Saturday, November 14, 2009

How to avoid Shoplifting and Employee theft in RetailStore

India has done it again. We are ranked #1 for the second consecutive year. Well hold on Folks !!!! This rank is not something we can cheer about. India achieved the dubious distinction of topping the Global Retail Theft barometer yet again in 2009 recording the highest shrinkage percentage of 3.2%.

For all those from Non-Retail background wondering what does Shrinkage mean - It bunches Shoplifting, Employee Theft and Administrative errors. The shrinkage rate of 3.2% amounts to approximately Rs.7350 honest tax paid per family. The total loss to Retailers due to theft is estimated at about 2.6 Billion dollars.

In a country which spends only 0.19percent of total retail sales on Security systems and more than 90% of retail is comprised from the unorganized retail sector we should not be surprised if we top this chart yet again next year as well.

A recent program on TV was a shocking display of the proficiency of some of these shoplifters who dare their act right under the nose of the enthusiastic salestaff and CCTVs. More so because of the fact that these were ladies in Hyderabad tucking apparels from Malls and DVD players from an Electronic showroom under their sarees and walking past the security without an inch of guilt. The retailer realized this only when a weekly periodic check of inventory found that the DVD players had been missing and a check on CCTV footage revealed the astonishing vanishing act.Now if the DVDs can vanish imagine the plight of the mobilephones retailers and stationary and supermarket store owners who mainly sell miniature products in open racks.

Loss Prevention is the not so glamarous part of Retail. It is however extremely important element of the success equation. Theft or shrinkage call it what you will, is all lost in 100% pure bottom line profit. Loss Prevention can be categorised under three main headings.
1. Shoplifting
2. Employee theft
3. Administrative Errors

Prevention Mechanisms that most Retailers adopt to curtail Loss prevention in a store are simply by using a common sense approach. Lets look at some of them, so the next time you enter a Retail outlet near your neighbourhood you can guesstimate how vulnerable or prepared he is to prevent his losses.

1. Know what your inventory shrinkage/ loss figures are
Most Retailers use the gut feel approach as to what their shrink is and whether it is a problem in the store or not. Unfortunately when they find out it is one of the major problem areas which they will need to deal with. The elusive shrink figures can be calculated by comparing the actual physical count of all inventories with a book value figure. Book figures are obtained by keeping a perpetual inventory accounting system which can be manual or computerized
Shrinkage = Book Value Inventory - Actual Inventory on Hand
The calculation of shrinkage figures may be done afterhours everyday, weekly or fortnightly or under supervision from a person who is normally not from the same store.

2. Employee theft prevention
Employee theft means when an employee of your store ends up stealing the merchandise while on the job. However employee theft is also theft.........the elements of the crime are identical. Basic loss prevention steps to reduce employee theft could involve good procedures of hiring, training and supervision of employees and managers, procedures clearly defined, articulated  and implemented will reduce the opportunity, desire and motivation for employees to steal.

3. Having an Employee rewards system for reducing shrink
In order to push losses due to theft to their lowest possible levels it is necessary to gain the commitment of each and every employee. Loss prevention should be part of all job descriptions. Rewards for recovering goods from shoplifters and identifying fellow employees who are stealing act as a deterrent to possible dishonest employees who may think they will never get caught.

4. Employees checking
This is a hard one to implement. All employees must open up and show the contents of all bags including purses to a supervisor or security. No one is exempt from this policy including store managers and supervisors.

5. Reference Checks on employees
Unfortunately retailers have a tendancy to hir each other's thieves. Two things to check with past employers are the candidates start and finish dates. One will usually fudge these dates if they were dismissed from a previous job for dishonesty. Also try to speak to their immediate supervisor regarding work habits etc.

6. Garbage Disposal
Again trying to restrict all methods of stealing usually keeps everyone honest. Putting merchandise in with the garbage is one of the oldest tricks in the book. Once out at the garbage bin the dishonest employee has an opportunity to hide the stolen stock so they can pick it up later. Having a second party check all garbage before it leaves and using clear transparent bags can further reduce this risk.

