Alpha Spider Wrap

Motive, Means and Opportunity = Occupational Fraud

May 15, 2015 by Staff Editor Leave a Comment

Building a successful small business is a part of the American Dream for many people. Every year millions of dollars, untold hours of sweat equity and unlimited hope are poured into starting and maintaining them. Unfortunately, also every year, occupational fraud is responsible for closing about 30% of these businesses (U.S. Department of Commerce).

Fraud negatively affects smaller companies more than larger ones; they’re simply unable to absorb the loss. Participants in the 2014 Global Fraud Study “Report to the Nations on Occupational Fraud and Abuse” estimated the average small business loses approximately 5% of revenue each year to fraud (The Association of Certified Fraud Examiners).

5% in a small business can mean the difference between a profit or a loss. Therefore, controlling employee theft can be the difference between staying open or closing the doors. It can also influence whether the owner is able to pay himself a living wage or not. Given its potential for harmful impact it’s unfortunate that many owners are unprepared to fight fraud.

Most think it’ll never happen to them, not understanding that probably it’s already happened, is currently happening and/or will happen in the future. Depending on the study 75% — 85% of employees admit that given the “right” circumstances they would or have committed fraud. The right circumstances are usually a combination of motive, means and opportunity.

Motive is the rationalization the employee uses to steal time, money and property from the company. Rationalizations are the reasons people create to justify their behavior and are as varied as the people who make them. These self-deceptions provide the employee with an excuse to steal, even from an employer who they like.

But, motive is not enough for fraud. A person also has to have the means — the ability, knowledge and access — to manipulate the system. A bookkeeper can embezzle money because she knows how to “cook the books”. Stock starts to go out the back door when the warehouse foreman creates an inventory method that only he understands or uses.

Finally, an employee can be willing to steal and know how to do it, but the opportunity must be present. An employee has her shoplifting friends come to the store when the easily distracted manager is working, not when the attentive one is. A clerk learns the cash register camera is unreliable and pockets cash transactions on the days its offline.

Occupational fraud is a broad and all encompassing term, whether it involves petty theft or a multi-million dollar embezzlement scheme. Its cornerstones are motive, means and opportunity. A smart and success business owner will learn its dynamics and use this knowledge to take steps to combat it.

Nicole Abbott is a writer and psycho-therapist with over 20 years of experience in the fields of mental health and addiction. She’s an educator, consultant, lecturer, trainer and facilitator, who has conducted over 200 workshops, trainings, presentations, college classes and seminars.

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Mystery Shoppers Can Help Your Bottom Line

May 13, 2015 by Staff Editor Leave a Comment

Brooke wanted to buy a special keepsake to commemorate the birth of a grandchild. She went to a jewelry store in the mall and was planning on spending about $200. There were 2 saleswomen in the store and no other customers. Both of them were having personal conversations on their phones, with one talking about the lack of sales and her concern that she was going to lose her job.

One clerk didn’t acknowledge Brooke, while the other put her finger up in the “just a minute” signal and then turned her back. After looking around for some minutes, and not being waited on, she went to the store next door. Brooke was greeted immediately, helped and spent $250. She repeatedly told the poor service story for months, right up until the store closed.

Everyone has experienced poor customer service in person, on the phone or via a web site, but they probably didn’t complain to the business. When most people are unhappy they show it with their feet and eyes, they’ll leave a store or web site and not return. A customer is 4 times more likely to go to a competitor when the problem is service rather than price or product (Bain & Company).

Obviously, good customer service has a significant impact on the bottom line. A 2% increase in customer retention has the same effect as decreasing costs by 10% (Emmett Murphy & Mark Murphy). Also, it costs about 6 times more to acquire a new customer rather than retaining an existing one. It’s just smart business to try to hang on to them.

One of the ways to evaluate your business’s customer service is to use mystery shoppers. A mystery shopper is an outside person who shops your business (in person, on the phone or via web site), usually purchases a product and evaluates the experience. You set the parameters of the information you want collected — including identifying loss prevention issues.

Mystery shoppers help you determine your problems before they turn into lost revenue. They give you the consumer’s perception of and experience with your customer service, as well as other concerns. It’s an effective way to get real-time feedback. Then, based on the identified problems, you can develop and implement the appropriate corrective procedures and policies.

