LOSS PREVENTION - SHRINKAGE IN RETAIL.....DEMYSTIFIED
What is loss prevention & shrinkage?
Loss prevention is concerned with the disappearance of merchandise and currency. Most retail establishments take a physical inventory annually, while some do it semiannually. When the count is completed, the
Difference between the actual inventory on hand and what it should be according to purchase and sales records is called shrinkage.
What are the causes of inventory shrinkage?
1) Shoplifting,
2) Employee theft,
3) Vendor fraud and
4) Administrative error
In the US, the top 120 retailers lose 1.5 to 2.0 percent of their total annual sales to inventory shrinkage on average.Whole retail store chains have gone out of business due to their inability to control retail theft losses.And worse yet, the cost of these losses is passed on to the consumer.In India, inventory shrinkage is a also reality, where large organized retailers may lose between 1-2.5 percent annual sales.
Source of Inventory Shrinkage
% of Loss*
• Employee Theft 48.5%
• Shoplifting 31.7%
• Administrative Error 15.3%
• Vendor Fraud 5.5%
Source: National Retail Security Survey, November 2002
What is shoplifting?
Shoplifting is a crime and occurs when someone steals merchandise offered for sale in a retail store. Shoplifting most often occurs by concealing merchandise in a purse, pocket, or bag, but can occur by a variety of methods.
Shoplifter Profile
1. Amateurs. Amateur shoplifters can be highly skilled, and some steal almost every day, but don't do it to make a living.
2. Professionals: People who make their living by stealing from retail stores. Professional shoplifters often are highly skilled and even organized in gangs. The crude professionals sometimes use force and fear much like gang intimidation and often commit grab-and-run thefts.
3. Juveniles: young persons who may be misled and do not know better.
4. Kleptomaniacs: These are mentally ill individuals who may be compulsively shop lifting and need help and treatment to overcome this problem.
SHOPLIFTING METHODS
1. Merchandise is concealed in boxes, bags or purses.
2. Merchandise is concealed in clothing. Professionals may wear garments fitted with large pockets or hooks. Oversized garments may be worn to afford easy concealment.
3. Stolen garments are worn in plain sight and out of the store.
4. Merchandise is carried between thighs and hidden by long skirt or overcoat.
SHOPLIFTING METHODS
5. Professionals wrap garments around the legs and tuck them into tops of socks.
6. Small articles may be carried out hidden in the palm of the hand.
7. Fitting Room Theft: Many items are concealed on the person of the customer when the customer is ostensibly trying on garments in the trial/fitting room.
8. Some thieves snatch articles and run out of the store. They may also attempt to hold up customers and sales staff inside the store by displaying a pistol/weapons and make away with articles/cash
INDICATIONS OF POSSIBLE
SHOPLIFTING
1. People wearing overcoats out of season, or raincoats on a clear day.
2. People carrying boxes, bags, or umbrellas, which could be used to conceal merchandise.
3. Nervous-looking people who are constantly touching the backs of their heads, tugging at sleeves, or adjusting socks.
4. Exceptionally fussy people who cannot seem to make up their minds about a purchase, or do not appear interested in purchasing an article that they have been examining.
INDICATIONS OF POSSIBLE SHOPLIFTING
5. People who walk around and constantly keep one hand in a pocket.
6. People who come back to the same area of a store several times.
7. People who are busy looking about, rather than at merchandise.
8. People who appear to be nervous.
9. People who walk into stockrooms or behind counters and have no business in such places.
10. Men who carry shopping bags.
Shoplifting Prevention
1. Plain-clothes floor detectives to observe customers as they shop.
2. Many shoplifters are detained and arrested for their indiscretions.
3. Stores use video surveillance cameras and electronic article surveillance (EAS) devices attached to their products that cause alarms to go off if not deactivated by the cashier.
4. Retailers place expensive and high theft items like small leather items, perfume, cosmetics, tools, liquor, or cigarettes in locked enclosures.
5. Cables or hanger locks that require the assistance of a sales associate to unlock the expensive item of clothing before you can inspect it.
