit, chased this guy up a path in the back of the store and refused to give up until they got the camera back. In his frustration, he took the camera out of his coat and threw it at his pursuers. This only infuriated my customers even more, so the dummy takes off his coat and throws that at my customers. Oh, did I mention that he forgot to take his wallet out of his coat pocket? It contained his ID with his address. DAH!

Well, wouldn’t you agree that this guy didn’t have much going on upstairs? Unfortunately, the thieves who are making the most money from you are more intelligent and crafty. In a recent survey of 24 large retailers conducted by Jack L. Hayes International, Inc., it was found that 1 employee out of 26 was caught stealing. The key phrase here is “was caught”. How many more out of that 26 were stealing and were not caught? Just think of it. You provide your employees with a great place to work and some of them become your partner without you ever realizing it. The first time that happened to me, I was devastated. I couldn’t believe that a trusted employee would steal from me. But he did. One of the biggest differences between the shoplifter and my employee partner is that I knew how much the shoplifter stole from me. I didn’t have any idea how much the employee thief partner stole from me and how long he had been at it.

Now that everyone is paranoid and ready to have all of your employees arrested for suspicion of theft, what are a few things you can do to help lessen the profit leaks?

• CONDUCT PERIODIC AND RANDOM CYCLE COUNTS – Pick a different department on a random day each month and reconcile your inventory. Don’t let staff know when you are going to do this. This in itself may well help deter any theft from taking place.
• “SHOPLIFT PROOF” YOUR STORE AS MUCH AS POSSIBLE – Merchandise your store so items are not sitting close to an entrance where there is no security. Don’t put valuable merchandise in nooks and crannies that have an obstructed view. If you have a lot of hidden areas in your store, use mirrors and/or cameras that make it difficult for a shoplifter. Place a security system at all entrances and exits.
• CLOSELY MONITOR YOUR DRESSING ROOMS – Make sure all merchandise that goes in, comes out and is sold or goes back on the rack. If someone looks 20 pounds heavier when they come out of the dressing room, you probably have a thief.
• EDUCATE YOUR PERSONNEL – Train your personnel to be observant. Develop a store policy around shoplifting. Tell them what they can say to a suspect and what they can’t say. You can get into big trouble by saying the wrong thing.
• RANDOMLY BALANCE THE CASH TIL – First, never keep large amounts of cash in the drawer. It is tempting for a quick grab and run and also tempting for a dishonest employee. Check your closeout reports and look for any consistency in shortages or overages with the same employees.
• CHECK THE TRASH BEFORE IT GOES OUT THE BACK DOOR – Putting merchandise in trash bags and retrieving it later from the dumpster is a common way for employees to steal. Checking the trash is an unsavory task but you never know when you will find a treasure.
• DO A BACKGROUND CHECK ON NEW HIRES – Make sure to check references and require references from former employers. Why did they leave their last position? Most often we do not call references. That can lead to a big mistake.
• GIVE REWARDS TO EMPLOYEES WHO REPORT EMPLOYEE THEFT – Motivate your employees to inform you when someone is stealing from you. Unless you are unfortunate to hire a “crime ring”, most of your employees are honest people and don’t want to be associated with a thief.
• BONUS YOUR MANAGERS FOR LOWERING SHRINK – Provide an incentive to managers who consistently strive to lower shrink. Those managers who don’t lower shrink may, in fact, be your “silent partners”.
• INSTALL A SYSTEM THAT INTEGRATES VIDEO SURVEILLANCE AND POS TRANSACTIONAL ANALYSIS – This new technology will help you catch your thief much more quickly and provide you with invaluable evidence for prosecution and restitution. It will pay for itself in no time.
• DEVELOP A STRONG RETURN POLICY – According to an NRF survey conducted with 90 retailers, return fraud is expected to hit 9.6 BILLION this year. Thieves commonly steal merchandise and try to return it to your store for cash or merchandise. Insist on original receipts, original packaging, and tags. Inspect the receipts and tags to make sure they are yours. Thieves are getting very good at emulating your receipts and tags. Make sure you post that policy very clearly and put it on your receipts.

These are but a few preventative measures you can take to help you deal with shrink. But remember, at the same time, you need to maintain a friendly environment where personnel are motivated to give the customer the best shopping experience possible.

After you have put some of these measures into practice, come January 2007, you can reap the rewards and drive to work in that hot new car from your new designer kitchen after a wonderful carefree week in the Caribbean.