Strategies to Prevent Shoplifting and Employee Theft

by Nancy TankerIn partnership with the National Retail Federation and ADT Security, retail-loss expert Dr. Richard Hollinger of the University of Florida Department of Criminology, Law and Society, revealed the results of his latest annual National Retail Security Survey over the summer. Retailers in the 2008 annual survey results estimated a loss of $35 billion in sales the prior year due to the four major sources of shrink: vendor fraud, administrative errors, shoplifting and employee theft-the last two accounting for the vast majority of losses.

Thats down from the previous years survey findings, but theres no telling what shoplifters will be up to this holiday, so now is the time to take measures to protect your business.

Tips to prevent shoplifting

Loss experts agree that a crucial way to prevent shoplifting is to have well-trained and alert employees who how to spot a potential shoplifter. Employees need to watch for customers who:

Avoid eye contact

Appear nervous

Wander the store without buying

Leave the store and returns repeatedly

Linger in a location that employees have a hard time monitoring

Constantly keep an eye on store employees and other customers.

In addition to training your employees to spot shoplifters, general shoplifting-prevention techniques include:

Staying alert at all times.

Greeting all customers.

Asking lingering customers if they need help.

Knowing where shoplifting is most likely to occur in the location.

Using a log to share suspicions about shoplifters among employees.

Displaying signs that Shoplifters will be prosecuted.

When shoplifting is suspected, its crucial for your employees to know how to handle incidents. The Los Angeles Police Department recommends that retail employees:

Never directly accuse anyone of stealing (call security instead).

Give the person a chance to pay for the item they forgot to pay for by asking, Are you ready to pay for that? or Can I ring you up?

Never try to physically stop a shoplifter. Call security.

Cooperate fully with center security and the prosecutor if/when the time comes.

Strategies to reduce employee theft

Some specialty retailers say employee theft is a bigger threat to their bottom line than shoplifting. Experts agree that the best defense is a watchful eye. Try these strategies:

Stop by your store without warning. Make periodic (yet randomly timed) unannounced visits to each and every retail location.

Spot-check inventory/drawer. During unannounced visits, announce: Im just double-checking inventory numbers and doing a register check. Pick a few products and check physical inventory against inventory sheets/POS inventory figures. If possible, run a cash drawer reconciliation. Announce: Ill be back again soon to run through this again. This lets employees know management is keeping its eye on the ball.

Have an inventory-tracking system. Use a POS system that tracks inventory automatically or, at a minimum, use paper-based inventory-tracking sheets to send a signal to employees that inventory is indeed being monitored.

Check the z-tape. Check those z-tape numbers. If yesterdays z-tape was number 24 and todays is 27, what happened to 25 and 26?

Train employees. Provide all employees with training on theft-prevention, both shoplifting and employee theft. Discuss the ways the company is prepared to detect either.

Encourage anonymous tips. Publish a phone number employees can call to leave an anonymous message if they suspect a co-worker of stealing product or cash. If employees are aware their co-workers are watching and could report them, they will be less inclined to get sticky fingers.

Watch for employees with calculators and receipt books. Many retailers say that a sure sign of a problem is an employee who has a calculator next to the cash drawer, or a separate receipt book tucked into a drawer or pocket.

Check deposits. Dont just check if the deposit numbers match the sales figures. Also check that deposits are being made routinely and when expected (particularly easy to do through online banking). If deposits are typically made every day and then suddenly they are being made every-other day, find out why.

Check cash-to-credit purchase ratios. If the typical purchase ratio is 30 percent cash to 70 percent credit, and then suddenly the ratio is 10 to 90, its time to ask a few questions.

Watch the no-sales. Many retail owners know that the leading indicator of theft is a single piece of data on your x-tape: the no sale number. If a typical days no-sale tally is four, but every time a particular employee works the tally is 10, there may be a problem.

Of course, theres no way to completely protect yourself against shoplifting and employee theft, but if you make customers and employees aware that youre keeping a close eye on your business, experts say thats the first and most-critical step in shrinking your shrink this holiday season.

