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New Report Identi�es US Retailers Lose $60 Billion a Year, Employee Theft Top Concern

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Nicole Leinbach-Reyhle Contributor i

A recent report from Retail Knowledge - producers of the largest risk and loss

prevention conference series in the world - recently identified that United States

retailers are losing $60 Billion a year to shrinkage, up from $57 Billion in 2014.

Additionally, this report - the US Retail Fraud Survey - identified employee theft

as the single biggest cause of loss to retailers.

The study represents 91 retailers with annual sales totaling $844.6 billion. While

not all merchants are represented here, this snapshot gives a strong portrait of

what retailers are up against. James Harris of Volumatic, the US Retail

Fraud Survey sponsor, underlined the value of the Survey, stating that he is

"confident that the outputs of this Survey will help the loss prevention

community benchmark themselves against their contemporaries and identify

opportunities to engage with their businesses, as well as each other, to win back

some of the multi-billion dollar hole in profits that is being created through

shrinkage.”

Preventing Theft

American retailers generally put losses owing to staff ahead of losses owing to

external shrink. This is the opposite of the situation in the UK,” commented

Paul Bessant of Retail Knowledge. “As economic conditions continue to be

tough for retailers and consumers alike, it is perhaps not surprising that

employee theft is such a big problem," Bessant further states.

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As revealed in this report, employee theft remains a top contributor to overall

shrinkage. Customers - or thieves, depending on who you look at it - also

contribute to this billion dollar issue, however. Bessant suggests that "the big

problem for retailers is that good salesmanship and modern store layout is the

equivalent of having a house sale. It is like opening your garage and front door to

total strangers and then sitting in your back yard and facing your neighbor's

fence."

Certainly not all sales associates are looking away when customers enter a store,

however the reality is that many consumers are left unattended, rarely greeted by

a store associate and often tend to themselves during their entire store visit.

Keeping this in mind, Bessant offers some tips to help merchants avoid theft and

limit their shrinkage.

In this March 24, 2009 photo, Brooke Zupnick of Gahanna, Ohio, unloads her grocery cart near the LaneHawk

loss prevention device at a Kroger store in Gahanna, Ohio. Stores are employing new measures, both seen

and unseen, to �ght back against rising theft problems during the recession. While retailers won't give away

all their security secrets, industry of�cials say stores are adding plainclothes patrols on their �oors and that

increasingly sophisticated video surveillance systems, some that allow a security expert to monitor stores

across the country, are becoming common. (AP Photo/Paul Vernon)

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1. Have an employee be responsible to greet every person who enters the

store, as well as make sure they make eye contact

2. Position the cash-wrap - also known as the check out area - in the front of

the store, allowing visibility to the entrance and exit

3. Identify high shrink items and place them sensibly within your store,

ideally demanding employee / customer engagement

4. Use loss prevention technology appropriate for your business

5. Check employees in and out of your store everyday, checking their

personal bags to help control potential loss

Additionally, Bessant recommends managing refunds, loyalty cards and

coupons like cash - noting that fraudsters often steal these, as well. Expanding on

this, the President and CEO of Sterling Payment Technologies Paul Hunter

suggests the following tips on what businesses can do to help reduce credit card

and debit card fraud:

Be sure to check that the customer’s signature on the receipt matches the

signature on the back of their card. This will verify that the cardholder is, in

fact, the card owner. If there is no signature on their card, ask for ID.

Additionally, ask for a customer’s ID if the amount of the transaction is larger

than your average transaction size. This policy has already been implemented

at many of our nation’s largest retailers. You should also implement payment

solutions that include 'point-to-point' encryption in addition to EMV. Point-

to-point encryption further reduces the possibility that card numbers can be

determined if a transaction request is intercepted. Finally, when a customer’s

card is processed through the card reader, make sure that last four digits of

the card number that print on the receipt match the last four digits embossed

Helping to Prevent Employee Fraud

According to the 27th Annual Retail Theft Survey conducted by Jack L. Hayes

International, a loss prevention and inventory shrinkage control consulting firm,

over 1.2 million shoplifters and dishonest employees were apprehended in 2014

by just 25 large retailers who recovered over $225 million from these thieves.

This was up 7.1% from 2013, with dishonest employees showing an increase of

1.7% from 2013. Another interesting point that was revealed in this study was

that on a per case average, dishonest employees steal over six times the amount

stolen by shoplifters.

While checking employees in and out of retail environments may help limit fraud,

this alone won't fix the problem. Often, employees work together to steal from

their employers and likewise, employees may have customers visit stores and give

them items they did not purchase as part of a theft plan. To help minimize

employee theft, consider the following tips:

1. Complete a background check prior to making any employee

hires. While someone may seem ideal to hire, perceptions aren't always

the reality. Using suggestions recommended from the U.S Small Business

Administration, possible background checks may include credit reports,

criminal record reports, school records and workers' compensation

records.

2. Follow through with at least three candidate references. You have

to assume if a potential employee gives you a reference, they are doing so

under the impression they will get a good referral. With this in mind, it's

important you have at least three references to connect with and gain

insight on your potential employee.

on the front of the card. Some POS systems will prompt the cashier to re-

enter those digits from the card to make sure they agree with the value

obtained from the card reader," shares Hunter.

3. Create a strong management environment. When retail

environments are led by strong managers, they are less likely to experience

theft. A strong manager will deliver trusted leadership that employees

respect while also setting professional boundaries and work expectations.

Holding one on one employee reviews at least quarterly also helps to create

a stronger retail environment, and regularly communicating to the entire

team of employees is essential in letting employees understand you are

well engaged and informed with what is going on in the business.

4. Control cash intake. While the majority of consumer purchases are

made with debit or credit cards, cash is still used in many environments

and can put businesses at a higher risk for theft. To help control your cash

intake, have more than one person managing this at the end of the day to

ensure it matches the register receipts. Ideally a manager will always be in

charge of this, however even a manager should have a second employee

confirming the totals match and are accounted for.

5. Be aware of new inventory received and accounted for. Often,

theft happens before items even hit the sales floor. Make sure that

inventory is properly checked in, accounted for and managed to ensure

theft is prevented... and whenever possible, have more than one person

oversee this.

There are countless ways to help prevent fraud among employees, although no

one way to guarantee it won't take place. If you're a business owner looking to

control theft, consider controlling your employees first.

Nicole Leinbach Reyhle is the Author of Retail 101: The Guide to Managing and

Marketing Your Retail Business, as well as the Founder of Retail Minded and the

Independent Retailer Conference.

In 2007 I founded Retail Minded, a publication and online destination

committed to helping independent retailers through news, education and

support. Additionally, I’m the Co-Founder of the Independent Retailer

Conference, which takes place at various retail events and trade... MORE

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