Shoplifting Stories and Stats

January 14, 2015 by Leave a Comment

shoplifting4Many retailers invest thousands of dollars to protect themselves against theft. From surveillance to electronic devices, these retail shop owners try to find a way to reduce their shrinkage in a daily basis. Whether they are dealing with petty shoplifters, employee theft or organized groups, they have to know their problem first to be able to find a solution they can implement in their store. To read more about this common problem, follow the links below for more information.

EPD: Retail theft up in 2014

EASTON — The Easton Police Department reported a 61 percent increase in retail thefts in 2014 — from 163 retail theft cases in 2013 to about 263 in 2014.

In response to this increase, the EPD announced that each month it will release photographs of all individuals who were charged with retail theft.

There’s an understanding that to better prosecute and deter thefts, a partnership between retailers and law enforcement is vital, EPD said.

In August 2013, EPD also started a Retail Investigator’s Network, which brings together retail loss prevention/asset protection investigators, prosecutors and law enforcement from Easton and Denton.

During these meetings, solved and unsolved investigations are discussed, which has increased closure rates in Easton and Denton, police said. These meetings have opened lines of communications between retailers. These meetings are also used to educate everyone in crime trends and other criminal activity that’s associated with retail theft.

In 2014, retail loss prevention/asset protection investigators and law enforcement in Easton and Denton have saved retailers about $142,722, EPD said.

Dover Police See 19% Drop In Reported Shoplifting Cases Since Posting Arrests Online 1-6-15

The Dover Police Department saw a 19% drop in shoplifting complaints since beginning the Shoplifter Notification Program on August 7th, 2014.  The program which posts mug-shots of persons arrested for shoplifting on a weekly basis on the department website and social media outlets, has helped to reduce shoplifting incidents during the 4-month trial period.  The reduction in shoplifting incidents during the trial period also led to a 12% drop for the entire calendar year compared to 2013 numbers and bringing the total number of shoplifting cases below 1,000 for the first time since 2010.

From 2011 through 2013, the Dover Police Department investigated 3,290 shoplifting cases, averaging 3 per day during that time period. In an effort to help reduce the amount of shoplifting cases in the City of Dover, the department began the weekly notifications, displaying the names and booking photos of those arrested. The goal of the notifications is to notify Dover merchants of offenders in hopes of being able to reduce the number of shoplifting cases. The majority of shoplifting cases are committed by repeat offenders and the department’s goal is that by releasing the information, store employees will be better informed when monitoring their stores and inventory, and that suspects will think twice before stealing merchandise in fear that their name and photo will be shared with the public.

The Flowerpot Bandit: Man ‘holds up petrol station’ wearing a flowerpot on his head and wielding a chainsaw, but only manages to steal a bottle of soft drink

A teenager has been arrested after he allegedly held up a petrol station while wearing a flower pot on his head and wielding a chainsaw, though he only managed to steal a bottle of soft drink.

The man entered the 7-Eleven service station in Ipswich, Queensland, at 4.30am on Monday, wearing a flower pot on his head in an attempt to conceal his identity, it will be alleged.

He is accused of lunging at the shop assistants while holding a running chainsaw, and demanding money from them.

Chainsaw attack: The 19-year-old held up a service station wearing a flower pot on his head. He then made demands for money from the male attendant

The terrified shop assistants, who were cleaning a coffee machine at the time he entered, claim they then retreated into a back room and called police.

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Start 2015 With Loss Prevention Best Practices For A More Profitable Year

January 9, 2015 by Leave a Comment

theft (4)Now is the time to go on the attack! Fix your loss issues before they cost you this year’s profit margin. To do this, in many cases requires you to change the way you look at losses. First and foremost, if you are not leading with an “LP” mindset, how can you expect others to follow and support your goals? Loss prevention should always enter into decisions even if in a minor way. Decisions on how and where to display merchandise and the standards you set for employees to follow, are just the start.

There are three main sources of loss in a retail environment: External (shoplifters), internal (employees) and paperwork errors.