- See more at: http://specialtyretail.com/issue/2008/10/running-a-cart-or-kiosk/dealing-with-retail-theft/strategies_to_prevent_shoplifting_and_retail_theft/#sthash.CDrJ8pyD.dpuf

Five Inventory Management Techniques to Avoid Theft of Inventory

By Jagath on January 19, 2012

In a perfect world, there would be no need to worry about the possibility of inventory being stolen. Sadly, many businesses lose a pretty big chunk of change every year due to theft. It can be tough to know if inventory shrink is because of waste, breakage or theft. The first thing you should do is make sure your staff are required to record all waste (like offcuts, residuals etc.) and breakage (items that are literally broken in production, assembly or handling) to a supervisor. The supervisor should keep track of waste and breakage on a daily basis and deduct it from inventory either daily or weekly. This can also help the supervisor with remedial training or process improvements if there are patterns with certain staff or certain processes.

After you have identified waste and breakage, the rest of the shrink is likely due to theft. If youre losing money because a measurable portion of your inventory is being stolen, there are a few inventory management techniques you can employ. Remember depending on your business, inventory can disappear either through customer or employee misdeedsHere are five techniques to help you reduce loss of inventory by theft:

1. If you have a physical store, your inventory management efforts will need to include efforts to prevent shoplifting. If you notice that shoplifting is a problem, you may want to install security cameras and educate your employees about loss prevention and in-store inventory control. Even if you dont have a physical store you might want to use tracking methods such as cameras and time-clocks so that you know which employees are around the inventory at all times.

2. Make sure your employees know that you are carefully keeping track of your inventory with highly efficient inventory management techniques. Employee theft is far less likely if inventory systems are well-run and organized.

3. Only allow trained and trusted employees to edit data in your inventory management software. Its easy to change a few numbers in the inventory software so no one realizes products are gone. Many software systems require a unique logon and therefore updates to inventory can be tracked by user. Make sure employees do not share user ID or passwords. This will give you an ability to audit changes made to inventory numbers if you ever identify a problem.

4. On a related note, its a good idea to password protect your inventory tracking software and any other business software you use. You can then choose to only give the password to employees who deal directly with your inventory management or supply chain management. Again make the user ID and password unique to each individual that has access.

5. Store your inventory in a secure place. This may seem obvious, but where inventory is stored is sometimes overlooked. You should try to set up some kind of protocol with your employees to ensure that doors are always locked and alarms are always set. Only allow certain employees (either line supervisors or managers) to have access to the most expensive inventory items. That way they are accountable for those items. You can often utilize a cage within your warehouse for really important stuff or use locked cabinets in your retail store like you see in jewelry shops (and only give managers the keys!). Small steps like this can save you a fortune in the long run.

If you are using the right inventory management techniques, theres no need to worry about inventory theft. Just arm yourself with a highly organized inventory management system!

Criminal versus ControlEmployee Theft in RetailIn a market where brand recognition, market share and high competition have most businesses working overtime to reduce cost, there is little room for the losses caused by internal theft. Industry reports suggest that as much as 43% of all losses are caused by dishonest employees, totaling $16 billion annually in revenue loss. Obviously with so much at stake, an honest employee is a key element to business health - but is there a magic bullet? How can we tell if an employee is likely to engage in dishonest behavior?

Why Employees Steal: Criminal TheoriesThe prevailing explanation of crime is known as the Cultural Deviance Theory, which is a sociological study of deviant behavior, the recognized violation of cultural norms and the creation and enforcement of those norms. Unfortunately, this theory of criminality doesn't always apply in retail environments, and even our own experience with employee theft tells us that this classic model of crime and criminal behavior does not fit neatly into the categories describes by the Deviance Theory. In fact, this explanation creates more questions than answers. Of course all theft is criminal, but there is an inherent difference between someone who commits armed robbery and someone who simply steals merchandise. If, as the theory suggests, crime is the result of 'cultural forces,' then stores in crime-ridden neighborhoods should have higher losses than those in more affluent. And, if crime is the result of 'strain' to achieve material goods, theoretically, lower paid employees should steal more than those that are paid higher wages. So why are we continually surprised by an otherwise 'nice' employee's involvement in theft? It's obvious that the Cultural Deviance Theory does not fully answer all of the questions posed in the retail environment. Even if we accept the contention that "criminals commit crimes," it does nothing to help us explain the nature of the small number of employees that actually steal, nor how to identify the differences between the honest and dishonest employee. To compensate for these shortcomings, many theorists have placed white collar and retail crime into a separate category model; however, even this model identifies the catalyst for behavior as the socialization of the individual and unknown personal motives.

