When it comes to insider theft and employee dishonesty, the news is not good for the nation’s retailers. At least that is what Mark Doyle, president of Jack L. Hayes International, one of the leading loss prevention and inventory shrink control consulting firms in the world, confides as the group announced the results from their 29th Annual Retail Theft Survey this week.
The 23 large retailers who were surveyed comprise 16,038 stores across the country with over $370 billion in sales in 2016 and they reported 438,000 incidents of shoplifting and employee theft where suspects were apprehended. A staggering $120 million was recovered by retailers from these thieves.
“The five-year trend shows a continued increase in employee theft in both apprehensions and recovery dollars. This past year is the first decline, which was very minimal, in both shoplifting apprehensions and recovery dollars. In four of the past five years both shoplifting and employee theft apprehensions and recovery dollars have increased, and in many cases, this is with a reduced loss prevention/asset protection staff. The losses are real and the theft problem is only getting worst,” says Doyle.
Doyle adds that dishonest employee apprehensions increased almost 10 percent in 2016, with the dollars recovered from these dishonest employees up nearly the same amount (9.3 percent).
“While shoplifting apprehensions and the dollars recovered from these shoplifters decreased ever so slightly, 0.2 percent and 0.9 percent respectively,” says Doyle, “The seriousness of retail theft is a much greater problem than most customers realize. These theft losses are stealing profits from retailers’ bottom-line, which results in consumers having to pay higher prices for goods.”
While the drop in actual shoplifting was minuscule from 2015 to 2016, the rate of employee theft has increased dramatically. There were 53,786 dishonest employees apprehended in 2016, up 9.9 percent from 2015, translating to one in every 27 employees being apprehended for theft from their employer in 2016 (based on over four million employees). This was the ninth increase in employee theft apprehensions in the past 10 years. There was also over $42 million recovered from employee apprehensions in 2016, up 9.3 percent from 2015.
According to the annual report, employee theft is perceived by many to be the most severe problem facing the industry today. Theft and abuse in companies is often thought of as being isolated acts, which in themselves cost an organization little. Unfortunately, this is untrue, as is the perception that most employees are caught stealing inexpensive items such as “pens, pencils, and paperclips” from their employers.
Hayes International says that over the years it has witnessed a steady and significant rise in this serious problem, pointing out that each year thousands of employees are caught stealing from their employers and co-workers. Furthermore, the retail theft studies also reflect that this group of thieves is being caught stealing far more than a few insignificant supplies. The value of merchandise stolen by store employees in 2016 averaged $787.42. Another interesting fact highlighted in the survey is its review of job applicant admissions where close to 20 percent of employees apprehended for store theft were deemed “high risk” when hired.
“There are a variety of reasons why internal theft cases and dollar recoveries from those cases were up almost 10 percent each. There has been some increased focus on internal cases; enhanced POS exception reporting systems has resulted in better and quicker identification of dishonest employees, and with fewer employees on staff and less supervision dishonest employees have more opportunities to commit theft,” points out Doyle.
He adds that there are some basic best practices that can be used to deter and combat internal theft. They include:
- Thorough pre-employment screening processes – do not hire the “bad apple.” Money spent up front to identify quality employees will result in savings from reduced turnover and losses.
- Use a quality POS exception- based reporting system to quickly identify possible fraudulent transactions at the point-of-sale.
- Ensure consistent compliance to company P&P by conducting unannounced loss prevention/shrink audits on a regular basis.
- Invest in loss prevention/shrink training and awareness for all associates, with a reward program for employees who report dishonest activities.
Yet as great a problem as internal theft presents to today’s loss prevention professional, the survey says that make no mistake about it, shoplifting and shrink are the scourge of the retail industry. The stats are frightening. Total retail losses are approximately $45.2 billion annually (based on the NRF/University of Florida's 2016 National Retail Security Survey). Shoplifting is conservatively estimated to account for 30- to-40 percent of total retail shrink/losses (both the NRF/University of Florida and Hayes International surveys), and the average shoplifting case for all types of retail is approximately $50.00 (based upon data taken from various surveys).
“Shrink rates are averaging around 1.38 of sales (at retail), per the 2016 NRSS (National Retail Security Survey). Shrink/losses come right off the retailer’s bottom-line profits. High shrink losses have put some companies out of business, made others close stores, and many others cut back staffing,” Doyle says. “These losses are typically passed along to the consumer in the form of higher prices. Many companies have found that it is easier to become more profitable by reducing shrink than by increasing sales. In these tough economic times, sales increases are very hard to come by for many retailers; however, a reduction of just a couple tenths of one percent of shrink will add nicely to a retailer’s bottom-line profits.”
Doyle adds that this is the first time in several years shoplifting apprehensions and recovery dollars have not increased from the previous year. However, shoplifting continues to grow with thieves getting more brazen and confrontational. Some of the items Doyle and his organization recommend to help prevent/reduce shoplifting include:
- Ensuring good customer service. The best deterrent to shoplifting is good old customer service, as shoplifting generally want and need privacy to commit their theft, so take it away from them with great customer service.
- Reduce "blind spots" on the sales floor to create better sight lines so employees can easily view high value and highly pilferable items.
- Train employees on the characteristics of shoplifters (what to look for to identify possible shoplifters) and how to respond to a possible shoplifter.
- Limit quantities of high value and highly pilferable items openly displayed on the sales floor to reduce losing large quantities of these items to shoplifters.
- Use technology (EAS, CCTV, Mdse alarms, Ink/Dye tags, Keeper boxes, etc.) to stop or slow down shoplifters. Remember, this technology is only helpful if it is managed properly.
About the Author:
Steve Lasky is the Editorial Director of SouthComm Security Media, which includes print publications Security Technology Executive, Security Dealer & Integrator, Locksmith Ledger Int’l and the world’s top security web portal SecurityInfoWatch.com. He is a 30-year veteran of the security industry and a 26-year member of ASIS.