The many faces of retail ‘shrink’
The vast majority of people don’t steal, but some do and this small minority finds retailers particularly temping targets – they have money and goods, with relatively easy access to both.
“Slick Willie” Sutton, the most prolific bank robber in American history said he targeted banks “because that’s where the money is.” Retailers should never lose sight of this perennial truth.
Even more than banks, every retail business, no matter how well run, suffers from asset leakage. In industry jargon this is known as ‘shrink’.
Retailers are exposed to shrinkage on many fronts. Thieves posing as honest members of the public can steal stock without breaking in and dishonest staff have access to both stock and money. Even a trustworthy supplier can short-ship or deliver incorrect/defective stock. Your delivery man could be a culprit too.
Stealing from a business can be as simple as restaurant staff secretly consuming food, or bartenders giving free drinks to their friends. This can be controlled to a point via strict audit and inventory controls, but this requires vigilance and hard work.
More sophisticated schemes include employees who design programs to continually steal over time. They tamper with security and computer equipment and learn the ‘blind spots’ in your stores and systems.
To counter such schemes, retailers must control access to equipment and software, as well as train cameras on vulnerable areas and even have cameras trained on cameras.
Best practice dictates that retailers should utilise systems that track merchandise from entry to exit, allowing it to be crosschecked against sales, disposal, personal use and charity. It’s also wise to ensure that multiple employees handle these processes.
If, after these checks, the merchandise still can’t be accounted for, the retailer should start investigating.
Control, surveillance and constant monitoring can be effective in policing merchandise, but these systems don’t actually prevent theft – they just slow it down.
To further reduce the instances of theft, a defined process to apprehend and prosecute violators should support the above practices. Prosecution sends a strong message to other employees engaged in stealing or considering it.
Tardiness and laziness also means theft
Employees can steal a retailer’s time too, not just stock or money. While few businesses refer to this as theft, ineffectual employees can cost you a fortune.
Of course, this doesn’t apply to all staff. Some individuals have passion and they don’t need to be motivated, but others require closer supervision. Therefore, you need solid time management and KPI systems in place. If monitored, most people will naturally apply themselves a bit more.
Protect your cash
Banks protect their cash well, but retailers lag badly in this area. This makes cash a retailer’s most exposed asset. Stealing from a cash register occurs frequently, particularly in stores with multiple departments where amounts can be run up and voided, driving auditors crazy. The cash register still balances, but the inventory doesn’t.
To minimise cash theft you need processes for tight money management, daily inventories and monitoring of registers for voids. In particular, avoid post-voids at all costs. If your system supports it, disable it.
Overcharging customers and pocketing the difference happens too, as does sliding. The latter requires customer collusion – the cashier allows the goods through but doesn’t register all the purchases.
The only defence here is an overhead security camera, ideally synchronised with your POS system.
Summing it up, retailers should deploy a four-pronged approach to the elimination of value leaks:
- Prevention – such as installing security systems at entrance/exit points, packing small items in large blister packs, installation of mirrors and arranging stock to eliminate blind spots.
- Monitoring – examples include surveillance cameras, good reporting and robust reconciliation systems.
- Detection – this requires analytical systems that can spot irregularities, based on statistics and Six Sigma principles rather than just numerical reconciliation.
- Deterrence – this means security patrols, warning signs, security calls on the shop floor, prosecution of offenders and even the mere existence of a Loss Prevention department.
The Retail Directions omni-channel Platform (merchandise management, logistics, POS, warehousing and eCommerce) operates fully integrated on a database-level. This level of control helps retailers detect theft, in effect acting as the deterrent. Relying on information highlighted by Retail Directions’ systems, a number of fraud cases have been detected, at least partially recovered, and successfully prosecuted.
Shrinkage in retail won’t go away, but by making prevention, monitoring, detection and deterrence a business priority such losses can be contained. Investing in developing solid processes and in retail-specific IT systems pays for itself by ensuring your valuable assets have the protection they need.