Criminal Versus ControlA new theory has been posed that may offer more insight into the trend of employee theft in retail environments. In Gottfredson's and Hirschi's "General Theory of Crime," (1990), it is suggested that the one factor common to all types of crime and deviant behavior are as a result of low self-control. It is argued that when the components of crime are carefully reviewed, we observe that it is a lack of control by the individual that results in engagement, regardless of any social or economic factors. If their model is valid, then it should be fairly easy to not only explain retail theft in terms of low self-control, but also to design an environment that minimizes the opportunity for those losses to occur.The authors explain that all types of crime have the same universal characteristics: It provides immediate gratification It is easy and simple It provides excitement There are no long-term benefits It requires little skill and planning It results in pain and discomfort for the victimThese characteristics appear appropriate to retail crime. For example, we know that the majority of employee dishonesty falls into the category of merchandise theft; i.e. pass-offs, merchandise in personal bags, or brought out with the trash. This is a relatively easy-to-commit crime that does not require much skill or planning. Even in cases of refund and credit card fraud, it is rare that we see any elaborate or new method of operation. Additionally, when one compares the long-term benefits of stealing to those of continued employment, it is clear that employee theft is not a successful endeavor - they are never going to get rich or retire from their activity.So how does low self-control fit into our environment? As explained by Gottfredson and Hirschi, like criminal acts, there are universal characteristics of a person with low self-control, including: No concern over the rights and privileges of others if they interfere with the individual's personal satisfaction Impulsive behavior Inability to form deep and persistent attachments Poor judgment and planning in attaining goals Apparent lack of anxiety or distress over social (group) maladjustment Tendency to project blame onto others Inability to take responsibility for failures Lack of dependability Tendency to create drama over trivial mattersA careful review of these characteristics provides greater understanding into retail crime behaviors. First, it makes sense, according to the "low self-control" theory, that the majority of employees would be honest. In order to maintain a job an employee needs to have a fairly stable level of self-control. They need to show up for work, do their job and perform to the company's acceptable level of standards. Secondly, in our own experience, we have seen that some of the stores with the lowest amount of loss and smallest number of employee theft cases are in fact located in the highest-risk locations. This concurs with the theories' contention that the characteristics involved in criminal and deviant behavior are not founded in social causes, but rather individual levels of control. Additionally, almost all associates are exposed to the same level of opportunity to steal, so it seems reasonable to conclude that the decision to steal is based on internal factor, rather than external.

Employee Theft: Deterrence and PreventionObviously if we accept this theory, then opportunity still plays a key role in theft. As we have established that employee theft is relatively an easy method that requires little skill or planning, we need to ensure that the level of difficulty for success is high. The best way to accomplish this is through consistent presence in all of your stores, as well as targeted training and awareness programs. Consistency in presence can be executed through several venues, such as monthly audits, store security visits, even a mystery shopping program, all of which communicate to associates at all levels that operations are being monitored continuously, thereby reducing the opportunity available to steal.Training and awareness also plays a key function in the reduction of opportunity for theft. Communicating your policies on operations and suspected/confirmed cases of theft, whether through training meetings, printed materials in all stores, and so on, acts as an effective deterrent for most associates with low self-control. More importantly, this model dictates that the best prevention and deterrence in employee theft starts with hiring the right employees. It may be appropriate to consider an applicants' previous demonstration of self-control to ensure a good fit into your business culture.Through the application and interview process, we can look for clues to levels of commitment and dependency (multiple job changes, corrective actions for being late, etc.,) and ask questions that better determine their level of impulsive behavior, ability to accept responsibility and sense of drama.Our experience already tells us that most dishonest employees are neither hardened nor career criminals. We also realize that the vast majority of our employees are honest and hardworking. However, by understanding the theory of 'low self-control' in relation to your associates, as well as applying deterrence measures in your policies and procedures, employee theft can be effectively reduced throughout your organization.

