13,355 views | Oct 7, 2015, 07:07am
New Report Identi�es US Retailers Lose $60 Billion a Year, Employee Theft Top Concern
Retail I cover retail, customer service and all things to do with small biz.
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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