Let us look at two of these, starting with internal. My experience tells me that about 10% of employees in a given retail store are involved in theft. You may be saying to yourself that “my employees wouldn’t do that to me”. If you find yourself thinking that way, you are actually at a greater risk than most. Because you are in denial. People will steal regardless of how good you are to them, how much you pay them, how many times you have helped them and so on.

Often when I hear someone say that, we end up finding out that they have some of the largest losses. I know this may sound cynical but it is the truth based on my experience and thousands of employee theft investigation I have personally conducted. So what can you do to prevent employee theft?

To start, understand that employees must be held accountable. Employees can steal four different things from you: cash, merchandise, supplies and time. All of these have value including supplies. If you operate at a typical profit margin of 2% after taxes a loss of $100 will cost you $5000 ($100/0.02). So even a twelve pack of toilet paper has value, not to mention the serious morale issue when you don’t have toilet paper! Employees need to understand that the only thing they are allowed to remove from the store is the air in their lungs.

On top of this, what message are you sending employees by your actions? For example, if you have a policy that cash register shortages under $5.00 are not investigated and a cashier held accountable, then you are telling everyone that it is okay to steal up to $4.99.

Look for employees that wholeheartedly share, understand, support (not just to your face) and practice your LP policies. These employees should be held up to be the standard. Others will then follow. Those who don’t, well… you get the picture. We have a great sample document you can use for your LP employee handbook. It sets the standards and lets them know from the very beginning what you expect, tolerate and will not tolerate. If you would like a free copy in Word format that you can customize for your use, please send me an email.

Shoplifters, those horrible people that come into your store and try to steal everything they can. Okay I will say up front, we sell Checkpoint anti-shoplifting systems. These systems are used by most major retailers worldwide and for a reason. They shut down a huge amount of shoplifting. They are commercial grade and meant to stand up to the tough retail environment. With that aside, let me ask you this, Why are you not using one? A Checkpoint System is a proven way to bring your shoplifting losses under control.

Other best practices include the use of CCTV. However, you must have the correct expectations for this. CCTV is a reactive measure. Shoplifters are rarely deterred by cameras as they know you do not have the payroll to watch them all the time or even when they are skulking around in your store. CCTV is good for employee theft prevention and investigation. You can use it in a somewhat proactive way by bringing an employee in, showing them a 60 second clip of them doing something good and then complimenting them on a job well done. They leave with a good feeling but say to themselves and others “wow I guess he/she is watching”. Do that monthly and see what happens. Believe me, word will get around.

Employee training is something we almost always overlook. Or we just say that they are learning as they go. You invest a lot of effort and money into a new hire. Spend a few hours with a structured outline and make sure they understand what their new job is, the standards you have and what you expect them to do each and every day. The document I offered you above for free will help with this.

Pre-employment screening is also overlooked. For example, have you ever confirmed that a person you are looking to hire can actually count money? Do you test for that? Put $100 on the table and see if they can make correct change without the assistance of the cash register. If they cannot, do you really want them handling your cash?

Paperwork errors are just as deadly as any other form of loss. Keeping a correct inventory not only helps with reordering but is a critical component of controlling theft. How can you react to loss, if you do not know what items are stolen? For example, you might not know that a particular item is being stolen because shoplifters have found a demand for it elsewhere.  If you suspect that a particular item is being targeted, then conduct what is called a cycle count on it. A cycle count simply means you are counting it on a daily, weekly or biweekly basis. Comparing that information to your sales of that item will allow you to react quickly before it is too late and the losses become severe.

Are you ensuring that your employees are not making mistakes in their work and then not correcting them? You also need to set the standard that you are watching and reviewing. For example, if an employee is checking-in a shipment and they are to piece count every item, then follow through by picking up the manifest that they just did and spot check their counts on a few items. When they get it right, complement them. If they made mistakes, show them their errors and let them know how the job is to be done and the standard. By the way there are vendors that will try to short your shipment hoping that you don’t check.  Vendors and shippers also have employee theft issues and you do not want to be left holding the bag for their issues. I have caught major shipping company employees cutting open the bottom of boxes removing merchandise and then taping the box back up. All of this is done on the truck before they arrive at your business.