*ReferencesTheft statistics from the 2008 National Retail Security Survey (Dr. Hollinger, University of Florida)- Dr. Hollinger's survey finds that 90% of employees have never stolen from their employer.

Will You Fall Victim to Organized Retail Crime?A Question for the Small to Mid-size RetailerOrganized Retail Crime (ORC) has become one of the more widely discussed topics in the loss prevention community. In January 2006, President Bush signed H.R.3402, which among other provisions required the Attorney General and the FBI to create an ORC Task Force to support the efforts of the retail community in combating the increase in organized theft.Two retail support organizations, the National Retail Federation (NRF) and the Retail Industry Leader's Association (RILA), have developed a national database to allow retailers and law enforcement to track incidents, analyze possible patterns and help identify organized rings. The efforts of the NRF, RILA and individual retailers have helped to raise the level of support and commitment by the legislative and law enforcement communities. Even with increased support, the individual retailer is still on the front line and must see their efforts at prevention and protection as the first step in reducing organized retail crime.More Than Just ShopliftingORC is different than the traditional forms of shoplifting that most retailers encounter. Although the theft methods are the same, the scale, frequency, and losses of each incident are much greater. Unlike the thrill seeking teenager or the drug addict supporting a habit, organized retail crime is a network of well trained individuals whose sole purpose is to shoplift in large quantities for profit. As the name suggests, these shoplifters are more organized and tend to work in groups allowing them to blitz a store, distract associates and provide lookouts to assist in the crime. These ORC "gangs" rely on their experience, expertise and well planned execution to hit stores quickly, while removing as much merchandise as possible.The objective of an ORC network is to re-sell the stolen merchandise through fences, diverters and even wholesalers. Goods are often shipped overseas, resold to merchants who believe it is discount priced goods, or placed on black markets. Often the merchandise makes its way to online auction sites for sale to the general public. The reach of an ORC "gang" can be global, extending well beyond a single country's border.Who Are These People?Organized Retail Crime groups are created with a well established network of roles and responsibilities. Members come from various ethnic groups, age ranges and gender. In the United States, groups have been identified from South and Central America, Asia, Russia and North America. The central theme in ORC is that regardless of size or cultural difference, the groups are well networked, well trained and well equipped. Ongoing intelligence indicates that roles and responsibilities extend up and down the organizations from the actual thieves, to the organizers, fences, diverters and the sales personnel who get the merchandise back out to the market. While members are well trained and educated in their roles, knowledge and contact with other members is minimized, either by design or by nature, making it difficult for law enforcement to break up an entire ORC network.The Extent of the ProblemThe exact financial impact of organized retail crime within the retail community is still undetermined. We do know that an increased number of retailers have confirmed incidents of ORC. National news and television has highlighted only a fraction of these occurrences, but even these show hundreds of thousands of dollars worth of recovered goods. Various surveys and studies throughout the last five plus years have also shown alarming individual losses but with little movement to overall industry statistics. At first glance this contradiction seems to create a problem in any claims of increased ORC activity. Although difficult to place an industry-wide value on the costs of organized retail crime, the investigation results and shoplifting apprehension numbers support the contention that a growing problem exists.Many larger retailers, who have quantified large ORC losses, have developed specific loss prevention teams to combat ORC. These task forces travel the country tracking incidents, following leads and gathering intelligence in an attempt to apprehend ORC groups. Through a coordination of efforts with local, state and federal law enforcement, some of these task forces are making a difference within their retail organization.Will You Become a Victim?Answering this question is difficult when talking to an individual retail company. The majority of the known ORC incidents suggest that it is more prevalent in department stores and large specialty store environments; however this may be more a condition of our focus than actual occurrence. It seems more likely and prudent to assume that victimization depends more on retail business factors than just the square footage. The most important factors to consider include: Store Location Merchandise Type Resell Value (Street Value) Loss Prevention / Operational MeasuresThe geographical location of the retail establishment does play a role in it becoming an ORC target. Although store location alone does not mean that a retailer is susceptible to increased loss, various risk assessment analysis has proven that certain geographic retail locations have seen more incidents of crime, including retail crimes, than others. Merchandise Type and Resale (Street) Value is considered a primary factor in a retailer's target potential. ORC groups are much attuned to consumer demands and trends, and target those items with that they can turnover quickly. In addition to demand, thieves must think in terms of portability. A 55" flat-screen television may have high demand and high resale value; however it is often difficult for a shoplifter, organized or amateur, to walk out of the store carrying the television. Merchandise which is more portable to the thief is a larger target. Items often found to be in demand for ORC operators are trendy apparels, baby formula, razor blades and small electronics. Any merchandise that can be sold easily on the street or in various markets (black, overseas, wholesale) would be those of obvious choice for the ORC criminal. ORC networks and operators pick the targets and plan their operation well in advance. Learning the retail target's environment is a part of their regular planning. What do they look for? Various security measures in place (EAS, CCTV, and guards), employee awareness and customer service techniques, and operational procedures, such as how many employees work at given times, how employees service customers, etc. Retailers with fewer security measures and lack of operational controls, increase their chances of being viewed as an easy or profitable target by the ORC networks. How Do I Know That I am a Victim?Studies suggest that 1 in 11 Americans shoplift. Additionally, since shoplifting and larceny top the FBI crime report for crime frequency, it is fairly safe to assume that all retailers experience some degree of external theft. The extent of the incidents and its bottom line impact is dependent on the quality of loss prevention controls and measures used to deter shoplifting. Unfortunately, there appears no single or simple answer to whether or not a retailer is being victimized by an organized group.Knowing whether or not the loss of merchandise is from ORC or from what can be classified as "general shoplifting" can be difficult. The easiest or most direct determinant is to witness or apprehend a unified group who has stolen large quantities of your merchandise. That along with certain indicators of the perpetrators, such as quantities of other retailer's merchandise, information on the network, choice of targets, etc. will provide proof that a network is operating within your retail environment. Based on ORC practices, one could then assume that a single location is most likely not the only target.The best indicator is the tracking of inventory losses in specific items or SKU's. The ability to track losses at the SKU level during inventory periods will help determine if a specific item is being targeted. More effective and timely is the implementation of cycle counts, which is a proactive tool that allows you to track potential shortages as they occur, rather than awaiting less frequent inventory results. The benefit is the ability to identify issues, add deterrence factors and reactionary processes as quickly as possible, to avoid larger losses from sustained problems - ORC or otherwise.The Final DeterminationAs a small to mid size retailer, the potential for falling victim to ORC may be less than that of your larger retail partners. The best precaution is a holistic approach to shoplifting in general. Employee training, education and awareness, strong operational controls, development and testing of the on-the-floor customer service practices of your employees and for identified problem locations the allocation of physical security measures to raise the deterrence level. Organized Retail Crime may be more frequent or our awareness of the issue may have increased, either way it makes sense to stay informed and think proactively.Real Prevention Requires Real HelpFoster a Helping Attitude Among Your AssociatesLoss Prevention is as much a philosophy as it is a department. To reach shrink goals, a company must enlist the help of every associate. Belief that one person or a single department is solely responsible for loss control is no more valid than the belief that a company mission statement can ensure great customer service. Real prevention requires the real help of every associate. Established policy and strong operations may be the corner stone to loss prevention, but ultimately, culture creates the positive behaviors that make a difference. Creation of that culture is dependent on understanding why and when associates provide help.

