WHAT CAN EAS TAGS DO FOR YOU?

August 8, 2015 by Leave a Comment

shoplifting3The technology placed in retail anti-theft devices seems to change and evolve every month. Every time I go to an expo, or browse online, I always find new and exciting tools to reduce shrink and protect the financial investment I have in my inventory. Most people assume that EAS devices are there to stop a shoplifter, and while that is absolutely true, they can also be used for training your employees.

In a perfect world, I would hire a cashier and they would be familiar with every item that I sell in my store. They would know the difference between a $20 fishing pole and a $200 one. They would be able to tell the difference between a $250 paintball marker and a box of paintballs. In reality though, they do not. So how do I get my cashiers to think like an LP? It’s easy… I make it dummy proof.

My store carries a good selection of offshore fishing rods that are easily over 6 feet long. Nobody is putting these bad boys down their pants and walking out the store. I still secure them with an EAS device. Same goes for those big expensive coolers. Those aren’t simply walking out of the store, but I’ve got EAS tags on those too. To some, this may be unnecessary and a waste of the resource and tools. To me, though, it’s one more way I make it easy for my cashiers to know what they are scanning.

Just the other day, one of my cashiers called me over for a customer that was trying to purchase one of those big fishing reels. Problem was it was scanning at the register for $14. These retail for $199. How did the cashier identify the fraud? It’s because she was trained to identify the retail anti-theft device placed on the rod. She doesn’t have to know a single thing about offshore fishing, but she sure as heck knows that if it has that security device, it will cost more than $100!

While EAS devices can and will deter a shoplifter, that doesn’t always account of all the other types of theft that criminals will come up with. Price switching is a very common fraud scheme and with inattentive and untrained cashiers, you could be opening yourself up to substantial losses. While it’s highly unlikely that someone will attempt to conceal a tennis racquet, there will be those who will attempt to alter its pricing indicator. Be ready for them next time with this simple, easy and effective way to leverage your EAS assets in a way that you may not have considered before.

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EMPLOYEE THEFT MOVES INTO ONLINE MARKETPLACES

August 8, 2015 by Leave a Comment

theft (13)This past month, I closed out one of the biggest employee theft cases of my career thus far. While it was quite exciting and a huge win for my team, it left a lot of questions about our internal controls, that after this case, surely must evolve. Lots of people that I come into to contact with really misconstrue the facts regarding employee theft. You’ve heard the phrase before… “You have more internal theft than external theft.” Every time I hear this phrase, I find myself trying to educate the manager on this. While most people assume that 75% percent of their employees steal, realistically, only a very small percentage of employees engage in this behavior. Those that do though, create a substantial financial loss to the company.

As part of my investigative routine, I normally check online sale sites for possible stolen merchandise. Selling stolen product online is most likely to quickest and easiest way to get rid of goods in a hurry. As I was browsing through I noticed a pair of wireless headphones that had just hit our stores. Interesting enough, the item still had our company markings on it. From there I was able to quickly identify the geographical area and before long I was able to identify the owner of the page. That owner was a warehouse supervisor at one of my stores.

Well, it didn’t take long for me to find quite literally, hundreds and hundreds of items either that had previously been sold, or were up for sale on this website. Lots of these items were electronics such as cameras, headphones, accessories, phone cases and other large bulk product such as coolers and outdoor furniture. Looking at the store’s inventory I could tell that some of the product had in fact come from that location. Over the course of several weeks, I initiated several online purchases. Most were for electronic devices that had a serial number. Once received, I was able to determine that the items did in fact belong to that store and those particular items were not accounted for. I had made my case.

How was this associate getting this much product out the door without anyone noticing him? I still didn’t have that piece of the puzzle. Without enough ammunition for prosecution, I interviewed this supervisor to determine how he was obtaining this much product. I knew it was stolen, I just didn’t know by whom and in what manner. What I uncovered during this interview was one of the most sophisticated and organized theft operations I have seen in my career.

