Retail shrinkage is mainly associated with shoplifters, and certainly, shoplifting accounts for a large part of it, but in the United States, the bigger problem lies with employee theft. According to the Global Retail Theft Barometer study, dishonest employees account for a staggering 43% of lost revenue, more than shoplifting, vendor or supplier fraud, or non-crime losses. And while all types of retailers are affected by employee theft, discounters, supermarkets, apparel specialists, and drugstores tend to experience a higher percentage than others, adding up to about $42 billion lost each year!
Employee theft encompasses more than just taking merchandise from the sales floor or cash from the register. It can take the form of unauthorized discounts or refunds, consuming food inventory, falsified timekeeping, stolen customer lists, and credit card or check fraud. It even extends to smaller infractions, such as taking home office supplies, using office equipment for personal gain, or spending company time on personal business instead of work.
While employers want to trust their employees, the unfortunate truth is not all employees have an ingrained sense of loyalty and honesty. Often, the employee who steals will work for a company for several years before they start, and once they do, the theft continues for an average of three years before (and if) the employee is caught.
So how do you protect your company from this type of retail shrinkage? Be in tune with your employees. Some behaviors which may raise red flags include:
- Spending habits and a lifestyle not in line with their salary level
- Objections to changes in procedures, especially those related to finances or inventory
- A sudden, previously unseen willingness to take on additional work or handle issues, disguised as being strongly devoted and eager to help
- Working late or early hours, secluded or alone in the office
- Evidence of gambling, drugs, or alcohol abuse
Pinkerton, a leading risk management services company, offers some specific strategies to combat employee theft, including pre-hire screening tips and assessing the physical layout of your retail space. You can read their suggestions here. Pinkerton also recommends following as much of your standard hiring protocol as possible during the crunch of your seasonal hiring, as these part-time, temporary employees can be a higher risk for employee theft issues.
The loss prevention procedures you put in place to protect your merchandise from shoplifters aren’t necessarily effective in revealing internal theft. Take proactive steps to protect your business from retail shrinkage from employee theft!