I realize that much of this is common sense.  However, in many cases we are so busy trying to make money that we forget to keep the money we have on the bottom line. Remember, we are here for you. If you have any questions or issues, we are simply a phone call or email away.

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Law Enforcement and Retail Loss Prevention Partnerships

January 9, 2015 by Leave a Comment

law-3Shoplifting isn’t just a problem for retailers. It is a crime and it affects everyone in some way. Whether it be the retail store that suffers lost profits, the consumer who is faced with higher prices, or a community that is plagued with organized criminal syndicates all dealing in stolen property. For years, it seemed like I was fighting the shoplifting battle alone. I could deploy the most sophisticated camera systems, or use the newest EAS technology, but those career shoplifters were still targeting my stores on a daily basis. And getting away with hundreds of thousands of dollars in goods.

I felt the response from local law enforcement wasn’t what it should’ve been. Understandably, police usually see shoplifting as a petty crime. It’s a low priority in most jurisdictions, as it falls behind drug crimes, auto theft, burglaries and the more violent crimes. It wasn’t’ until two years ago that police in my parish began addressing the ever-growing shoplifting problem with a very unique solution.

The local sheriff’s office began reviewing shoplifting statistics and assigned two detectives to develop a program with local retailers to coordinate efforts and share information on shoplifters. At the onset, I was approached by these detectives. I was the regional LP manager for one the the largest retailers in the parish. It didn’t take much to convincing to get me and my company onboard. I reached out to my industry contacts and before long, over 100 different retailers were working in concert with local police to dismantle some of the most well-known shoplifting rings. These weren’t just big box retailers with LP departments. The vast majority were small, family owned stores and supermarkets who were tired of seeing the same shoplifters day  in and day out. Once a quarter, everyone would meet in a large auditorium and swap cases and share photos of big time boosters, or unknowns. It didn’t take long for some very substantial cases to be made, as well as the sheriff’s office realizing just how bad the problem was.

Everyone was quick to see what we knew all along. Shoplifting was not being committed by a bored teenager. Most of our shoplifters were drug addicts who were hooked on heroin, which is making a massive comeback in the US. Gangs of 10-15 at a time would target stores across the area. They would steal merchandise, conduct fraud refunds; whatever it took to make enough money for their next score. As more and more information was shared, police came to learn that most shoplifters were also suspects in other, more serious crimes. Based on our partnerships, we bang identifying car thieves, drug dealers and violent offenders, al who hand their hands in shoplifting.

While we’ve only scratched the surface, preliminary numbers for 2014 show over 4,000 arrest for shoplifting in this one parish alone. Most of these originated from the partnership group. This is a staggering number to comprehend. The hope is that with more support from the DA’s office, this number will start to decrease. We’ve already seen prosecutors push for heavier penalties and even prison time for some of the biggest repeat offenders. Hopefully, these types of partnerships can continue to be forged, and our law enforcement agencies will continue partnering with the Loss Prevention industry to help turn the tide against shoplifting.

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Cycle Counts

January 9, 2015 by Leave a Comment

shoplifting2With only a distant memory of the holiday shopping season in our minds and spring business just on the horizon, it’s a good time to start focusing on inventory control and accuracy. With the hustle and bustle of the holidays, retailers sometimes lose focus on what’s really important, their inventory. It should be second nature for you to take an annual inventory of your store. The best time to do this is soon after the holiday. Think about it, your store is most likely at a low inventory point, so counting is normally easier, and you have a little extra in the payroll budget due to that month of increased sales. It only makes since. Often though, this annual inventory is the only time some retailers verify their on hand accuracy, however, cycle counts can be of great benefit to any store environment, any time of year.