Smart business owners know the adage that the product gets the customer in the door, but service is what gets her to return. People who contact your business have a need, providing you the opportunity to make a sale. The method of the sale gives you the chance to build positive word of mouth and strong consumer loyalty, which contributes to higher profit margins and a healthy bottom line.

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Background Checks Should be Standard Operating Procedure

April 29, 2015 by Staff Editor Leave a Comment

It’s not every day that I bring someone new to my team. I’m a regional Loss Prevention Manager and I manage a very small, but highly motivated and productive team. I need someone to work independently, make good business decisions and get results all with very minimal supervision. I also need someone that is of good moral character and has integrity above all else. Normally, when I have an open position, it will take me weeks to fill. I’m extremely selective and always go with the person that I know will fit into my team the best. So running a background check is one of the first things I do when I have a potential candidate, and it should be something you do as well.

It wasn’t all that long ago when I was looking for a market investigator. The position had been posted for a few weeks and I had already interviewed a group of candidates. I had narrowed it down to three and had to make a hiring decision. They all had tons of experience working investigations, retail operations or law enforcement. I knew who I wanted and made a job offer, which was contingent on the successful completion of a background check. We shook hands and he assured me that his record was clean.

A few days later, my background check company sent the results back to me. I was completely taken back. What seemed like a very qualified, motivated person was a complete fraud. His rap sheet was ¼ mile long and he was recently convicted of several counts of fraud. There was absolutely no way I could bring this person onto my team. Had it not been for a solid background check, this person could have potentially cost me and my company thousands of dollars and untold hours of frustration and heartache. This should be a lesson to any owner out there. It doesn’t matter how clean someone appears to be, how well the interview, or even how great their resume may look, there’s always the potential for skeletons to be hiding just below the surface. Do yourself, and your business a favor and always run a background check on new employees.

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The Truth About Internal Theft

April 29, 2015 by Staff Editor Leave a Comment

Do you know what small business owners and Loss Prevention professionals have in common? In my career, I have found that there is no other business unit in a retail company more concerned about the financial health of the company than the LP department. Our life goal is to SAVE money, all while finding ways to increase sales and profitability, improve margins and assist in improving operational efficiency. Doesn’t that sound like a savvy business owner to you? Reversely, as a small business owner, you’re plagued by theft. You may also find yourself asking, where is that theft coming from?

If you do some online research, you’ll probably find a ton of sites and quotes that all say internal theft causes more financial damage than external. Well, that’s not entirely true. External theft has steadily been on the rise and causes millions of dollars in loss every year. The same also holds true for internal theft. What these statistics do though, is misrepresent internal theft. Yes, your employees sometimes steal from you, but that doesn’t mean 1 out of every 3 are. What that means is those employees who do engage in theft, are taking you for a LOT more than an average shoplifter. Last year alone, personally, I managed over 650 cases. 540 were shoplifters. The dollar amounts associated with those cases were almost the same in both the internal/external category.

Take this for example. Last year, I was contacted by some inventory control guys regarding a specific electronic device at a store location. We looked at a store inventory report and it showed that this one sku was showing a negative 600 on hand at this location. By investigating transaction records, we found these units had been refunded to the store over a period of time. Further investigation showed that a single cashier had conducted nearly 600 refunds of this particular sku and was able to pocket nearly $65,000 in cash from ghost refunds. It would take a lot of shoplifters to equal that dollar amount, but this was only ONE employee.

What I want owners and managers to understand is the reality of the internal theft problem. Understand that not all of your employees are thieves, but that 1% that will steal from you, will steal over and over again. As an owner, you should have internal control measures in place that limit your exposure to losses, and at the very least, a descent CCTV to review those losses when they are uncovered. While shrink will always be a part of life in retail, you have the power and the tools to make that financial impact as less as humanly possible.

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How Are You Preventing Shoplifting?

April 23, 2015 by Staff Editor Leave a Comment

There is always so much debate about how to fight shoplifting in the retail industry. There are loss prevention teams in all the major retail stores, and the management team at any other store is, if not trained at least aware of what to do when facing a shoplifting accident. Millions of dollars are lost due to shoplifting, and the matter seems to get bigger every day. New government policies are making sure shoplifting is punishable accordingly, and retail stores are spending millions of dollars in security and personnel to fight this crime, but why is that not enough? Follow the links to read more about this and other stories.

