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.