6.Point-of-sale data mining software solutions that detect potential theft problems at the cash register and alert appropriate personnel in realtime.
7.Source tagging programs where tiny anti-theft labels about the size of a paper clip are placed inside an actual product or product package, effectively hiding it from view.
8. Self-alarming anti-theft tags that broadcast an audible alarm throughout the store when a shoplifter attempts to improperly remove it from merchandise.
9. Uniformed Security Guards as a deterrent
10. Using Sales Staff Involvement: Training to spot shop lifters and
taught the action to take to prevent the loss of merchandise. Incentive programs to encourages interest and participation in loss prevention.
Shoplifter Detention
• If caught, a retailer may detain the consumer and attempt to recover the items. The practice of physically detaining and arresting shoplifters is not without risk.
• May make the first contact with the shoplifter at the exit.
• The store detective should attempt to keep the apprehension as quiet as possible, without disturbing other shoppers or of creating a physical confrontation.
• The shoplifter may attempt to run, may assault the employee, or may even pull a weapon. The training of the security staff is the key to ensure proper action in accordance with developing circumstances
Shoplifter Detention
• When guards are posted at or near exits, they should assist in apprehensions if requested.
• Normally, the suspect will come along quietly when asked.
• If the detective has made proper observations, the recovery of stolen articles should be uncomplicated.
• A retailer may make a choice at this stage to call in the local police and press charges further.
Employee Theft:
A large part of inventory shrinkage and retailer loss in attributed to employee behavior:
1.Cash Register, Cash Handling and Bookkeeping Theft
2. Shortchanging and Refund Fraud
3. Stock Room Theft
4. Employees colluding with customers who shoplift, with the assistance of employees
PREVENTION OF MERCHANDISE THEFT BY
EMPLOYEES:
• Pre –employment screening
• Background checks and reference from former employers.
• Separate Employee Entrances with a security person posted there, and the right to frisk and even search may be reserved by a company.
• Garbage Inspection
• Stockrooms security and restricted entry
PREVENTION OF MERCHANDISE
THEFT BY EMPLOYEES:
• Receiving and Shipping:High security at this point and Test counts can be done randomly as a security measure.
• Warehouse security: Propoer procedures at receiving platforms and shipping platforms, cargo documents and purchase orders should be matched, so that proper bookkeeping is ensured.
• Theft of cash: track cashiers’ performances, spot checks of the cashier funds during the day, “Integrity Shopping” checks/ “Honesty shopping”
• Money Rooms: A special area for handling and storing cash, well constructed and burglar resistant.With convenient alarms and holdup buttons
• Refunding policy: a well laid out policy for authentication of merchandise and return of money to the customer. Procedures must be established to constantly monitor payouts against related documents and merchandise.
• Strict Policies for dealing with employees caught for theft
CREDIT CARDS FRAUD:
• Losses due to acceptance of lost or stolen credit cards are on the increase. Suggested procedures which help cut such losses are:
• Examine card for authenticity; expiration date. Imprinted name and signature must match.
• Use terminal or telephone to obtain authorization.
• Follow instructions according to code. If "hot card," confiscate if possible. If above floor limit, may need additional ID.
• Be aware that lost or stolen cards issued by out-of-state banks experience unusual time lag in appearing on "hot list".
• Examine ID carefully; compare signatures.
• Be wary of customers who appear unconcerned about price of merchandise.
• Watch out for customers in a hurry, particularly at closing time.
Tips for the Cash Till
• Know the merchandise; prices; number of pieces.
• Do not turn away from an open register drawer; keep it closed between transactions.
• Do not count the contents of register on the selling floor.
• Do not leave register unlocked; take the key.
• If unusual amount of cash has been taken in, request it be collected.
• If customer claims to be shortchanged, request assistance.
• Allow only properly identified persons behind showcases and counters.
• Be alert to detect counterfeit bills.
• On any suspicion, close the drawer.
Shrinkage is a problem, which does not cure itself. Crime is also developing, making use of technology and becoming more sophisticated. Criminals devise improved and new schemes everyday. Expertise in loss prevention is as essential in today's retail world as fashion and salesmanship. The retailers have recognized and accepted the fact the money spent to protect company assets does its share in providing profits.
