What Haooens If Someone Steals From A Customer In A Retail Store And There Is No Cameras

Loss prevention refers to the deportment a business takes to reduce theft and fraud. These preventable losses, caused by human mistake or deliberate efforts, are known equally "shrinkage."

Shoplifting and employee theft make up the majority of a $61 billion annual problem for the retail industry. The increase in incidents and new means to steal are encouraging retailers to invest in new technology to reduce inventory shrinkage.

So what preventive measures tin can yous put in place to reduce loss and protect your profits? This guide volition walk you through dissimilar types of inventory shrinkage, plus strategies and examples to help mitigate risk in your retail business.

What is loss prevention?

Loss prevention is any practice taken to reduce theft, fraud, and errors in a business. The goal of loss prevention is to eliminate preventable loss and preserve profits. It's primarily found in retail but also exists in business environments.

Retail loss prevention is responsible for identifying shrinkage causes and following up with solutions. Businesses oft will implement strategies like hiring a loss prevention managing director or installing security cameras to improve loss prevention and increment profits.

Loss prevention continues to be a challenge on both digital and retail fronts, from skilled cyber criminals to shoplifters who steal depression-priced items. The risk has become more than of a priority to retailers over the concluding five years, according to the 2020 National Retail Security Survey:

Organized retail crime (i.e., shoplifting, cargo theft) has become more than of a priority for 60% of retailers.
Internal theft (i.e., employee theft) has become more than of a priority for 58% of retailers.
Return fraud has go more of a priority for 53% of retailers.

Loss, also referred to as shrinkage, robs your retail concern of its profits. The higher your shrinkage, the harder it'southward going to be for you to stay in business concern. Addressing loss tin can atomic number 82 to unexpected benefits across saving money, including meliorate employee training, improved security and prevention measures, and amend customer service.

What is shrinkage?

Shrinkage is an accounting term used to describe when a store has fewer items in stock than in its recorded book inventory. Factors contributing to shrinkage include employee theft, shoplifting, administrative errors, vendor fraud, production impairment, and more. Shrinkage has a direct correlation with turn a profit: the higher your shrinkage, the lower your profits.

The 2020 National Retail Security Survey plant shrinkage at an all-fourth dimension high, bookkeeping for 1.62% of a retailer's bottom line, costing the industry $61.7 billion. Virtually twice equally many businesses reported shrink rates of 3% or higher compared to previous years.

Let's apply shrinkage to your day-to-solar day functioning: say you receive products to sell from a vendor worth $10,000. You'll record the dollar value of the inventory on your balance sheet as a current nugget. Each time you sell an particular, the inventory account is lowered past the toll of the product and you lot record revenue for the sale.

Say you lose some inventory, for whatever reason. There will exist a discrepancy between your physical inventory and book inventory. The divergence betwixt the ii is shrinkage.

If your volume inventory is $10,000 but your physical inventory is only $9,000, then some of that inventory is lost and the shrinkage is $1,000. The large issue?

If y'all lose inventory through shrinkage, you cannot recover the cost of the trade because in that location is nothing to sell or return, which direct impacts your bottom line.

Some businesses volition try to cover the cost of shrinkage by increasing prices for the customer. They now have to behave the weight of theft and inefficiency. If your customers are toll sensitive, shrinkage can besides damage your customer relationships and sales.

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Types of inventory shrinkage

At present that you understand the nuts of loss prevention and its touch on retailers, let'due south look at common types of inventory shrinkage:

Shoplifting or theft
Return fraud
Employee theft
Administrative fault
Vendor fraud
Unattributed loss

Shoplifting or theft

Jack L. Hayes International'due south 33rd Annual Retail Theft Survey found shoplifting case value increased xiii% in 2020. Shoplifting represents the largest unmarried share of retail shrinkage, accounting for over 35% of annual losses.

When you think almost shoplifting, you might picture someone walking out the door with a product tucked nether their shirt—and that is role of the shoplifting problem.

But it isn't the whole pic. Shoplifters may steal items ranging in cost from $1 to $1,000. They may work alone or in a group of thieves. They may strike in one case or come back every week.

Shoplifting can take many forms and it can exist a problem for any and every retailer. That'southward why it'southward vital that you take steps to mitigate the potential for shoplifting in your shop.

Here are a few ways you tin can do only that:

Conspicuous surveillance and signage. Don't underestimate the power of monitoring your shop and making it very articulate to customers that you are doing so. Surveillance cameras enable you to catch shoplifters before they always leave the store, and signage reminding customers nigh cameras and your willingness to prosecute shoplifters can go a long way in deterring that behavior.
Deliberate store organization. Depending on your store'south layout, you might be making it fifty-fifty easier for shoplifters to exercise their matter. Dark or unmonitored corners and overflowing or disorganized merchandise brand it easy for shoplifting to go undetected. After all, how tin can you tell something's missing when you don't know where it was to begin with? If your store carries expensive or ofttimes shoplifted items, consider locking them away in a case.
Great customer service. Encourage your staff to greet customers when they enter the shop, offer help as they look around, and always staff areas like plumbing fixtures rooms. Reminding shoppers that in that location are people around to grab shoplifters is another great way to deter shoplifting behavior.