If you are unfamiliar with cycle counts, just think of them as a mini-inventory focused on a small section of your store. In my experience, conducting a count on high value, or high theft merchandise at least quarterly (monthly is better), can actually help boost sales. For example, let’s say that you sell several styles of pocket knives. Your sales are good in this category, but your shrink is always high. You know you lose knives daily due to theft, so your on hand counts are always a little off. If you are replenished based on those counts, then you may not be getting the product you need, which will then hurt your ability to sell that product. Not only is the theft creating a loss, but now you are losing sales because your customers can’t purchase a knife you don’t have. If you waited an entire year to conduct an inventory, you would lose those sales for the entire year. This can easily be corrected through consistent and well planned cycle counts.

Once you have the areas of the store selected that would benefit from a cycle count, plan to do them on a day that is historically a low sales day, like early on a Monday morning. This gives you a chance to get it done with minimal interference from customers, and it won’t mess with your counts if a customer purchases an item you are counting. Take a small section, once a month. Don’t try and count an entire department. Keep it simple and focus on a small area that is normally high shrink. Print out what you should have on the books, and compare it to what you physically have. Simply make any adjustment to your inventory as needed. It’s really that simple and it’s a great way to stay in stock for your customers.

As in the example above, as a manager, or store owner, you know what areas of the store have the most shrink. In order to combat theft and remain in a good stock position throughout the year, you have to have accurate on hand counts. If you implement any inventory adjustments, always ensure that they are conducted by a manager, or one of your most trusted employees. Having an inaccurate count can cause a loss on paper, and/or keep you out of stock even longer. Additionally, this can also help you to identify areas of employee theft as well. If you have items that are shipped to your store that are stored in areas only accessible to employees, you shouldn’t have any losses. For instance, if you have high end sunglasses that are kept locked in a case and you find you are missing hundreds of dollars’ worth of those glasses, chances are you may have an internal theft issue. If you would wait until the end of the year to find that during your annual inventory, you may never be able to uncover the source of the loss.

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Does Your Business Culture Encourage Employee Theft?

January 9, 2015 by Leave a Comment

theft (2)There is a belief among many small business owners that, because the company belongs to them, they ought to be allowed to behave anyway they want. They want to be able to run things their way and believe the employees “should and will” respond accordingly. That’s why they went into business for themselves – they wanted to create and control the work environment or cultural.

This is the paradox, and downfall, of many small business owners. The characteristics of independence and self-determination, coupled with the need to be in charge, are the hallmarks of a successful entrepreneur. Unfortunately, they’re also the attributes of unsuccessful, bankrupt entrepreneurs.

One of the differences between successful and unsuccessful owners is the ability to marginalize the negatives and maximize the positives of their desire to be in control. This ability is particularly important when establishing and maintaining the business’s security culture. Yet, ask any business consultant or security advisor and they’ll say this is one of the areas owners are least likely to address.

They usually don’t address it because they have the mistaken belief that the culture they’ve established and are maintaining, through the power of their personality, is an effective theft deterrent. They believe the way they behave (i.e. nice, nasty, supportive, demeaning, conciliatory, confrontational) will keep them safe from employee fraud.

However, it rarely works that way. The company’s culture is usually not enough to stop employee theft. “Good” guys who try to create an atmosphere of ease for their employee and “bad” guys who create one of stress have the same amount of fraud. The statistics and antidotal information show that owners who manage through personality, rather than systems and controls, are likely to fail.

Employees are 15 times more likely to steal than outsiders and are responsible for 44% of a business’s theft losses (National Federation of Independent Business). This results in almost a 1/3 of businesses failing due to employee fraud (U.S. Department of Commerce). In another 1/3 it’s believed to be a .05% – 1% loss of profit.

The number 1 deterrent is security systems and controls embedded into the cultural. A business’s security culture – values, beliefs and norms which guide how the business and the people in it operate – is important to a business’s survival. When people work within one there’s a profound positive effect on employee morale, operations and the bottom line.

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What’s Trending in the World of Shoplifting?

January 8, 2015 by Leave a Comment

shoplifting1Wouldn’t it be nice if the criminal world was as easy as Twitter? You could just go online and look at what’s trending and then take proactive steps to stem any potential losses. That would be great! Unfortunately, criminals, especially thieves rarely broadcast their intentions. It’s up to the loss prevention community and local law enforcement to share these trends amongst each other in order to combat shoplifting.

