Dealing With Store Theft

Inventory shrinkage is a big problem for retailers. According to the 2002 National Retail Security Survey, it cost U.S. retailers more than $31 billion, about 1.7 percent of total annual sales. Inventory shrinkage is caused by a combination of employee theft, shoplifting, administrative error, and vendor fraud. Total inventory shrinkage was down slightly (half a percent since 2000), but both employee theft (accounting for 48.5 percent of total losses) and shoplifting (31.7 percent) are on the rise. (Administrative error accounts for 15.3 percent, and vendor fraud 5.4 percent.)

While the survey analyzed results from large retail chains, the problems it highlights challenge retailers of all sizes. Preventing inventory shrinkage can be expensive and technologically challenging. But it can also be a simple matter of proper training and common sense practices.

There's a dizzying array of technological help available to monitor shoplifting. Sensor tags and ink tags are familiar devices in apparel stores, as are anti-theft barcode labels. There are even microwave frequency clothing tags. Visible sensors installed near the front door discourage shoplifters by their mere presence, and sound the alarm when they sense tags. (Dummy sensors are available to act as silent sentinels.) However, such systems cost money to install and maintain, and they occupy valuable floor space.

Most specialty retailers rely on simpler methods to deter theft: lockable display cases for valuable merchandise, and good old-fashioned people power. Two of the most effective ways to reduce shoplifting and employee theft losses are to provide good customer service and make sure your staff feels a high level of job satisfaction.

While most specialty retailers can't afford, and don't need, a full time security force, they can use their salespeople to help prevent shoplifting. But training is essential.

Chris E. McGoey, of McGoey Security Consulting, San Francisco and Los Angeles, points out that if employees don't handle it right, a store and its owner could end up in legal hot water.

If you decide that your store's policy will be "detention and arrest" of shoplifters, make sure you understand your local laws before you confront someone. Some states have "merchant statutes" that provide you with limited liability protection if you approach a suspected shoplifter in good faith. In jurisdictions that don't have the statute, you'll be making a citizen's arrest without any liability protection.

To establish probable cause that a person has left your store with goods they have not paid for, McGoey offers these steps:

1. Watch the shoplifter approach the merchandise.
2. Watch the shoplifter select the merchandise.
3. Watch the shoplifter conceal or carry away the merchandise.
4. Watch as the shoplifter fails to pay for the merchandise.
5. Approach the shoplifter outside of the store.
6. Detain only the person directly responsible for the theft.

If you've suffered heavy losses, you might want to consider having someone at the door to check that the cashier correctly charged for all items. You can do this only if the procedure is voluntary. A customer can refuse to have their bag checked and simply walk out. Train checkers to know that they cannot force anyone to submit to a bag search without cause.

But having your employees keep an eye out for shoplifters means that you may be missing a likely culprit. Unfortunately, statistics show that the average financial loss caused by a dishonest employee is more than $1,300, compared with the loss of about $200 caused by the average shoplifter.

One tool to use in stopping employee theft is your POS system, which can detect potential theft problems at the cash register and alert you right away. They can also be tied to video recorders to provide proof of who sold what to whom.

But probably the most effective way to deter employee theft is to make employees feel valued and develop a real sense of trust with them, according to Gifts & Dec columnist Carol L. Schroeder, who wrote about employee theft in the August 2001 issue. As she points out, a disgruntled employee is more likely to steal.

Besides paying attention to each employee (and your manager, if you have one) keep a regular check on your inventory levels. Do a physical check at least once a year, as well as tracking merchandise through your POS system.

If you suspect that an employee is stealing, you may have to set up surveillance, Schroeder notes. Once you're convinced that the employee is guilty of theft, you can choose dismissal or prosecution.

A "one strike and you're out" policy may be harsh, but it is the only way to prevent your shop from establishing a reputation as an easy place to steal.

Steal Me Blind! Shoplifting & Retail Theft ... And How To Stop It Without Getting Sued by R.W. Helena, Bluelight Publishing, $34.95.

"Savvy Staffing Solutions" by Carol L. Schroeder, Gifts & Decorative Accessories, August 2001, page 34.

A few more pointers for painless arrests include:

• Approach from the front
• Have at least one witness of the same sex present
• Have at least one more backup than the number of shoplifters
• Clearly identify yourself
• State the reason for the detention and ask for the item back
• Don't be afraid to immediately disengage and apologize if you make a mistake
• Listen for spontaneous utterances (i.e. "I forgot to pay for it")
• Closely escort the shoplifter to a private office
• Do not chase the shoplifter through the store
• Always be polite and professional even if the shoplifter is not
• Do not use excessive force
• Do not make threats or exchange insults
• Accommodate reasonable medical and handicap requests
• Process the arrest swiftly according to store policy
• Save, tag, and photograph the stolen merchandise as evidence
• Cooperate with the police and appear in court, if necessary