Best practices for combating retail fraud

In addition to preparing for the inherent security challenges that large crowds bring this Christmas shopping season, retailers also need to be on the lookout for con-artists and dishonest employees that will be looking to take advantage.

To examine how loss prevention managers can better identify and prevent retail fraud, SIW hosted a webinar on Tuesday featuring several industry experts including; Curtis Baillie, principal, Security Consulting Strategies, LLC; Liz Martinez, retail security analyst and author of book, "The Retail Manager’s Guide to crime and Loss Prevention"; and, Matt Powers, technical director of security solutions at Anixter.

While many fraudsters are still using tried and true methods of retail fraud such as making their own receipts, returning sealed items without the actual merchandise or attempting to get refunds on items that were never purchased, Baillie said that there are several new trends that are also starting to make an impact.

One of these new trends is the concept of “wardrobing,” which refers to people who purchase clothing or tools, use them for a period of time and then return them, essentially renting them for a period of time. According to the results of a recent survey conducted by the National Retail Federation, more than 61 percent of retailers believe they have fallen victim to this type of fraud thus far in 2011.

Among some of Baillie’s recommendations for detecting these and other types of retail scams include:

- Destroying receipts if customers do not want them
- Emptying trash containers frequently
- Checking a customer’s refund history
- Checking refunds against employee databases
- And, most importantly, providing good customer service

Another trend that Baillie said is on the rise is gift and credit card skimming. While this has traditionally been seen as an issue that mainly affects restaurants, gas stations and ATMs, Baillie said it’s becoming more prevalent in the retail sector.

"Check the credit card machines on a regular basis," said Baillie, who explained that the technology and information needed to conduct these scams are easily available on the Internet.

Despite that losses that retailers can incur from savvy scammers or shoplifters, Martinez said that the biggest risk stores face are internally in the form of dishonest employees. According to National Retail Security Survey, employee theft was responsible for 43 percent ($16.2 billion) of total losses reported in 2010.

Martinez said that employees today are more likely to steal cash than merchandise because not only is it convenient, but it also doesn’t have to be converted and is simple to cover up in many cases.

To prevent this, Martinez suggests that retailers run exception reports, conduct surprise drawer checks and pay attention to foreign objects in the drawer.

Another common issue being experienced by retailers is “sweethearting,” which is when employees give unauthorized price breaks to friends and family members. Martinez said this is commonly done by avoiding price scanners or by scanning a lower-priced item and then placing several in a bag.

Of course, one way in which retailers can combat these crimes is through the utilization of various security technologies.

According to Powers, more retailers are turning to point-of-sale systems integration as a way to fight fraud. This integration allows retailers to link transactions with video footage, perform exception reporting and pinpoint areas for process improvement. He added that the advent of network video technology has also had a big impact on the retail security.

"The video surveillance industry has made major advancements in the technology as it rapidly migrates to the IP network," he said.

Powers said that video also provides numerous benefits in retail environments outside of loss prevention including;

- The ability of business analysts to study customer behavior patterns
- Buyers being able to verify that the correct product is present and displayed properly
- Risk management personnel can investigate slip and fall claims
- And, district managers can view key areas in the store

Click here to listen to the entire webinar, which will be available after 1 p.m. EST on Dec. 7.