Return fraud

I of the more than overlooked causes of retail loss is return fraud. It's overlooked because render fraud can exist tough to spot in the commencement place—its effects only evident as they add up throughout the year. Return fraud can too take several different forms, including:

Returning stolen merchandise
Returning merchandise purchased with counterfeit money
Returning used trade
Using apocryphal receipts to return merchandise
Returning exchanged trade

Return fraud is harder to curb than shoplifting because of all the ways it can play out. Yet, you can combat each form of return fraud with an intelligent return and exchange policy that employees consistently enforce:

Require receipts for cash returns. Well-nigh retailers require a receipt to get a cash refund for returned items, and y'all should, as well. No receipt ways customers can simply receive store credit or exchange the detail. Brand certain employees enforce this policy 100% of the time.
Train employees to spot return fraud. Fraudulent returns aren't as obvious every bit shoplifting. That's why employee training to spot and end return fraud is a must.
Require an ID to runway returns. Regardless of your render policy and staff training, some fraudulent returns slip through. It's a good idea to require a valid ID during all render and exchange transactions so you can flag and address customers with frequent or iffy return beliefs.

Fortunately, return fraud simply makes up about 6% of returns, according to the National Retail Federation. If you desire to get the most from your returns policy, read Recurring Refunds: How Retailers Tin can Deal with 'Series Returners.'

Employee theft

Employee theft isn't something retailers desire to accept to worry about. It's easy to say yous trust your employees and leave it at that.

Declining to properly prepare for internal theft leaves y'all vulnerable, however. Subsequently all, employee theft makes up 90% of significant theft losses, with businesses losing $50 billion per year as a result.

Employee theft tin take many forms, and not all of it looks like the straightforward theft y'all might envision. Employee theft includes:

Straightforward merchandise theft
Ringing up fake returns and issuing fraudulent gift cards
"Sweethearting" (neglecting to scan all of a friend or family member's items or improperly using their employee disbelieve)
Skimming off the cash drawer—usually done in pocket-size amounts at a fourth dimension that tin can add up to big losses

So, how can you stop employee theft in your store? You lot ever have the option of placing surveillance cameras throughout employee-only areas, posting signage that employees are being monitored, and checking employees' bags before leaving. Simply as you tin can imagine, that kind of enforcement doesn't create the best morale or work environment.

Hither are a few more practical means to adjourn employee theft and fraud:

Audit your hiring practices. Retailers aren't always known for stringent hiring requirements, simply you should have intendance in deciding who your frontline partners in the loss-prevention fight will be. Wait for conscientious employees who behave themselves with integrity. They're less likely to take advantage of their ability equally employees and will be better allies in helping you combat all the other types of retail loss, too.
Railroad train employees properly. Once you have the correct team in identify, it's your task to give them the training they demand to mitigate errors and losses, identify shoplifting and fraud, and bring down your retail shrinkage rate.
Consider your store culture. When your retail store has a great workplace culture, employees stick around longer and are more invested in your store's success. Piece of work to create a positive, low-turnover civilization (in addition to the tips above) and you'll come across incidents of employee theft and fraud drop off.

Shockingly, 75% of employees admit to stealing at to the lowest degree in one case from their employer. But at that place are means to keep employee fraud at bay.

Authoritative fault

When your lesser line takes a striking, it never feels good. Merely not all retail losses stem from malicious or illegal behavior. Simple administrative and paperwork errors really business relationship for every bit much every bit 18.8% of annual shrinkage—sometimes chosen "paper shrink."

That's a big chunk of sales y'all can hold onto just by implementing the right systems to seamlessly and accurately track inventory and sales.

How does an administrative fault translate to retail losses? Mistakes like mislabeling, incorrect markdowns, and bookkeeping errors can lead to trade existence sold for less than it should exist or refunded for more than it should be. That means real dollars are lost.

Administrative errors are by nature accidental, but that doesn't hateful they can't exist prevented. Permit'due south look at how to avoid and catch "paper shrink" before it costs your store:

Employee training. Whether they're conducting inventory audits, running around with the price gun, or processing returns, properly trained employees are less probable to make mistakes that terminate upward contributing to your retail losses.
Wheel counts: Depending on the number of products and variants you deport, counting all your store'south inventory can exist a lengthy process. Consider doing cycle counts (too known every bit partial inventory count)—where y'all count inventory on-hand for one product type rather than all the products you carry at one time. Since they tin can be done quicker and more ofttimes than full physical inventory counts, bike counts can assistance y'all spot shrinkage and address information technology before information technology becomes a larger issue.