Shoplifting & Loss Prevention: Do We Need A Fresh Look?

Traditional Loss Prevention is not working. If it was working, the retail world would not still be suffering $35 million or more a day in losses. If it was working, retail owners and store directors would not be going through security and loss prevention officers or the security companies they represent like the free samples they often hand out to customers. Security experts and loss prevention companies would not be constantly scrambling for new accounts, or be in conflict with the accounts they service.

Shoplifting is one of the least detected and most unreported crimes. Stock control in many stores is so deficient that few retailers know how many goods they are losing to shoplifters or their own staff. Statistically, so long as shrinkage does not exceed 2-3% of goods sold, retailers pay little attention to shoplifting. There are also financial incentives for managers to increase the bottom line profits. The bonuses they receive are often based on profit margins, and paying for security services can be a drag on profits. Managers are under constant pressure to justify expenses in a corporate world driven by profit.

Shoplifting Prevention: Top 5 Tips

Shoplifting is of major concern to vendors, so much so that it’s considered normal to budget 10-15% in losses due to store theft. This means each honest customer is paying 10-15% more due to the sins of his fellow shoppers. This budget figure can be reduced by one of your company’s most important assets: Your employees. Real, live, people. While we recommend security cameras, computerized security tagging, door security guards, and even undercover security personnel, this article will address how your employees – often the most involved people with your customers – can also be involved in shoplifting prevention. Here is a Top 5 list of suspicious behavior often exhibited by shoplifters, all of which are easily spotted by employees.

Baggy or oversized clothing. There’s reason it’s called “baggy” – shoplifters are using their clothes as veritable bags, stuffing their stolen ware on their person as if it’s part of their wardrobe.
Hands in pockets, or hidden otherwise. A regular shopper has nothing to hide. In contrast, a shoplifter has everything to hide.
Teaming Up. Shoplifters might hang together when planning or passing along stolen items. If you see two or more people in a group speaking in low tones, looking over their shoulders, diverting their eyes, or of course, stuffing their or others’ pockets, it’s a sound suspicion of illicit activity. Regular shoppers, on the other hand, will likely happily chat away at full volume, and keep their non-purchased items in full view.

Japanese organization considers shared biometric database to combat shoplifting

The National Shoplifting Prevention Organization (NSPO), a nonprofit organization of major Japanese retail businesses, is considering developing a biometric database to share facial recognition data in order to combat shoplifting across Japan, according to a report by The Japan News.

The NSPO said it would consider allowing retail stores to share the facial data with other stores in the same industry or other establishments in the region.

The organization proposes to set up a shared biometric database, and store managers can enter the facial data of shoplifting suspects into said database to continually monitor the suspects as he or she visits other stores.

Many retail stores have been using biometric technology in the past five years, however, the majority establishments that use facial recognition do so without publicly notifying any of their customers.

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Employee Theft

April 16, 2015 by Staff Editor Leave a Comment

Employee theft according to the research done by many independent companies, is the number one reason stores across the country lose profits. A loss prevention team can help you address the issue and solve it, but most often than not, the theft that is happening in your store can go undetected for many months, or even years before your or your loss prevention team is aware of it. Training and educating your loss prevention team could save you thousand of dollars every year by making sure they attend workshops or seminars that keep them aware of the happenings of loss prevention every year.

Follow the links below to read more about this topic.

U.S. retail workers are No. 1…in employee theft

Light-fingered employees cost American stores (and consumers) more than shoplifters do.

It’s almost Groundhog Day, but for retailers, the holiday season is finally winding down.

“The four months from October through January are when stores see not just their biggest sales volume of the year, but also the most returns and exchanges,” says Ernie Deyle, a 30-year veteran of the retail loss-prevention wars who leads the business consulting practice at London-based data analytics firm Sysrepublic. “Unfortunately, the same four months account for about half of all annual shrinkage.”

That shrinkage, made up of missing goods from shoplifting and other causes, costs U.S. retailers about $42 billion a year, according to the latest Global Retail Theft Barometer, an annual industry study led by Deyle and inventory management firm Checkpoint Systems.

