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How to Reduce Retail Shrinkage by Two Thirds? Concentrate on Shoplifters and Staff

15 minute read

The Company’s Staff
– Troublemakers Right Under Your Nose

You can be the best boss at the best shop, paying decent wages to your employees and giving them good employee discounts and believe that your employees aren’t stealing from you. Dream on! Of course, for the most part, you’re right – the majority of your employees are honest. But don’t be naïve. According to a 2017 survey conducted by Jack L. Hayes International, every thirty-fifth employee admitted to stealing from their employer. This conclusion was reached after analyzing data from 1.4 million employees from twenty-one large retail chains in the US.

It’s also best if you remember that your employees cause you nearly as much damage as shoplifters. And this isn’t an estimate but is backed by surveys. Some even believe that employees are a bigger problem. Australian Retailers Association estimates that 55% of shrinkage is caused by employee theft. Michael Wilkinson, senior consultant at Employsure describes the situation to as follows: “There are many different kinds of theft. Theft can mean forgetting to swipe a friend’s purchase or transferring thousands of dollars to your bank account.”

Huge affairs like the one where the management of the Dutch retail giant Royal Ahold’s subsidiary US Foodservice forged the company’s results, by adding a whopping $800 million, are extremely rare. Most employees will never get anywhere near that. But taking just one lipstick or bottle of beer doesn’t seem a huge sin to many. Retail economics professor Joshua Bamfield recalls his first encounter with employee theft in Shopping and Crime. He was working as a shop clerk and the employees would often gather around the freight elevators to have lunch. Since that was also where the shop stored bottles of Schloer (a popular health drink at the time), the employees would drink a bottle with their lunch. To avoid being detected, they would throw the bottles down the elevator shaft.

Bamfield points out that the situation met all three qualities of a classic theft:

  • A desirable goal – the expensive and tasty drink;
  • Motivated lawbreakers – young men having lunch;
  • An opportunity – since the products were unguarded, the chance of getting caught was slim.

If all three factors are met in any shop, it’s basically inviting the employees to commit theft.

The National Retail Security Survey conducted by Florida University in 2010 also rates the risk of employees theft as high. Actually, according to the survey, the risk of employee theft is much higher than the risk of shoplifting – it claims that 43% of all shrinkage is caused by employee theft. Another problem highlighted by the survey is that while the average shoplifter caused $381 worth of damage, the average employee theft causes $967 damage.



Red Flags to Look Out for

It’s difficult to know when to suspect your employees because not everybody steals. Richard Davis from global security camera firm A1 Security Cameras highlights that certain behavior might help you detect a dishonest employee. However, he warns against making any hasty conclusions. Suspicious behavior should prompt you to monitor the employees more closely but ignoring it altogether and letting your goods vanish would also be unwise.

  • The employee buys new expensive things – an expensive phone may be a gift but it may also be a sign of living beyond one’s abilities.
  • The employee prefers to work alone – he comes to or leaves work well before or after others.
  • An employee who claims to have worked more hours than they actually did is inherently dishonest – this might not be the only way they try to deceive you.
  • Friends visit too frequently and use the employee entrance. The goods are often left in a hiding place where they’ll be picked up by someone you wouldn’t even suspect of theft at first glance.
  • Reports of damaged goods are more frequent on some days than others – it’s wise to see who is working on those days.
  • The amount of cash in the register differs from that in the system. If this happens rarely, it’s most likely the cause of carelessness or a mistake. But if it happens repeatedly, you might want to start looking for a pattern.
  • Suspicious cars that repeatedly park or drive by the warehouses or the shop on certain days.


How To Effectively Reduce Employee Theft?

Keeping in mind how the employees stole the expensive drinks during lunch and threw the empty bottles into the elevator shaft, the golden rule is – do not tempt your employees!

Here are things to try:

  • Choose your employees carefully. Jack L. Hayes International analyzed 19,000 randomly selected pre-employment “honesty tests” and discovered that a fifth (19%) fell in the high-risk category. The higher risk was motivated by prior violations or the person’s understanding of honest or dishonest behavior.
  • Minimize the time an employee is left alone with money or goods. Employees must know that they are in camera view when they take out the trash. Some surveys suggest that up to 75% of retail employees have stolen something at least once. Don’t let them!
  • Distribute tasks clearly – who has access to cash and unscanned goods.
  • Have a clear and transparent gift card system to avoid theft and other fraud.
  • Regularly check employees as they are about to leave work. There is no single good solution but employees should not be allowed to feel that they are not being monitored if they have access to cash, stock or sensitive personal data.
  • Use software that can help you detect potential cashier fraud. For example, Erply’s software helps you monitor which employee concluded which transactions.
  • And last but not least, regularly find time to talk to employees. Show them that you care by asking for their input on how to improve working conditions.

Thank you!

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