Is Help on the Way?No single process can guarantee that associates will help reduce losses. However, we can draw on the research in social psychology to understand the factors that lead to assistance, and to design communication that creates the best environment to foster a "helping attitude." A determined and methodical approach to build a positive shrink reduction culture may not have guaranteed results, but will definitely create an environment where results are most likely to develop. This advice may seem counter intuitive to the business mind that prefers direct correlation; cause and effect, supply and demand and return on investment. The fact is, as we tend to focus on the number of apprehensions, audit compliance, and tighter operational controls, great awareness seldom receives credit for lower shrink results. However, consider why we became knowledgeable of dishonesty, how we created better compliance, and why associates actually followed our new policies. The answer: We asked and they decided to help.How Many 'Yes's' Do I Need?The Decision-Making Perspective in social psychology contends that an "individual decides to offer assistance and then takes action(1)." In this perspective, the individual actively participates in a process whereby they use social cues and rational evaluations to determine if they will assist. In short, the company presents its case and the individual judges the merits of the request based on the answers to four simple questions:1. Does someone need help? As simple as this seems it is the most vital trigger for gaining associate assistance. If the individual does not perceive a problem then they will not consider providing help.2. Am I responsible for helping? The associate may understand that a problem exists, but they only take action if they also believe they are responsible to help fix that problem.3. Is helping worthwhile? Every associate functions like a business enterprise. They conduct a cost-benefit analysis in the formulation of decisions. If the costs are too high, the benefits too low, or the process is too time-consuming or unpleasant, then the balance sheet works against receiving their assistance.4. Do I know how to help? Even if we score three "yes's," our efforts are meaningless and without clear direction. An associate may being willing and able to assist us, but have no idea what they should do.