Loss prevention is concerned with the disappearance of merchandise and currency. Most retail establishments take a physical inventory annually, while some do it semiannually. When the count is completed, the
Difference between the actual inventory on hand and what it should be according to purchase and sales records is called shrinkage.
What are the causes of inventory shrinkage?
1) Shoplifting,
2) Employee theft,
3) Vendor fraud and
4) Administrative error
In the US, the top 120 retailers lose 1.5 to 2.0 percent of their total annual sales to inventory shrinkage on average.Whole retail store chains have gone out of business due to their inability to control retail theft losses.And worse yet, the cost of these losses is passed on to the consumer.In India, inventory shrinkage is a also reality, where large organized retailers may lose between 1-2.5 percent annual sales.
Source of Inventory Shrinkage
% of Loss*
• Employee Theft 48.5%
• Shoplifting 31.7%
• Administrative Error 15.3%
• Vendor Fraud 5.5%
Source: National Retail Security Survey, November 2002
What is shoplifting?
Shoplifting is a crime and occurs when someone steals merchandise offered for sale in a retail store. Shoplifting most often occurs by concealing merchandise in a purse, pocket, or bag, but can occur by a variety of methods.
Shoplifter Profile
1. Amateurs. Amateur shoplifters can be highly skilled, and some steal almost every day, but don't do it to make a living.
2. Professionals: People who make their living by stealing from retail stores. Professional shoplifters often are highly skilled and even organized in gangs. The crude professionals sometimes use force and fear much like gang intimidation and often commit grab-and-run thefts.
3. Juveniles: young persons who may be misled and do not know better.
4. Kleptomaniacs: These are mentally ill individuals who may be compulsively shop lifting and need help and treatment to overcome this problem.
SHOPLIFTING METHODS
1. Merchandise is concealed in boxes, bags or purses.
2. Merchandise is concealed in clothing. Professionals may wear garments fitted with large pockets or hooks. Oversized garments may be worn to afford easy concealment.
3. Stolen garments are worn in plain sight and out of the store.
4. Merchandise is carried between thighs and hidden by long skirt or overcoat.
SHOPLIFTING METHODS
5. Professionals wrap garments around the legs and tuck them into tops of socks.
6. Small articles may be carried out hidden in the palm of the hand.
7. Fitting Room Theft: Many items are concealed on the person of the customer when the customer is ostensibly trying on garments in the trial/fitting room.
8. Some thieves snatch articles and run out of the store. They may also attempt to hold up customers and sales staff inside the store by displaying a pistol/weapons and make away with articles/cash
INDICATIONS OF POSSIBLE
SHOPLIFTING
1. People wearing overcoats out of season, or raincoats on a clear day.
2. People carrying boxes, bags, or umbrellas, which could be used to conceal merchandise.
3. Nervous-looking people who are constantly touching the backs of their heads, tugging at sleeves, or adjusting socks.
4. Exceptionally fussy people who cannot seem to make up their minds about a purchase, or do not appear interested in purchasing an article that they have been examining.
INDICATIONS OF POSSIBLE SHOPLIFTING
5. People who walk around and constantly keep one hand in a pocket.
6. People who come back to the same area of a store several times.
7. People who are busy looking about, rather than at merchandise.
8. People who appear to be nervous.
9. People who walk into stockrooms or behind counters and have no business in such places.
10. Men who carry shopping bags.
Shoplifting Prevention
1. Plain-clothes floor detectives to observe customers as they shop.
2. Many shoplifters are detained and arrested for their indiscretions.
3. Stores use video surveillance cameras and electronic article surveillance (EAS) devices attached to their products that cause alarms to go off if not deactivated by the cashier.
4. Retailers place expensive and high theft items like small leather items, perfume, cosmetics, tools, liquor, or cigarettes in locked enclosures.
5. Cables or hanger locks that require the assistance of a sales associate to unlock the expensive item of clothing before you can inspect it.
6.Point-of-sale data mining software solutions that detect potential theft problems at the cash register and alert appropriate personnel in realtime.
