Retail insights - Stifling internal theft

By Ross Densley

“The retail landscape is changing as loss prevention is fast becoming the last bastion for shrinkage”

As Britain and Europe drag themselves out of the recession mire, retailers have faced several financial issues that need to be addressed. Several high-profile media outlets have offered retail insights with headlines like 'High street freeze-out', 'Plunge in sales adds to retailers', and 'Retailers braced for horrible year' which suggests that making a profit during the last five years has been somewhat of a challenge.

Retailers have been forced to cut corners, run understaffed, and drop prices in an effort to stay competitive and retain customer loyalty. However, according to Doug Hargrove, Chief Marketing Officer at Torex, one activity which threatens to undermine retailers' efforts is slipping under the radar: internal losses.

The retail landscape is changing as loss prevention is fast becoming the last bastion for shrinkage. Until recently, it has been perceived as a luxury rather than necessity; the high cost of security and technology rendering it unavailable to all but the largest retailers. However, with technology prices falling and entry‐level systems being introduced, loss prevention is now receiving far more attention.

And the facts bear this out. Retail shrinkage currently accounts for almost 1.5 percent of retail turnover and half of this being attributable to human error or the dishonest activities of employees. Some retail studies suggest that one third of all thefts from businesses were by employees. And considering that in 2006, according to the British Retail Consortium's Retail Crime Survey, crime cost the retail industry £2.10 billion*, that's an enormous amount of money lost to internal fraud and theft.

Retail insights - shop floor internal theft

The truth of the matter is that employers would rather trust their employees than laden them with the finger of guilt, but with the recession meaning employee cut-backs the majority of shop-floors are sparser places, meaning those employees looking to make money and commit a crime are more likely to avoid detection.

One method for employees' is to try extracting small sums of money on several occasions, believing that a small sum will slip under the retailers anti-fraud radar. And with the recession causing more cash to be used on the shop floor, the result is more cash at POS, and for dishonest employees, the bigger temptation to pocket some change.

However, there are other theft techniques that mean keeping less cash in a till is not necessarily the best way to reduce POS theft. 'Sweet-hearting' is, by recent accounts, still an extremely prevalent form of internal theft; where an employee works in cahoots with a customer to steal from the shop floor. One example of this might be a cashier at POS only scanning certain items that go through the check-out. This technique is extremely popular and as the majority of retailers have several thousand transactions a week, is very difficult to keep a lid on.

Surveillance and loss prevention tools

This is where technology plays a huge part. Staff aren't numerous enough to big brother employees, and so surveillance cameras, originally, and traditionally used to deter and catch shop floor criminals, can now be utilised behind a check-out, uncovering criminal activity and providing concrete proof of it.

The good news is there are loss prevention tools available which can help retailers. With a fully regulated system in place, senior staff are not faced with the difficult situation of knowing money or stock is being unlawfully taken, but not being able to identify the culprit. Loss prevention tools can show results within a few days of monitoring and reporting, and will spot suspicious trends.

There are also workforce management tools available to retailers, with its prime objective being to optimise staffing costs and ensuring sufficient numbers of staff are in place at busy times within the store, and blatant crimes may otherwise go unnoticed.

Similarly, there are other standard ways to reduce internal theft, like scrutinising potential employees' credentials at the interview stage, having good document protection, having strong internal personnel policies, conducting inventory checks at irregular intervals, checking external rubbish bins at random times for pilfered goods that might have been placed in them for pick-up after the trash is taken out, understanding key control and not having duplicates, and establishing receiving procedures that specify where vendors are allowed to park and enter the business.

The reality is that internal theft is costing retailers millions of pounds a year, and although there is no sure fire way of eliminating it completely, having loss prevention in place and good workforce management tools are a good place to start.

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