7. Staff Purchase program
A generous staff discount off the retail selling price especially for retailers who average a 50% markup can compensate the employee theft habits. This can also be a good program to eliminate some of the dead stock which may not be sold to customers inspite of all the store promotions

8. Store design to minimize shoplifting opportunities
Blind spots, cash counter placement and merchandise displays must be such that it is impossible for a customer to be in the store without being seen by the sales staff. Word travels fast if your store is easy to steal from. Stores with an unobstructed clear view from the outside will again create doubts in the shoplifter's mind

9. Securtiy Systems
A centrally monitored security system can reduce rates substantially plus give reports as to who was in the store and at what time. Security mirrors help eliminate blind spots and security cameras can persuade a would be thief to move on to an easy territory.

10. Alternate clothing hanger directions
This is mainly applicable to all the high street fashion retailers who use circular display fixtures outside the stores and directly accessible to the street. Shoplifters can steal a tremendous amount of clothing as they can carry just by grabbing the hangers and run out before a store staff can react. A simple way to thwart this is to alternate the direction of each hanger on display especially near the store exit. This makes it almost impossible to take an entire armful of clothing off a circular rack at once and makes it difficult on a tree rack.

11. Take receipts for all Returns
Many shoplifters steal with the express intent of returning the merchandise to the store, the same or another branch for a cash refund. This can be addressed by requiring a purchase receipt for all returns. This creates some conflict however with the interest in delivering quality customer service.

12. Lockup shoplifter attractive merchandise
As a general rule the smaller and more valuable item is the more attractive is to a shoplifter, particularly to those who steal with intent to either sell their merchandise or return for a refund. Keeping small expensive items behind the counter or locked in a display case will reduce the risk from shoplifters. Obviously the legitimate customer will understand this as a necessary evil and mostly wont object. Shoplifters will go elsewhere.

13. Smart Tags - EAS
Electronic Article Surveillance tags is a system in which merchandise has a small tag aaffixed to it which is either removed or deactivated when the item is purchased. It nor removed it triggers an alarm as it passes through sensors near the store exit. Though these systems are expensive they are highly effective especially in places with high footfalls and irrespective of any security systems shoplifters will try to hoodwink the storestaff. These tags should be hidden beneath the labels of apparels, or on an internal page or wrapper of a book or magazine. It the tag cant be hidden it could be made less noticeable by aligning it with the physical aspects or graphic design of packaging.

14. Signage
Posting the correct signs around your store can deter many shoplifters. You can post the classic sign that says "SMILE - YOU ARE ON CANDID CAMERA" even if your store does not use CCTV cameras.

15. Montior your Fitting rooms
Do not let customers enter and exit your fitting rooms without encountering your staff as this is an ideal place to conceal merchandise. If shoplifters can get merchandise into the fitting room they have complete privacy and even a mirror to guage how nicely the merchandise is concealed. Make sure your fitting room does not have any place to discard labels, packing materials and price tags

16. Prosecute all thieves
Call the police on every shoplifter you catch. No exceptions. In the shoplifter's mind, if you dont call the police they win and will continue to hit your store over and over.

17. Exceptional Customer Service
This is far and away the single most effective thing you can do to deter shoplifting. By knowing where your customers are, offering your assistance and anticipating their needs you can virtually eliminate shoplifting.

Lets hope the Indian Retailers implement most of these effective and inexpensive steps to reduce their losses and not make India top the Retail theft barometer again next year.

Please click "COMMENTS" to post your views on how you feel these simple measures can reduce retail theft. 

You may also express your "REACTIONS" by rating this post

ArunKumar Arunachalaiah


  1. This is nice one and gives insight to prevent theft in store.
    Also if you can give some light on warehouse theft prevention.
    Mukesh jain

  2. Dear Mr Arun,
    Well thought and written. If the retailers learn from this, I am sure half their shrinkage would be safeguarded. Would appreciate if you could share your contact details.


  3. Hi Mr. Arun,
    Very well written and useful article.. Would love to connect and explore Business potential.

  4. This post is very comprehensive, nice work. This has lots of value for small business owners like me. I am also considering the use of appropriate
    loss prevention devices to help out with the shrinkage problem. Thanks for reminding me also about the trash bag technique. I have never checked it ever since.

  5. Thanks all of you for your excellent comments

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  9. Quality CCTV Cameras and how to properly use it is what these business owners need to protect their business from shop lifters. If only they could assign a person to monitor these cctv cameras the theft can be prevented. If not, then through these surveillance systems I'm sure the footage that they will provide can be a form of evidence against a crime.

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