Aware-a-size me!One of the easiest and most direct channels for communicating the desired behavior is through a clear and concise awareness program. We can think of such programs as "education," in part because that is the main purpose, but in truth, this is our best shot at an advertising campaign. Our customers have finite dollars to spend and we want at least a part of it, so we advertise, convince, and convey a very clear message - "spend your money here!" Our associates have finite resources of time and attention, so if we want them to "spend some of it here" then we also need to advertise, convince, and convey. Unlike the single purpose of the ad campaign, our awareness message must also elicit the four "yes's" needed to get the associates to "buy." It should ask for help, communicate an expectation that they should help, explain the benefits of helping (or the costs of not helping) and most importantly, give them the tools to help.The perfect awareness program meets three objectives; interesting, concise, and clear. Like a good ad campaign, we should have awareness information presented in a format that is appealing to our potential customer. An attractive presentation not only draws them in, but it demonstrates that the information is important enough to the organization to warrant its own place on the wall.If we expect our associates to read a monthly newsletter, then it is also important that we keep the information concise. The average person can read 250 words per minute and has a comprehension rate of about 60%. Newsletters should convey our message in a "one minute" format by maintaining a word count of 200 to 300 words.Since that one minute read will achieve an average of 60% comprehension, it is vital that we make the message as clear as possible. The rule of thumb is to keep it simple - Here is the issue, here is how you can recognize it, and here is how you can help. Fancy Posters Are No Substitute for a Good Corrective Action There is no doubt that punishment can be effective in correcting unwanted behavior. Receiving help, however, is about influencing a person to do what they otherwise could avoid. In every study related to influence, it is clear that coercion (the threat of punishment) is the least effective method because it requires constant surveillance. The associate may do what we want, but only as long as they are being watched. Coercion leads to "lip service" and secrecy, neither of which will assist us in our shortage reduction goals. A good awareness program explains the problem, asks for their help, explains the benefits, and shows them what to do. In doing so, the associate volunteers their efforts and are most likely to make their efforts known. This is the ideal situation that will continue, provided we reward their efforts through recognitionyes, the majority of associates do not want cash, they want a simple and sincere "thank you."Is Help on the Way? Part IIYour company can apprehend dishonest associates and customers everyday, you can have a spreadsheet filled with 100% audit scores, and you can send reams of policy manuals to your locations, but none of those things alone will help you achieve your shortage goals without the help of your associates.We need to investigate, we need to audit, and we need to write and enforce policy, but ultimately the real power to control loss lies in their hands. The true key to loss prevention is the associate's willingness not to engage in dishonest activity, their willingness to report those who do, their desire to help deter shoplifting, and their commitment to follow procedures that reduce exposure.Determining if you foster an environment for 'help' is as simple as taking an inventory of the company's actions and communication: Is loss prevention an active priority for our entire organization? Do our actions communicate that priority? Are we asking associates to help? Are we showing them how to help?How did you answer these questions? If the answer to any of these questions is, "No," then you may need to re-think how your company perceives loss prevention.