That particular store was also a hub warehouse. This means that online purchases made by customers in a certain geographical area would be sent to our store and warehouse to fulfill. This of course gets the item to the customer much faster than going through our centralized distribution center. Once the order was filled for a customer, it would be packed and set in a designated area and a private mail delivery service would pick up once a day.

The supervisor had gained access to the shipping account, so he was able to ship product out without anyone second guessing the boxes. At first, according to our records and his online account, he was shipping merchandise directly to his customer’s houses. He said that he thought that was a bit risky and ultimately began shipping massive quantities of merchandise to a vacant home close to his. Each day, he would pass by and take the packages from the porch. From there, he would run his online store. This had been going on for the past two years. This one employee, working alone had taken nearly $250K worth of merchandise over this time period.

With the dishonest employee out of our store, we focused on what went wrong. We began a program of inspecting all boxes and shipments prior to them being sealed and implemented a system that a number of shipping boxes each day could be verified. We also set up exception style reports that showed any time a delivery was sent to the same address more than 5 times a month. This was a costly lesson for us to learn and hopefully with better controls and more oversight, it will never happen again.

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Warning Signals of Theft by Outsiders

July 2, 2015 by Leave a Comment

theft (2)Last month I discussed the Warning Signals of Employee Theft. Employees account for an average of 45% of a Retailer’s losses. However, shoplifters and vendors account for another 35% on average.

As business owners we work hard to run our business. We deal with a number of liabilities every day and people who have never owned a business rarely understand that. We have to keep a number of balls rolling on the table at the same time: Sales, inventory, ordering, human resources, payroll, insurance and expenses just to name a few of the more common ones.

Contrary to current reports and opinion we see in the news more and more, we business owners are not the evil, money hording ogres that is sometimes portrayed. We work hard for our profits and many times we invest most of that back into the businesses.

So when someone steals from us regardless of the amount or type, it is a huge hit to our bottom line. What many Retailers do not understand is the impact. Theft of toilet paper or cleaning supplies from our restroom has the same impact as the theft of merchandise. It still costs us money and we have to replace it.

Many Retailers do not understand the true impact of shrink or loss. For example: If your store’s shrinkage this year is $100,000, that’s $273.97 in shrinkage every day.  Is that the total impact on the bottom line?

Consider this: For your organization to simply recover or break even on a $100,000 shrink or loss, you would have to sell an additional $13,698.50 every day!  ($273.97 divided by .02% profit margin) This is on top of your normal sales.      

Think about this…how many more items would you have to order, receive, count, mark, prepare paperwork for, stock, and finally sell just to produce these extra sales?

Add to this the fact that shrinkage really cannot be recovered. You then begin to understand why one-third of US business failures are blamed on theft.

The obvious solution is to prevent the theft, errors and abuse that cause loss in the first place. To that end here is a list of early warning signals of theft by shoplifters and outsiders to our business:

1. Unusually large or frequent refunds to a particular customer for returned merchandise.

2. Anonymous phone calls or letters concerning theft.

3. Unusually friendly relationships among employees and outsiders such as truck drivers, repairmen and trash collectors.

4. Frequent contact among employees and visitors (that do not appear to be customers), especially those visitors who carry shopping bags or other containers.

5. Contact by employees with gamblers, drug dealers, gang members, loan sharks, etc.

6. Many customers that always deal with one employee and refuse to buy from anyone else.

7. Your stock being sold in outlets, e-bay…. That never buy from the company.

8. Gifts or favors to accounts payable employees from suppliers or to accounts receivable employees from customers.

9. Reduced purchases by customers who deal closely with warehouse or shipping personnel.

10. Presence of outside personnel (telephone repair, building service, salesmen, etc.) in areas where they have no legitimate business, or in un-business like communication with employees.

11. Newly received items being sold in flea markets, e-bay, on-line….

12. Complaints received from other businesses or retailers.

13. Shoplifters are always blamed for the theft.

14. Gifts or favors from other retailers accepted by your employees.

Remember – It is of greater benefit to us to anticipate losses, procedural defects or lax enforcement of controls, then to concentrate only on resolving losses that should have never occurred.

