Shoplifting might steal the limelight, but in the US, the cold hard reality is that employee theft accounts for almost half of all retail loss.
According to the latest Global Retail Theft Barometer, employee theft is the main contributor to retail shrink, accounting for 45 per cent of loss each year.
So why do employees steal and what can be done to combat the loss?
The trouble with employee theft is the hit is often higher than everyday shoplifting.
The New York Times notes a global study found dishonest employees averaged USD$1890 in theft, compared with USD$438 for shoplifters.
But it’s not just the financial cost, employee theft takes a very real emotional toll as well, as CNBC explains:
“Often, the employees who embezzle are trusted members of a company’s team…It can be incredibly devastating to find out they have been ripping you off.”
Why employees steal
While there are varied reasons why an employee may steal, there are often common themes and factors at play.
Motivations may include:
- Need: To support family or lifestyle
- Revenge: Bitterness about their situation or anger toward management, often emotionally driven.
- Thrills: The adrenaline rush brought on by the risk of getting caught (often there is no financial need to steal).
But opportunity also plays an important role. The Theft Barometer found the following factors contributed to employee theft:
- Weak pre-employment screening procedures
- Reduced associate supervision
- Increasing part-time workforce (especially during peak winters); and
- Easy sale of stolen merchandise.
Meanwhile, some store types are more prone to theft than others. Verticals witnessing the most employee theft were:
- non-grocery retailers (81% of the total shrinkage)
- department stores (59% of the total shrinkage); and
- supermarkets/grocery retailers (50% of the total shrinkage).
How employees steal
In many cases employee theft comes down to opportunity, meaning as much attention should be paid to internal security as to general shoplifting prevention strategies. Common methods that retailers report are:
Under ringing – In this scenario the cashier uses the Point of Sale to ring up an item at less than its listed price, collects the full amount and pockets the difference.
Product theft – This is just the straight theft of a product.
Skimming – An oldie, but still prevalent, skimming involves pocketing a small amount of money from the till in the hope it will go unnoticed or won’t matter when the till is counted at the close of day.
Sweet hearting – Sweet hearting can involve a series of strategies but sees employees fail to ring up or discount items for the benefit of friends.
Gift card theft – Typically difficult to detect, gift card theft involves an employee issuing fake refunds for gift cards that they keep. It also involves handing a customer a blank gift card while they keep the loaded one.
Refunds – In this case the cashier rings up a false refund and keeps the cash.
How to combat employee theft
Like all areas of loss prevention, tackling employee theft requires a multi-faceted approach. It is part technology and part education, but it starts with the employees you choose.
Employee screening – Ensure all new employees are effectively vetted and screened by conducting interviews, checking them on the internet and contacting previous employers along with referees.
Clear policy – Create a clear policy regarding employee theft and fraud. Educate your staff as to the internal controls used to prevent theft and the disciplinary implications. A strategy that encourages anonymous reporting of theft assists with this, along with educating staff about the signs and effects of theft.
The Point of Sale – The Point of Sale is where many cases of theft occur, so look to POS software which requires staff to log in with unique access codes so you can see who is at the register, when. Use reporting features to track gift card sales and examine all discounts and returns.
Use technology – There is a host of technology that allows greater visibility of staff and products. This includes smart locks that offer the convenience of a single type key which can be programmed to limit the access staff have to specific cabinets or their department. Importantly these keys can track which staff members access what cabinet, drawer or spider wrap and when they do it.
RFID allows the constant monitoring of products so management can understand what items are available at any point in time. This increases accuracy of stock monitoring which in the long run helps to reduce theft. When applied at the point of manufacture, RFID tags also offer an understanding of where exactly items are in the supply chain.
Monitoring – Staff monitoring, whether via CCTV or supervision acts to deter employees from theft. Monitoring can also involve regular locker and bag checks or employing security staff to watch the entire store.
The environment – The culture and environment of a retail outlet plays a huge role in the deterrence of theft. Foster a positive working environment where employees are treated fairly and with respect and there will be fewer or no incidents of stealing out of revenge.