You may or may not be aware, but shoplifting is much more than just putting one item in your purse, or pockets. I routinely see individuals and groups operating some very sophisticated fraud schemes in order to remove product from the store. One of those trends that have become more and more prevalent over the past year has involved refund fraud. I had a very complex case that spanned several months that was more sophisticated than anything I had every come across in all my years conducting Loss Prevention Investigations.

The basic storyline is that a brick and mortar store front was employing individuals to target stores for small, high dollar merchandise. Once the product was stolen from one store, it would then be brought to a second store where a refund was given for the product in the form of store credit. That individual would then utilize that credit in order to purchase a high end electronic item. The item, along with the receipt was sold to the store front. This is where it takes a more complex turn.

The store owners would then arrive back at the store with the receipt and electronic item and ask to exchange it for other product. This was routinely conducted with footwear or apparel items. The store owners would conduct the exchange and, on most occasions, pay a difference in cash of anywhere between $10 and $20.

Over several days, the store owners would return to my store and refund each item that was purchased during that exchange transaction. Since the receipt showed they paid a cash balance, inattentive store personnel would always give them a full cash refund. Did I lose you?

Essentially, I was at a loss 5 times for the same product. First it was stolen. Second, I gave them a store credit for stolen goods. Third, the store credit was then spent. Fourth, the product the credit was spent on was exchanged for additional merchandise. Fifth, we gave them cash. It was incredible once it was all uncovered. This group has figured out a way to essentially launder stolen goods and with a few steps and some patience, get cash. All while keeping the appearance of a legitimate transaction. All told, our stores lost well over $100k to this scam.

It was an expensive lesson to learn, but it goes to show just how creative people can be when it comes to fraud. While this was the first time I had ever seen something of this complexity, I can assure you that in the next year, someone will come up with an even more complex method to defraud retailers.

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Prevent Shoplifting This Year

January 7, 2015 by Leave a Comment

shoplifting3The shoplifting figures in the United States are nothing to laugh about. Billions of dollars are lost to shoplifters every year and the detrimental effect they have on business is serious. Loss prevention personnel are at risk every time they stop a shoplifter, and the solution to this problem has evaded the retail industry with costly consequences. Retailers spend millions of dollars in loss prevention systems, and studies show that these businesses benefit from the investment. The shoplifting is still there, but retailers are able to maintain and keep track of the inventory more easily. For more news about shoplifting, follow the links below.

Shoplifters Costing Businesses Billions

GREENSBORO, N.C. — Shoplifting is a crime police say affects all types of businesses, and it’s costing a fortune.

WFMY News 2 went to several Triad businesses Friday. Owners at those businesses said shoplifters are crippling their day-to-day operations.

One Greensboro store manager said shoplifters cost his business anywhere from $10,000 to $15,000 each year.

“If somebody really wants to steal something, they’re going to steal it,” he said, “Ain’t nothing you can do about it.”

He’s frustrated, and he’s not alone.

Nationwide, shoplifters steal about $13 billion in merchandise every year, according to the National Association of Shoplifting Prevention. The same organization reports one in 11, or 27 million people in the U.S., are regular shoplifters.

KCSO shoplifting task force makes record number of arrests

KNOXVILLE — A Knox County Sheriff’s Office holiday shoplifting task force made a record number of arrests for 2014.

KCSO’s Safe Holiday Task Force made 372 arrests between Nov. 24 and Dec. 29, according to the Sheriff’s Office. The team was credited with 342 arrests during the same time period in 2013.

While the majority of the 2014 arrests were for shoplifting, they also included 35 felony theft charges, 12 DUI arrests and two fugitive captures.

The annual operation also recovered a record amount of stolen merchandise, totaling $65,614 worth of goods, and located two stolen vehicles. About $50,000 worth of stolen items were recovered in 2013.