*References1. Latane & Darlay, 1970, and Scharts, 1977Loss Prevention 101The following information is provided to educate those unfamiliar with the concept of loss prevention across the retail industry. The information below is by no means all-inclusive and is provided solely as an introduction to loss prevention.For more detailed information and specific recommendations and support for your loss prevention needs, contact LP Innovations.(The term retail can be applied to any industry or segment, including food service or food retail)What is Loss Prevention?Loss Prevention is the concept of establishing policies, procedures and business practice to prevent the loss of inventory or monies in a retail environment. Developing a program around this concept will help you to reduce the opportunities that these losses can occur and more specifically, work to prevent the loss rather than solely be reactive to them after they occur.Why does a retailer need to understand loss prevention?When a retailer experiences a loss, they are losing direct, to the bottom line profitability. Lost inventory requires replenishment at a cost to the retailer and lost monies cannot be replaced. The cost of these losses goes direct to the bottom line of a retail balance sheet causing lost profits. Profits that could have been used for new inventory, new store openings, employee benefits, increased earnings or improved EBIDTA.Why do you need a loss prevention function?Like any other part of your business a loss prevention function or established program helps make the business better. You have business functions around sales, marketing, human resources and more - why wouldn't you have a business function around the protection of inventory and the prevention of losing it?The size of your loss prevention function, department or program depends on your business - the number of locations, what you are selling and the potential threats, risks and concerns facing your business. Having an established function that includes program elements and resources to establish, implement and monitor loss will make your business more profitable and less susceptible to certain losses.How do losses occur?Most losses occur in three categories; internal theft, external theft and through errors. Here are some brief descriptions of each category:Internal (Employee) Theft is the largest contributor to loss for most retailers, regardless of size or segment. Although some may wonder why employee theft would be the largest category of loss, hands down, every survey, study and comparison across segments has shown time and time again that those who steal from a business the most are employees.Employee theft occurs through many different methods. From simple merchandise theft to collusion with friends or other store employees, inventory losses by employees can easily deplete your profits (and the merchandise available for sale to customers). The point of sale (register) brings with it many other forms of employee theft. Simply removing money from the till to elaborate "conversion frauds" that include refund, void or discount thefts, point of sale theft can often cause a "double-dip effect" where you lose money and inventory simultaneously through a single incident.External Theft is often caused by shoplifting, break-ins, robberies or other acts by outside sources. Although it does not cause as much loss overall compared to internal theft, shoplifting and external theft most certain causes a substantial amount of loss annually to the retail industry. Controlling external theft requires a commitment to educating your employees on good customer service, awareness to the signs of a potential loss and how to best protect the store and inventory against external loss. This requires the establishment of procedures and training in areas such as; shoplifting prevention, robbery awareness, safety and how to handle various situations dealing with people. What security measurements you have in place within your retail location can also greatly assist you in your efforts against external loss (although not always).The last major area of caused loss in the retail environment is through Errors. Often considered paperwork errors, these mistakes can contribute upwards of over 15%-20% of a retailer's annual loss. Ironically, most of the errors seen in retail are employee-caused, thereby making a retailer's employee perhaps the highest contributor to the business loss every year!Errors can occur anywhere - from checking in shipments, to ringing on the register to transferring merchandise. These errors can include the inaccurate counting of merchandise to the improper discounting or accounting of a sale or tender. Simple mistakes caused over and over again have resulted in thousands of dollars lost to a single retail establishment.How do I know if I may have a loss prevention problem?Losses can be caused by many different reasons and through a variety of methods. How you know you may have a problem is to look for possible symptoms that the business is not being profitable. Here are some questions you can ask to see if you may have a loss prevention problem: Your cost of goods or food costs are increasing but your sales are staying the same or decreasing You notice empty containers, hangers or missing items throughout your store Employees are reporting shoplifting issues or concerns You have been the victim of a robbery over the past year (robbers often look for easy targets) You are losing inventory but no one mentions any shoplifting or theft events (possible employee theft) One employee reports shoplifting events but nobody else is witness to these events Sales are down consistently when a certain employee works Your cash drawer never balances and has small overages and shortages A certain employee has a high number of refunds, voids or no-sales and not the only employee authorized to handle these transactions Friends hanging around of asking for a certain employeeThese are only a few of the potential indicators that your location may have a loss prevention problem. To learn more please read our Best Practices and White Papers or visit our Thought Leadership section.