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DETECTING FAKES – COUNTERFEIT MONEY

July 2, 2015 by Leave a Comment

Money1If you hadn’t noticed, every couple of years, the US Treasury completely redesigns the American currency. Just compare a few Ben Franklins from today and just a few years ago. They are radically different. Just in the last decade, the US has added different colors, designs, watermarks and other highly sophisticated elements into its currency to help reduce the prevalence of counterfeit dollars.

Just today, I was called by one of my stores about some funny money. It seems as if one of our new cashiers had accepted 5 crisp, new and ultimately fake, $100 bills. To say I was a bit frustrated was an understatement. For all the technology out there, it all still comes down to a cashier simply paying attention. You may say to yourself that it’s impossible for a fake bill to pass through your store. Maybe you think this because you have that fancy counterfeit detector pen. Would you be surprised if I told you that some of the better fakes can pass that test with flying colors? Yep, it’s true. I’ve personally seen some exceptionally made $20’s that, when marked, appear to be legit. So if the markers don’t work, how can you stop the madness?

Training. Training. More training. Your cashier is you last line of defense. They are taking in money all day long, so it’s only common sense that they be able to detect a fake quickly. I have friends in the banking industry and there are people out there that can spot a fake blind folded (based solely on the feel of the paper). So what’s your first step? The US Secret Service has a website dedicated to the detection of counterfeit currency. (http://www.secretservice.gov/know_your_money.shtml and http://www.newmoney.gov/). I constantly reference these resources when I’m conducting new store training, or manager training in my stores. You can’t get any better training material out there and the best part is that it’s all free!

Just as any other fraud scheme, the fraudsters will compete with new technology to defeat the controls and new controls will be implemented to fight the fraudsters. Counterfeiting is no different and as technology improves, you can bet that our dollars will get smarter. By staying on top of the latest changes and trends though, you can do your part to save your business the embarrassment of accepting phony tender.

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TIPS FOR PRE-EMPLOYMENT SCREENINGS

July 2, 2015 by Leave a Comment

image3-NEOBIZMAGDid you know that turnover and shrink play hand in hand? Stores that have less turnover, generally speaking, have lower shrink than their counterparts with higher turnover. So what can you do as managers and owners to reduce turnover? There are the standard answers you can easily find like “improve morale,” or “offer a generous salary and benefits package”. Reducing turnover starts with hiring the best candidate for the job. That starts with a solid hiring process.

I can’t begin to tell you just how many times I’ve cringed at the way I’ve seen managers’ interview candidates. They range from the “cookie-cutter” manager who simply asks the questions on the interview guide, to the manager who does all the talking. (Seriously, I’ve been in the office for several of these types. The manager literally will talk for 15 minutes and without so much as peep from the candidate, offer a job). Someone has to train the manager on proper hiring techniques, for starters. This protects you legally (there are some questions you can’t ask)! And it helps shield you from a bad apple (employees never steal from their employer, right)? Here’s a few suggestions of what your managers should be asking.

Can you tell me a little about your work ethic and how it separates you from other candidates?

If your candidate doesn’t know what work ethic is, then chances are, they are not the candidate for you. Take this time to listen to what they are saying. Anyone can show up to work on time and coast through the day. It’s hard to find someone with a strong work ethic these days. It’s not something that can be learned in school.

If hired, how would you sell yourself to the rest of the team?

How will your candidate establish credibility in your organization? Will then lead with an iron fist, or will they be a true leader and gain the respect of the rank and file?

What do you think is worse; a cashier who steals $20k to support her mother’s cancer treatment, or an electronics associate stealing computers to fuel a drug addiction?

Does your candidate possess a bit of empathy? While both scenarios illustrate internal theft, the first can be reasoned some (a little). It’s good to see what your candidate says about employee theft in a general sense here as well. The last thing you want is to hire someone that will steal from you.

How important is confidentiality?

This is a very important question, especially if you are hiring a supervisor, or a manager. Not only are we talking about keeping employee issues confidential, but also your company sales figures, market position and other proprietary information. A good candidate will understand just how important staying tight-lipped is to your business.

Can you tell me about your greatest failure?