What Wal-Mart U.S. Executives Learned By ‘Walking The Store’

I began my career in the grocery business as a bagger. During that time I observed that my boss, and sometimes his boss and some other senior executives, would “walk the store”. These walks provided the opportunity to perform visual inspections to see what was going right and wrong with the store. We all understood that we needed to be on our toes in case someone from headquarters decided to pull a surprise visit. This is exactly what the senior management of Wal-Mart (NYSE: WMT) U.S. recently did.

Eight months ago Greg Foran took over the U.S division of Wal-Mart, which has struggled with hit and miss same store sales ranging from -1.5% to positive 2.4% over the past five years. He and his team decided they were going to make it their top priority to understand the business under their charge and that included store visitations. On Apr. 1, they gave investors a strategic update indicating that Wal-Mart U. S. may be losing its grip in executing some basic common sense retailing principles. Let’s examine.

Empty shelves

One of my bosses in the grocery industry had a saying, “we sell groceries not real estate” in reference to empty shelves, with the underlying implication that shelves need to be full of merchandise so that customers can buy it. Customers aren’t interested in the air above empty shelves. Greg Foran noted some occurrences of empty shelves and full backrooms in some of the stores he visited:

Group steals bags of cash from D.M. stores, police say

A group of thieves distracted employees at four grocery stores over the weekend and stole bags of cash, including $10,000 from one business, police say.

Three females and a male would enter a store and pretend to buy items while distracting employees to another part of the business, security video shows. One of them would then steal from behind the counter or an office.

They robbed La Cruz 3 and El Palomino on East 14th Street and La Favorita on East Grand Avenue on Saturday. Saigon Market on Euclid Avenue was robbed Sunday morning, according to police reports.

“They seem to be targeting mom-and-pop type places. Businesses like QuikTrip and Kum & Go have rules about dropping off cash once they get to a certain amount,” said Sgt. Jason Halifax of Des Moines Police Department. “It may suggest the suspects had prior knowledge of how the businesses handle cash.”

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Controlling Retail Shrinkage by the Numbers

April 14, 2015 by Staff Editor Leave a Comment

The margins in a retail business can be slim. It doesn’t take much shrinkage for a store to go from the black to the red. One of the primary roles of a successful store manager is to develop, follow and then tweak a comprehensive security plan. The creation of an effective plan takes a large investment of time, money and effort.

Managers often have gut feelings about where their losses are, and may even have a good idea about how to control them. However, few of them understand — and therefore can’t effectively address — the full scope of the problems. A successful plan starts with knowing the numbers, not indistinct feelings or incomplete ideas.

The yearly National Retail Security Survey (University of Florida) started in 1991and is considered to be the most accurate and comprehensive in the industry. The 2014 report estimates that the total shrinkage amount for retail businesses is $44.25 billion. This is broken down into 5 categories. The numbers have been rounded and don’t add to 100%.

Employee Theft (41%) – Many managers believe shoplifting is their number 1 shrinkage problem and make the mistake of overlooking this statistic, to their detriment. Employees will steal time, money and merchandise. This is regardless of how nice or punitive their supervisor is, good guys get stolen from as much as bad ones do.

Shoplifting (33%) – People steal for a variety of reasons. With the advent of the Internet (which makes it easier to sell stolen items) and the difficult financial times of the last several years it has been steadily on the increase. But, it remains consistently second to employee theft, which has also been rising.

Administrative (15%) – This category represents common human error involving administrative tasks, not deliberate fraud. It includes things such as: miscounting or misplacing stock, money/cash register mistakes, lack of follow through on paperwork and poor record/receipt keeping.

Unknown (7%) – Some researchers view this category as a miscellaneous or catch-all one, where odd or seldom seen circumstances, which don’t fit any other classification, are located.

Vendor Fraud (6%) – This is another area of shrinkage that many managers overlook. They trust their supplier or its representative and ignore all the places (i.e. warehouse, delivery driver, invoices, order forms) where their shipment is shorted “just a few things”.

Before developing a loss prevention security plan it’s vital to understand where the loss is happening. Then valuable resources, time and money, won’t be wasted on ineffectual systems, training and equipment. Good managers know their employees, customers and suppliers, and have a feeling about where the problems are. Great managers know all that too, but they back up their subjective feelings with objective numbers.

Nicole Abbott is a writer and psycho-therapist with over 20 years of experience in the fields of mental health and addiction. She’s an educator, consultant, lecturer, trainer and facilitator, who’s conducted over 200 workshops, trainings, presentations, college classes and seminars.