Drug habit fuels shoplifting ring in Richmond and around Macomb County

A shoplifting ring has targeted Richmond stores for more than two years, according to a detective with the Richmond Police Department. Thieves steal easily marketable goods to fuel drug addictions, particularly heroin addiction, the detective said.

“What we have seen — and what our counterparts in Chesterfield and at the Macomb County Sheriff’s Department have seen — is a loose ring of individuals shoplifting certain high-priced items like Enfamil baby formula, Red Bull and Crest White Strips, and then either taking these directly to the drug house and trading them for drugs or selling them back-door to another store for cash to buy drugs,” said Det. Julia Frantz.

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Post Christmas Blues

January 5, 2015 by Leave a Comment

theft (10)Well, the 2014 Holiday Season is over; now we are dealing with the post-Christmas issues, returns, inventory and tallying up how we did! Even without official numbers you probably have an idea. Are returns higher than what you expected? Did shoplifters get more than what you were prepared to lose? One of the problems, we as business owners face, is that we get ramped up for sales but we tend to put off preparing for loses. We tell ourselves that we will get to it later. Then when that B or C priority rises to the level of serious loss, it is too late. But we all do that, with many things. It is part of running a business.

Eventually we get tired of dealing with something over and over again and decide to break the cycle. What is the saying? “Doing the same thing over and over but expecting a different result, is the definition of insanity”. Thieves will not go away, in fact they will only get worse unless you deal with them head on with real business solutions. Shoplifting and employee theft are actually very simple issues to address. You will never eliminate them completely, however, you can reduce them to an expected level balancing the cost and effect.

Many retailers do not realize that they can and should attack both issues internally first. Take a look at your procedures. Step back and look at them – I mean truly LOOK at them, hard. Why are you doing something the way it is done? Is that the reason for your losses? A good example may be your cash handling procedures.  Is your till generally short? How much? Why? If your policy is that you do not make an issue out of a drawer that is $15 or less short, then you have sent the message to your employees that they can steal or be careless up to $15. Fifteen dollars multiplied by 365 days a year is A LOT of money to any retailer, large or small. All of this because of your “procedure” or attitude.

How about shoplifters? Do you really know how to prevent and stop them? Do you teach this to your employees? If you don’t you can never expect to be as profitable as you can and should be. Shoplifters will react to your efforts by going elsewhere. That is what you want. This allows you to spend more of your resources and human capital on your paying customers. Sell more, lose less should be your motto!

If you want help, we are here for you. If you do not, that is OK also. But you can fix your losses.

We wish you a great and prosperous 2015!

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Your Store’s Reputation

January 5, 2015 by Leave a Comment

shoplifting4Your store’s reputation is based off of not only customer perceptions, but also how different elements of your community view your store. Beyond your customers, you employees, local law enforcement, criminals, and members of the court system all have a perception of your reputation. How you approach each of these community members plays a big role in how each one interacts with your store.

Customers are probably the easiest to understand. For the most part, they want a clean and safe shopping experience where they are going to get the best value for their money. The value placed on the goods you sell can be either through price reductions, or by offering designer or name brand goods, with stellar employee interaction as part of the shopping experience.

Employees are very similar to customers in their needs. They want a safe and secure place to work. They want to feel valued by their employers. When they see these things, employees are more likely to perform better at their jobs, and take better care of the people entering your store. When employees do not feel safe, secure, or valued, their job performance declines.

Employees are less likely to give good customer service, which can create a decrease in sales over time. It also allows for shoplifters and other criminals greater access to your store’s assets, without the same risk of getting caught. The more these events take place, the lesser of a reputation your store starts to have with the paying customers and your employees.

This can set of a chain reaction where it is now the criminals who favor your store. Your reputation becomes one where it is easy for shoplifters to steal from your store. This reputation will be passed from criminal to criminal and more thefts will begin to happen. The losses will become greater, and more brazen as the risk and fear of being caught diminishes.

Your local police station also has a perception of your store. If you are in a high theft area, but have low case production, they are wondering what is going on in your store. Is your reputation with the local police one of ignorance? Do they think you and your employees are incompetent and unobservant? Or do you maintain a relationship with the local police, and occasionally catch some shoplifters?