7.Source tagging programs where tiny anti-theft labels about the size of a paper clip are placed inside an actual product or product package, effectively hiding it from view.
8. Self-alarming anti-theft tags that broadcast an audible alarm throughout the store when a shoplifter attempts to improperly remove it from merchandise.
9. Uniformed Security Guards as a deterrent
10. Using Sales Staff Involvement: Training to spot shop lifters and
taught the action to take to prevent the loss of merchandise. Incentive programs to encourages interest and participation in loss prevention.
Shoplifter Detention
• If caught, a retailer may detain the consumer and attempt to recover the items. The practice of physically detaining and arresting shoplifters is not without risk.
• May make the first contact with the shoplifter at the exit.
• The store detective should attempt to keep the apprehension as quiet as possible, without disturbing other shoppers or of creating a physical confrontation.
• The shoplifter may attempt to run, may assault the employee, or may even pull a weapon. The training of the security staff is the key to ensure proper action in accordance with developing circumstances
Shoplifter Detention
• When guards are posted at or near exits, they should assist in apprehensions if requested.
• Normally, the suspect will come along quietly when asked.
• If the detective has made proper observations, the recovery of stolen articles should be uncomplicated.
• A retailer may make a choice at this stage to call in the local police and press charges further.
Employee Theft:
A large part of inventory shrinkage and retailer loss in attributed to employee behavior:
1.Cash Register, Cash Handling and Bookkeeping Theft
2. Shortchanging and Refund Fraud
3. Stock Room Theft
4. Employees colluding with customers who shoplift, with the assistance of employees
PREVENTION OF MERCHANDISE THEFT BY
EMPLOYEES:
• Pre –employment screening
• Background checks and reference from former employers.
• Separate Employee Entrances with a security person posted there, and the right to frisk and even search may be reserved by a company.
• Garbage Inspection
• Stockrooms security and restricted entry
PREVENTION OF MERCHANDISE
THEFT BY EMPLOYEES:
• Receiving and Shipping:High security at this point and Test counts can be done randomly as a security measure.
• Warehouse security: Propoer procedures at receiving platforms and shipping platforms, cargo documents and purchase orders should be matched, so that proper bookkeeping is ensured.
• Theft of cash: track cashiers’ performances, spot checks of the cashier funds during the day, “Integrity Shopping” checks/ “Honesty shopping”
• Money Rooms: A special area for handling and storing cash, well constructed and burglar resistant.With convenient alarms and holdup buttons
• Refunding policy: a well laid out policy for authentication of merchandise and return of money to the customer. Procedures must be established to constantly monitor payouts against related documents and merchandise.
• Strict Policies for dealing with employees caught for theft
CREDIT CARDS FRAUD:
• Losses due to acceptance of lost or stolen credit cards are on the increase. Suggested procedures which help cut such losses are:
• Examine card for authenticity; expiration date. Imprinted name and signature must match.
• Use terminal or telephone to obtain authorization.
• Follow instructions according to code. If "hot card," confiscate if possible. If above floor limit, may need additional ID.
• Be aware that lost or stolen cards issued by out-of-state banks experience unusual time lag in appearing on "hot list".
• Examine ID carefully; compare signatures.
• Be wary of customers who appear unconcerned about price of merchandise.
• Watch out for customers in a hurry, particularly at closing time.
Tips for the Cash Till
• Know the merchandise; prices; number of pieces.
• Do not turn away from an open register drawer; keep it closed between transactions.
• Do not count the contents of register on the selling floor.
• Do not leave register unlocked; take the key.
• If unusual amount of cash has been taken in, request it be collected.
• If customer claims to be shortchanged, request assistance.
• Allow only properly identified persons behind showcases and counters.
• Be alert to detect counterfeit bills.
• On any suspicion, close the drawer.
Shrinkage is a problem, which does not cure itself. Crime is also developing, making use of technology and becoming more sophisticated. Criminals devise improved and new schemes everyday. Expertise in loss prevention is as essential in today's retail world as fashion and salesmanship. The retailers have recognized and accepted the fact the money spent to protect company assets does its share in providing profits.