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The Tricks of the Shoplifter

April 9, 2015 by Staff Editor Leave a Comment

Managing or owning a retail store is not easy. Shoplifters and employee theft are in some instances a daily occurrence, and the profits you were thinking you were getting have disappear. The digital age has brought information to the young mind easily and instantaneously, and although some use it for the benefit of their mind, others use it to cause harm and to commit crimes. Have you checked the videos on Youtube about how to shoplift? From how to shoplift and not get caught, to instructions on how to prepare before shoplifting. Yes, your shoplifting prevention team has to be aware of these tactics to be effective apprehending shoplifters.

Follow the links below for more information.

Video:

How To Shoplift Without Getting Caught Using a “Thief Book”

Female shoplifters caught on camera

Several supermarkets have complained that social customs enable women to steal with impunity.

Muhammad Hamouda, sales manager at an electrical accessories company, said 70 percent of thefts in his shop are made by females, primarily stealing women’s accessories.

Most thefts are monitored on closed-circuit TVs, which have also revealed various tricks of these thieves, particularly women with large handbags into which laptops, devices for hair and body care can be concealed. Only female security staff at supermarkets can deal with women thieves.

Hamouda said: “Mostly shops do not complain to police, but demand a written confession with a copy of her identity card, and then let her go free. But there are also shops that make her pay double the price of the article she shoplifted and she is prohibited against stepping inside the shop in future,” he said, adding that some ladies deny the charges and threaten to call the Haia as a means of defense.

Muhammad Asiri, a salesman in Asir, said there were suspicious disappearances of women’s accessories such perfumes, vanity bags and rings, discovered at the end of the month. Guards do not notice anything because the missing articles were mostly light and can be easily hidden. Occasionally there are gangs of women involved in these thefts, Asiri said.

Confessions of a teenage shoplifter

Anonymous

I couldn’t help letting out a low whistle of admiration when I read news that the cost of goods stolen in the average shoplifting incident is now £241. Bloody hell, I thought, as I tried to imagine how exactly you would stash that many eye-shadow compacts up your sleeve. You see for a few months back when I was 16, shoplifting was the hottest craze at my suburban girls school. It spread like a virus through Year 11, to the point that students would pop into town at lunch and return with a huge cache of stolen goods. They’d upturn the contents of their bags on to a desk with a shout of: “Who wants what?” Now, the thieves providing the British Retail Consortium with a headache this week with their high-cost hauls are more likely to be professional “steal to order” shoplifters, not a gang of feckless teenage girls. Nevertheless, it instantly brought back that rush of adrenaline that always follows a bout of five-finger discount “shopping”.

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The Costs of “Wardrobing”

March 31, 2015 by Staff Editor Leave a Comment

According to the National Retail Federation’s annual survey, it is estimated the industry loses approximately $9.1 billion yearly in return fraud. This includes refunds on merchandising that has been stolen and a practice like “wardrobing” that is costing retailers this incredible amount. Those incidents are done by employees as well as shoppers and shoplifters. To read more about this topic follow the links below for more information.

NOT-SO-HAPPY RETURNS: RETAIL FEDERATION HIGHLIGHTS “WARDROBING” COSTS

In a new survey, the National Retail Federation says that holiday-return fraud could end up costing stores billions this year. The worst part? This scam is more organized than ever.

The holidays are over, but stores big and small will be dealing with more than the memories.

That’s according to the National Retail Federation (NRF), which reported late last month that during the holiday season alone, retailers could face as much as $3.8 billion in lost revenue from fraudulent returns, an increase from $3.4 billion in 2013 and a big chunk of the estimated $10.9 billion in return fraud in 2014 as a whole.

The organization’s 2014 Return Fraud Survey [PDF], which gathered responses from loss-prevention executives at 60 retailers, shows that retailers suspect that 5.5 percent of holiday returns are fraudulent. And while technology has helped curb illegitimate returns, NRF said, there’s only so much companies can do about retail fraud, which is often suspected to be the work of crime rings.

Eliminate the Practice of Wardrobing in Your Store

Well here’s a new one to me. The art of wardrobing. It’s a term coined for shoppers who buy merchandise with the full intent of using it, then returning it for a full refund. Take a read of the article as the insight is fascinating.