Vendor fraud

Just about 5% of shrink is due to vendor fraud. This blazon of inventory shrinkage involves 2 sides: fraud involving check tampering and billing schemes, or vendors stealing from the store when delivering inventory.

Some ways to gainsay vendor fraud include:

Conduct rigorous background checks on new vendors. Vendors are an extension of your retail business, especially if they are delivering orders to your shop. How well practice yous really know your vendors and their employees? Be sure to run a check on their reputation or any existing fines or lawsuits. You could also look at their social media, check for corporate tape verification, and see if employees have whatever criminal convictions.
Create an anonymous support line. Some employees or even external parties may be hesitant to report fraud. They may not want to attach their name to a study in fear of the consequences. You tin create an anonymous back up line or messaging organisation where people can written report fraud without giving up their personal data.
Authorize specific employees for inventory treatment and invoicing. If yous aren't handling all the invoicing and buy of goods, have separate employees manage each task. 1 for purchase of goods, one for invoicing.

Unattributed loss

Here'due south the almost bizarre and frustrating type of shirk: unknown causes. According to the National Retail Security Survey, over six% of shrinkage cannot be accounted for under the in a higher place categories, leaving you and the millions of other retail stores out there in the dark.

Retail loss prevention strategies

Despite the many known (and unknown) causes of inventory compress, in that location are useful ways to forestall it. Any mix of the following methods tin work:

Audit hiring and training practices
Institute articulate policies
Create strong deterrents
Go buy-in
Rent a loss prevention manager
Develop strict accounting practices
Ameliorate inventory management

Inspect hiring and preparation practices

While the latest engineering and tools can amend your operations, quondam-fashioned employee training is making a comeback. Talking about loss prevention during new-hire orientation was up significantly in 2020, with 95% of companies using these tactics respectively.

By taking loss prevention into account during the hiring and preparation processes, you tin can impact the ii largest of those factors—shoplifting and employee theft.

When it comes to employee theft, you might imagine shop workers pocketing trade for themselves. But employee theft besides includes things similar refund abuse and overuse of discounting.

When you rent shop workers, what qualities and skills are you looking for? You should be screening for conscientious candidates who behave themselves with integrity.

Employees who excel in those areas are partners in the loss prevention fight. They're less likely to abuse their ability as employees and exist more than invested in a retailer's success. They're more dedicated to helping you reduce retail shrinkage.

Adept employees want to foreclose inventory losses, but it's your job to give them the tools and grooming they need to make it happen. Employee grooming to identify and stop shoplifting tin make a big difference in your shrinkage.

When it comes to loss prevention training, you lot take plenty of options. You can attempt an online form from an system like the Loss Prevention Academy or Loss Prevention Foundation. Or you lot can bring in a third-party loss prevention and security expert to train employees in person.

Institute clear policies

A clear policy is essential to reduce inventory shrink. In fact, over 92% of businesses reported using a code of conduct every bit part of their loss prevention awareness programme in 2020. While this doesn't physically prevent criminal behavior from employees, it communicates your business'south commitment to ethical acquit and sets the expectations for employee behavior.

Create a policy that highlights adequate apply of company property and show it to employees during onboarding. Be clear virtually the disciplinary deportment you'll take if someone is defenseless stealing from the business.

It's important that everyone is held to the same standards. For example, if you don't want store associates to steal money or use supplies for personal pursuits, don't permit supervisors or managers practice it either.

Create strong deterrents

Organized retail crime (ORC) continues to exist a serious trouble for retailers, with boilerplate losses topping $700,000 per $one billion in sales. Relaxed police enforcement guidelines and decreased penalties have acquired an increment in ORC activity, co-ordinate to the NRF 2020 Organized Retail Law-breaking survey.

Businesses often modify their strategies for fighting retail crime, whether it'south employee or customer driven. Giving the appearance of potent security is as equally important as having it. This shows you lot take losses seriously and can deter people from carrying out bad behavior.

When was the last fourth dimension you examined your loss prevention system and its effectiveness?

In 2020, the elevation v loss prevention systems in utilise were:

Burglar alarms or electronic article surveillance (95%)
Digital video recorders (88%)
Live customer-visible CCTV (78%)
Armored car eolith pickups (77%)
POS data mining (72%)

Each of these tools saw significant growth from 2019, according to the NRF.