This is my personal favorite. I close out every interview with this question. I need to see that my candidate is human. Nobody is perfect and everyone will make mistakes. Find out the biggest mistake your candidate made and then how they reacted to it and moved forward. You’ll be surprised at what you may hear with this one.

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Credit Card Fraud and the Rollout of EMV

July 2, 2015 by Leave a Comment

shopliftingSome major changes are taking shape this year to help combat the ever rising prevalence of identity theft and credit card fraud. With it comes some confusion for the small business owner. Credit card fraud (duplicated cards, cloned credit cards, data breaches…etc) losses mount in the hundreds of millions of dollars every year. The numbers are doubling every couple of years. Chances are, you’ve been the victim, you’ve known someone who’s been a victim, or someone (or a group of someones) have used fraudulent credit cards in your store before. The new EMV (Europay, MasterCard and Visa) aims to derail these operations by installing a tiny computer chip on your credit card, instead of using a magnetic strip (which can be very easily duplicated). The “deadline” issued by the major credit card companies is October 15, 2015. That doesn’t mean everyone will be onboard though. You can bet that those large retailers will have the new software and POS systems in place, but where does that leave small businesses? What can you expect from this? And the big question is, how much is it going to cost you?

Basically, the United States is behind most other countries in the developed world with regards to credit card security. It’s time for us to play catch-up, but it could lead to some pretty substantive business expenses. Currently, cards issued in the US have a magnetic strip on the back of the card, which is swiped at the point of sale. That magnetic strip contains unchanging data. If a fraudster (think massive data breaches over the last few years), gets the information contained in the strip, credit cards can be duplicated, replicated and counterfeited, and thus the booming fraudulent credit card industry is born. It’s such a problem that law enforcement is overwhelmed. It’s impossible for them to investigate every time a card is used; they simply do not have the resources. Federal agencies focus on the counterfeiters themselves, but more often than not they are made overseas, far out of the reach of US prosecution. Enter EMV.

New cards, which have already begun hitting consumer pockets, will have a tiny computer chip embedded in the card. At first, they will also contain a magnetic strip (a backup until all businesses are 100% compliant). Unlike the strip, the computer chip will be inserted into the businesses POS via a card reader and a unique transaction code generated for each transaction, making cloned or counterfeit cards virtually impossible. It means a more secured card and less risk on the back of the issuer. In addition, the liability of loss will eventually shift from the issuer to the less EMV compliant party (the business). Basically, if a fraudster uses a fraudulent credit card in your store, you very well could be liable for those charges if you don’t have the proper technology installed.

This radical shift has both positive and negative impacts. First of all, it will reduce brick and mortar credit card fraud. On the opposite side, it will more than likely push the fraud to an e-com platform. Europe has seen this happen over the last few years. This will no doubt happen here as well. Criminals will always find a way. Second, small business owners like yourself will have to incur the cost of updating your payment processing systems. In some cases, it may be a few hundred dollars, but the costs can spiral into the thousands depending on your particular business and how your POS is currently set up. While I think this was a great step in the right direction to minimize fraud, I think the small business community will face some initial costs associate with the transition, as well as a tad bit of frustration.

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Organized Employee Theft

May 29, 2015 by Leave a Comment

theft (12)I seriously try not to be surprised anymore. During any given day, there is no telling what will come across my desk. As an investigator for my company’s Asset Protection department, there are no two days the same. I have two main focuses. One being organized retail theft and the other is employee theft. Ten years in and I haven’t figured out which one I love more. The external cases keep me on my toes, but the employees really do come up with some very clever ways to steal from me. Sometimes the two worlds collide for a case that is truly amazing.

Take one of my stores for example. It was time for their inventory and two days later we get the final numbers. The appliance department shows that it’s in the negative almost $200K. This is impossible. Every piece of equipment delivered to the store gets checked in, so there’s no chance of shipping errors. It’s pretty hard for a customer to stuff a dryer down their pants, so external theft is out. The only other option out there is employee theft. Again though, you would think it would be obvious if an employee was stealing a large bulk item. Unless of course, half the store is in on the theft.