When you catch shoplifters, you send a message to your community that you are aware of what is going on in your store, and make efforts to eliminate the criminal element from your premises. Customer’s and employees feel safer and more at ease when they shop. Local police departments are more confident in your store’s level of awareness, as they see more calls and reports being filed from your store.

To maintain your reputation with law enforcement, you also need to show that your cases are reliable when you go to court. A reliable case equates to a stronger reputation for your store within the legal community. When you present shoplifting cases to the prosecuting attorneys and you have solid evidence as proof of who committed which crime, the attorney’s job is much easier. The more often you present solid cases, the better your reputation is within the court system.

Other things you can do to help perpetuate your reputation is to always show up to your given court cases. You should come dressed professionally, and should show up early. This allows you to confer with the attorneys ahead of time, creating a smoother case for everyone involved. You will find that many retailers’ representatives do not show up for court, or do not bring case files or other evidence with them. By doing these things your reputation starts to precede the cases that you bring. Having a consistent history of solid case work and reliability will also filter back into the criminal community, as they can’t plan on your absence to get away with their crimes in court.

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The 80/20 Rule

January 5, 2015 by Leave a Comment

shoplifting2The 80/ 20 rule for retail is actually a series of rules, or guidelines to how and where your inventory shrink comes from. Once you drill down to see what is actually driving your shrink, you have the ability to implement much more efficient anti theft and anti shrink strategies.

The first part of evaluating the 80/ 20 rule is to determine a generalization of how your store is incurring losses. There are three main areas of shrink loss that all shrink can be categorized as. They are Internal, External and Operational shrink. As a rule of thumb, internal shrink is explained as asset losses intentionally carried out by an employee of the store. Employees who are stealing merchandise drive internal shrink.

Operational shrink, on the other hand, is merchandise losses carried out by an employee unintentionally. These are the store’s operational errors that end up causing losses. Did an employee accidentally miss an item when they checked a customer out? Did an employee pull some glass cleaner from the shelf to clean their workstation, but not record it on a store use log? Did an employee break an item of merchandise beyond repair and threw it in the trash without letting anyone know?

These are all everyday examples of how an employee can unintentionally cause losses. These are not theft related actions that we would arrest and prosecute and employee for, but the end result is still the same. We are now showing missing merchandise and our bottom line has suffered from the shrink loss. Unidentified items missing from freight shipments also fall into this category.

External shrink losses are created by anyone outside of the company. These are non-employees who steal our products- the shoplifters. The average shoplifter steals much less per incident than an employee does. Even if you have a higher frequency of shoplifters in your store, employee theft will still outweigh the losses caused by shoplifters over time.

While it is really up to you to determine the actual breakdown in your store, most retailers average about 40% of their losses from internal theft, 40% from operational errors, leaving only 20% to external theft. Obviously these numbers can change based upon your location, kinds of goods sold, and staffing sizes. Overall, these numbers equate to about 80% of your shrink is derived in house (by your employees), and 20% comes form external sources.

Next you want to drill down even further into your losses by looking at departments, and the individual items that are being stolen. Ideally you want to have an inventory system that allows you SKU level accuracy. By drilling down to the actual item number that is shrinking out, you can create an action plan suited specifically to that item. At the very least, you should know which departments and product assortments are the highest losses.

Once you determine your highest shrink items, you should know the quantity and/ or dollar amount lost. You can then put your efforts into where the biggest losses are. You might be loosing 100 packs of gum that cost $1.00 each, or you could loose one handbag worth $200. Frequency versus actual dollar amount lost might dictate a closer eye on your handbags, than the multiple losses in packs of gum.

By taking a look at the highest dollar losses, you should see that about 80% of your total shrink losses are coming from only about the top 20% of your shrink items. This drill down approach further streamlines your anti shrink strategies. Now, instead of focusing on every little loss that occurs in your store, you can focus on only the top items. By creating feasible reduction strategies on only those items, you can create a significant reduction in your store’s overall shrink losses.

 

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