I was astounded to learn that “nearly two-thirds of merchants had items wardrobed in 2007, up from 56 percent the year before, the first year the National Retail Federation (NRF) started tracking the trend,” according to the article.

The term wardrobing was chosen (I’m guessing) because it stems from clothing that’s been purchased, worn and then returned. But the article points out that wardrobing has taken on a broader meaning and is now applied to any merchandise that’s been used and then returned.

So how big is wardrobing? The article points out that “Wardrobers want to rent the things they want or need for free, which amounts to fraud, said Richard Hollinger, a criminology professor at the University of Florida who specializes in retail theft. He said return fraud, which includes wardrobing, fake receipts, and other practices, cost retailers an estimated $10.8 billion last year, up from $9.6 billion in 2006.”

RETURN FRAUD COST 9.1 BILLION IN 2013

Criminals trying to get refunds on stolen merchandise and customers engaged in practices like “wardrobing” cost retailers an estimated $9.1 billion in return fraud last year, according to NRF’s annual survey.

“While coverage of this issue paints return fraud as one of the less severe retail crimes, the fact of the matter is that returning used or stolen merchandise — or even using false tender to purchase items — is fraud, period,” NRF vice president for loss prevention Rich Mellor said in a release accompanying the survey. “Efforts to combat fraudulent activity are slowly starting to work, but criminals are becoming more savvy and technologically advanced in their methods.”

The dollar amount of fraud was up 2.8 percent from 2012, but the proportion of returns believed to be fraudulent (3.4 percent) remained the same. During the just-finished holiday season, fraud totaled an estimated $3.4 billion.

Fraud was experienced by virtually all retailers, with stolen merchandise involved in 95 percent of cases. Employee fraud accounted for 93 percent of incidents; 69 percent were returns of items purchased with fraudulent payment like stolen or counterfeit gift cards. Wardrobing — where customers typically purchase a dress for a party or a big-screen television for the Super Bowl and return the item after it has been used — accounted for 62 percent.

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Wardrobing & Returns

March 30, 2015 by Staff Editor Leave a Comment

There is a new term in the retail dictionary. “Wardrobing” is the process where a customer purchases a piece of your merchandise, uses it one time, then returns it claiming a small flaw or just taking advantage of your liberal return policy.

We see this especially in clothing such as expensive dresses, prom dresses, shoes and suits. But tools, electronics, beach wear and more can be a target. The problem is hardly new. However, it has always been frustrating. Not only has the retailer experienced a loss since the merchandise is no longer new but chances are that you or your staff put a considerable amount of time into the initial sales process. Couple that with tight margins and expenses and the problem gets expensive quickly.

Add to this that word will spread. If your store is known as an easy mark for wardrobing, then this kind of shopper will flock to you like metal to a magnet.

The problem is also not just a brick and mortar store problem. In many ways it is worse for online stores. Because it is a faceless transaction, the shopper is more likely to feel comfortable about doing this.

Whether it is right/wrong or illegal, is a side issue. Wardrobing causes Retailers significant losses.

So how do we fix the wardrobing problem that leads to your returns being higher than they should be? First look at your return policy. Have you dusted it off lately and updated it? Look at the circumstances of accepting returns. Look at the time limits. Is there a restocking fee? Is the customer responsible for shipping on certain items? Look at your competition’s return policies both in store and on-line. Maybe they have solved the problem and the wardrobers are now coming to you. If you would like, I can also be an LP sounding board (at no charge) for your return policy. Just call me, Bill Bregar, at 770-426-7593 x101.

We also offer an excellent fix for wardrobing. The “Shark Tag” by Alpha High Theft solutions basically puts an end to wardrobing. Shark tags are bright tags that mount directly to the merchandise or can be attached via a lanyard. An example could be that the Alpha Shark Tag is placed in a very obvious area such as the bust line (as a guy I would notice it!) of a prom dress. The Shark tag can be removed easily by the customer at home with a pair of ordinary scissors. Once the Shark Tag is removed, your stores policy kicks in. Without the Shark Tag attached, a return is no longer possible.

Also, Shark Tags are VERY inexpensive! If you would like a sample, please contact us.

Remember, you and your staff put a lot of time, effort and expense into your sales efforts. Do not let the thieves or even the wardrobers, rob you of your margins or even your business!

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