It didn’t take much research after that inventory to find out what was happening. The basic fraud scheme was this. A customer. A legitimate customer would come into the store looking to purchase a new home appliance. After speaking with one of the sales consultants (dishonest employee), the customer would be duped into thinking there is a special clearance item that meets their needs that just happens to be heavily reduced in price. The sales person would then tell the customer that the system was down and that his register was only accepting cash, and that the store was also short on change, so it had to be the exact dollar amount. In all, several steps, but all believable to an honest customer who just thinks they are getting a deal.

Once the sales person would collect the cash (normally about ½ the retail value of the item), they would call an accomplice in the warehouse. A phony pick label would be generated in order for it to be pulled from the warehouse. An AP associate is required to sign off whenever bulk merchandise is loaded, however the majority of this store’s AP staff was unfortunately, in on the scheme. At the end of the night, the cash would be split. For a busy store such as this one, the associates were splitting thousands of dollars a week. This organized employee theft scheme went on, unchecked, for nearly a year.

During our investigation, we found the ring leader of the bunch, who happened to be an AP supervisor for the location. He stated that it happened once for a friend and he saw just how easy it was to make some extra cash on the side. Before he knew it, things had snowballed into a very elaborate, sophisticated and organized scheme. Never before had I prosecuted an employee theft case so large and organized. So organized that the District Attorney charged all involved with Organized Retail Theft, a statute that I had never seen used with employee theft. In total, these 10 or so employees had cost the store nearly $200K in losses. Each one of the employees were found guilty of their charge and due to the dollar values, some of them actually did a few weeks in a state prison.

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Warning Signals Of Employee Theft

May 29, 2015 by Leave a Comment

theft (2)As Business Owners we are “hit” with something that we did not or could not see coming. A piece of equipment breaks, a key employee is in an accident and gone for an extended period of time, etc.  Many times this also applies to employee theft: We simply did not see it coming.

However, there is a difference with employee theft and the first two examples. Employee theft is usually preceded by warning signals. Many Business Owners and Managers simply do not know what they are or do not see the forest for the trees.

When you look at this list, keep something in mind. One of these things, all by themselves probably mean nothing but in my 35 years of dealing personally with 2300+ employee theft investigations, I have found that most of the time two or more of these factors are present in enough time that a responsible party should have seen the warning signals. 

Personal behavior is the key area to watch:

1.Double talk or inconsistencies by an employee who is explaining discrepancies or “errors”.

2.Borrowing, particularly from loan sharks, but also habitual borrowing of any kind.

3.Symptoms of a drug user.

4.Admission of theft from prior employer.

5.Violent temper or other unpleasant behavior, which tends to discourage people from asking questions.

6.Expensive habits such as heavy drinking, drugs, extra-marital affairs.

7.Having more money or spending more than earnings could support:

–  Flashes big roll of money

–  Buys expensive items–jewelry, car, house, boat

–  Has expensive hobby

–  Always picks up check at restaurant

–  Dresses expensively

8.Disgruntled, dislikes boss or company and complains about being underpaid or overworked.

9.Heavy gambling on horses, cards, numbers, sports, etc.

10.Abnormal fear of, or antagonism toward, security or management personnel.

11.Possession of knife, gun or other weapon.

12.Terrorization of one employee by another.

13.Advocating violence as a way to resolve routine problems.

14.Never takes time off or vacation, comes in during vacation or day off.

15.Concealed family relationships among associates.

16.Chronic employee conversations that cease when management approaches.

17.Employees who never make purchases.

18.Employees who are “wary” of members of management.

19.Constant complainers.

Too often, signals pointing to internal theft, even when noticed, are mistakenly ascribed to chance, error, coincidence, or some other benign circumstance…and the signals are ignored.

Remember, a thief, like a magician, depends on you misinterpreting the obvious…or on his or her ability to confuse you.  Don’t be deceived, distracted or misled.

