Few retail stores can claim immunity from shrinkage: Supplier fraud, employee theft and shoplifting erode profits in all types and sizes of stores. The Checkpoint Systems website reported shrink cost U.S. retailers 1.5 percent of sales in 2012, statistics gleaned from the 2012-2013 Global Retail Theft Barometer. As a small retailer, you can take inexpensive staffing, merchandising, inventory control and policy actions to stem these losses.
Enlist Your Staff
According to the Retail Customer Experience website, only 27 percent of shoplifters plan their crime in advance. You can thwart their temptation with solid customer service. That means scheduling enough employees to have floor coverage at all times. Require your employees to greet shoppers as they enter the building. Floor staff should make lingering or nervous customers aware of their presence and offer assistance. Get your salespeople and managers in the habit of walking throughout departments, especially along back walls. Showering attention on shoppers and monitoring shopping activity costs nothing extra and discourages thieves.
In addition to teaching sales associates how their alertness can prevent theft, your customer service training should prepare them how to react if theft occurs. They should never accuse a customer of taking merchandise or physically try to stop a thief. Instead, advise them to call mall security or the police. Specialty Retail Report.com also recommends associates give shoplifters an "out" by offering to ring their purchase or asking if they’re ready to check out.
A clean, well-organized and well-lit store sends potential shoplifters a message that details do not go unnoticed in your store. Picking up garments dropped on the floor, keeping fixtures neat and full and including regular fitting room checks to return unsold merchandise to the floor makes stealing harder for a shoplifter, according to the Crime Prevention Service for Business at Rutgers University.
Rethink Your Floorplan
Fixtures can increase a shoplifter's chance of success if their height and placement limit your staff's ability to watch the sales floor. Ideally, employees have a clear view down side aisles with no blind spots where theft can go unnoticed. How you display merchandise also can reduce your shrinkage. For example, secure expensive items in locked cases or with security cables, limit the number of items near exits and use areas near sales staff to display theft-prone products. Keeping shelves neat and facings full so associates notice missing merchandise, displaying one-half of a pair of shoes, earrings or speakers, instead of the whole pair, represent loss-prevention tips your visual merchandising specialists can apply.
Posting warning signs that your business prosecutes shoplifters acts as a deterrent, according to the North American Retail Hardware Association. Stockrooms should be locked when not in use. Depending on your store's vulnerability, you could invest in convex mirrors to eliminate blind corners, bell sensors to alert staff when someone enters the fitting room or special area of the store and security cameras. Tagging merchandise and installing electronic anti-theft tags on items signals to shoppers and employees that you don't tolerate theft.
Target Internal Theft
Most internal theft happens at the cash register in the form of return fraud, according to Matt Pillar, editor of Retail Solutions Online. Your cash-handling and register reconciliation policies should alert you to discrepancies: drawer shortages, missing checks, too many "no sale" transactions and returns without receipts. A rewards program for tips leading to an employee's apprehension or conviction keeps everyone on the payroll aware that their colleagues will report any suspicious activity.
Have a Vendor Policy
Vendors cause as much as 20 percent of shrinkage, according to estimates from the National Association of Convenience Stores published on the city of Jefferson, Mo., website. City officials recommend requiring packing slips for each delivery, on-the-spot checks of quantity ordered and received before any stock moves to the floor and double-checking all invoices. Other steps to prevent vendor fraud include never allowing a vendor to remove empty boxes or loiter in the building. Your vendor policy should cover payments, credit reconciliation and samples.
About the Author
Trudy Brunot began writing in 1992. Her work has appeared in "Quarterly," "Pennsylvania Health & You," "Constructor" and the "Tribune-Review" newspaper. Her domestic and international experience includes human resources, advertising, marketing, product and retail management positions. She holds a master's degree in international business administration from the University of South Carolina.
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Loss Prevention 101
The 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 throughErrors. 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 employee
These are only a few of the potential indicators that your location may have a loss prevention problem. To learn more please read ourBest Practices and White Papersor visit ourThought Leadership section.
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