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Take a Bite out of Shoplifting – Literally

May 29, 2015 by Leave a Comment

shoplifting5Shoplifters are great. Well, not great for business, but great for laughs sometimes. Most of the times, shoplifting incidents are pretty serious business. You’re confronting someone who has just committed a crime. You don’t know their state of mind and you definitely don’t know what they are capable of. I’ve personally been pepper sprayed by a shoplifter as they tried to escape, along with seeing countless managers suffer the same fate. Often suspects immediately want to become physical and more simply will flee the store. Every now and then karma and a little luck is on your side.

I was training a new LP agent last summer in a very active market. It was day four of our training and she had already thrown a half dozen folks in jail. So far, no problems, this particular agent was an attractive young female who didn’t take lip from ANYONE! It was amazing how many shoplifters hit on her… but we’ll save those stories for another time. The clock was ticking away and it was just about time to call it a night when one of our frequent flyers entered the store. I had busted this guy on no less than three previous thefts and he was definitely a runner. I had my new agent begin observation while I contacted the police. At the very least, I was going to charge him with trespassing. 

About 15 minutes goes by and like always, the shoplifter starts loading his pants up with electronics. About this time, the police were arriving, so I went outside to inform them of the situation and wait for the thief and my agent to exit the store. Well, she didn’t disappoint. Our thief exits, but completely ignores the agent and takes off running. The next thing I know he’s gone. He’s hiding around the vehicles in the parking lot, but we can’t seem to find him. The officer gets on his loudspeaker and announces that he’s going to let the K-9 unit loose if he doesn’t turn himself in. No answer. 

Standing a full 3.5 feet tall and weighing in at about 120 pounds, K-9 Officer Scout is ready for action. This is a game for the pooch and I can tell he’s ready to play. Within seconds of jumping out of the patrol car, he and his handler are on the scent. Like a scene from a movie, out of nowhere, the shoplifter emerges. Only… he doesn’t surrender. In true idiot fashion, he starts sprinting across the parking lot. I don’t care how fast you think you are; you will never outrun a German shepherd whose sole purpose in life is to take you down. And take him down he did. When the handler finally reached the scene the shoplifter had a knife he was trying to stab the K-9 officer with. Not only did this shoplifter go to jail with some pretty serious bite wounds, he also got to feel what 100,000 volts of electricity from a Taser felt like. 

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Who is really running my store? A Strong Case for Employee Background Checks

May 29, 2015 by Leave a Comment

shoplifting4Coming from big box retail, I never realized just how uncommon employee background checks are in terms of smaller businesses, until I worked for one. While it’s standard practice for major retailers to run a pre-employment screening, there are plenty of stores and business out there that simply don’t. This could be a problem. It could be a problem for you, your business, your other employees and your customers. Knowing who you employ shouldn’t be a luxury. It is and should be, a necessity.

One of my first LP jobs was a district manager position for a very small chain of hardware stores. If I recall, they only have about 50 stores. When I first came on, they were building up their LP program and lacked several basic control measures in place. Think EAS, CCTV, exception based reporting and basic physical security measures. Heck, the stores weren’t even equipped with alarm panels. Part of my job was to help build their LP department to better assist the stores in becoming more profitable, assist in inventory reductions as well as limiting a very high turnover rate. After my first couple of weeks, it was clear that in order to help all of those categories, store managers needed to make better hiring decisions and that all starts with a thorough background check. 

It didn’t take much convincing and the company eventually found a company to process the screenings for us for a very competitive rate. Part of our new policy was to run the background checks on all of our current store managers. What we found was very disturbing. Out of 50 store managers, nearly 20 of them had extensive criminal records. Records that including prison time, drug and weapons charges, assaults, counterfeiting, forgery, fraud and even murder. These were our store managers! Not surprising, these 20 or so managers all had some of the worst performing stores. Literally, every one of those stores had shrink, turnover and moral issues. Coincidence? I think not. 

It took almost two years to fully implement and turnover some of those managers, but eventually the company was able to start with a clean slate. Now, every employee, prior to being offered a position with that company is required to submit to a background check. Anything other than simple misdemeanor traffic violations results in a disqualification of employment. I can tell you that those stores operate more efficiently, there is less shrink and turnover and employee morale high. If your company is not reviewing the backgrounds of your employees, ask yourself, “Who is really running my store?”

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