Only those aren't the but deterrents retailers are using. The same report from the NRF showed big year-over-year jumps in the post-obit five loss prevention systems:

Point-of-auction analytics and alive customer-visible CCTV are becoming widely used tools. On the other hand, retailers continue to rely on the classics like a infiltrator alarm to deter crime. The question to consider here: what new or emerging technology should you consider exploring?

Small businesses today tin can leverage tools like CCTV and digital video recorders with ease. For example, Shopify partnered with Google and Nest to help merchants utilize high-tech security cameras at an affordable price.

Rather than install a clunky, expensive security system in your store, you tin get up and running with a Nest Cam for simply $199. It takes minutes to set up, and with the Shopify app, you can monitor in-store activity from anywhere, saving you time and protecting your hard-earned money.

Unify your inventory management with Shopify

Only Shopify POS helps you manage warehouse and retail store inventory from the same back function. Shopify automatically syncs stock quantities as you receive, sell, return, or exchange products online or in store—no manual reconciling necessary.

Become buy-in

Constructive loss prevention starts at the tiptop and flows down and out throughout the organisation. Fighting shrinkage means securing buy-in from anybody in the business concern—from the owner downward to rank-and-file shop workers.

But how practice retailers attain this?

The nearly of import tactic for getting your team invested in loss prevention is simple:

Exist transparent about the problem.
Communicate shrinkage numbers beyond the organization.
Aid your team conceptualize how much you have to gain by addressing shrinkage.
Share loss prevention goals and connect them with the progress you brand.

For most senior-level managers, the do good of loss prevention comes downwardly to the numbers. What almost store workers who may not exist as invested in the organization'south performance? Yous demand buy-in from them, also.

To get information technology:

Empower store employees to take responsibility for the store's success.
Set clear benchmarks and advantage employees who reach and surpass their goals.
Share team success with every member of the organization.

Hire a loss prevention manager

Hiring and preparation to reduce retail shrinkage gives you a headstart in the fight confronting losses. For many stores, it's like shooting fish in a barrel to push crafting and enacting a loss prevention strategy off of one person's plate … and onto no one's.

That'south why hiring someone whose primary role is to spearhead loss prevention efforts is an option worth considering, particularly every bit your business grows.

Loss prevention jobs are common for retail stores at all levels. These roles involve:

Leading, conducting, and delivering results regarding investigations of theft, fraud, workplace violence, and other critical incidents
Keeping owners informed on key issues and loss prevention strategy performance
Analyzing data, conducting audits, and identifying trends to create action plans that mitigate risk
Promoting and executing security best practices
Performing spot checks on foot throughout the store

Another option: You lot also can bring in a specialized retail security officer to serve that purpose rather than relying on your own employees to face potential shoplifters themselves.

Strict accounting practices

Non all shrinkage happens in-store. Sometimes yous'll merely see losses on your balance sheet. You may want to rethink your accounting practices if you want to improve loss prevention.

In accounting, retailers must establish the cost basis of all inventory. Cost accounting is a less involved inventory valuation method based on costs. Y'all only track inventory based on what you paid for information technology when received. But it's non the all-time approach for realizing inventory shrinkage.

Retail bookkeeping, on the other hand, values inventory based on retail price. Information technology lets y'all track prices over time, including mark ups, marking downs, and auction prices on individual products. While retail accounting is a more attentive way of accounting, it can help identify shrinkage.

Some other reason to prefer new accounting practices: If your inventory reports and sales records don't marshal, you'll have to spend a lot of time reconciling your receipts. If these documents are full of errors, the IRS may too go involved and could audit your business.

Improve inventory management

Inventory management should be a priority for your business organisation if yous want to amend loss prevention. With proper inventory command, you can account for items and prevent shrinkage.

Some ways to amend inventory management include:

Implement detail tracking. Tracking items is easy and tin help y'all see where a product disappeared, whether in the warehouse or on the floor. You can adhere RFID tags to products, which use radio frequencies to runway items, and automatically track inventory and stock levels.
Count inventory often. While a total inventory count may be too time intensive to do regularly, consider doing partial inventory counts instead. With Shopify, you tin compare the stock levels you physically have in store with the recorded inventory levels in your signal of auction organisation, reconcile and update recorded inventory levels when you notice discrepancies.
Exercise surprise audits. If you sense an employee is stealing from you, run a surprise audit. A random inventory count can uncover anomalies in your stock without giving employees time to set.
Invest in inventory management technology. Using inventory management software rather than notebooks or spreadsheets tin make stock management less prone to human error—information technology also equips yous with tools, data and reports that help manage inventory more efficiently and maximize your return on investment.

With Shopify POS, for instance, y'all can order and categorize an unlimited number of products and variants, track, count and reconcile inventory across multiple store locations, and access detailed stock on mitt reports to see toll price and retail value of your current inventory on hand from one dorsum function.

As your retail business grows and inventory becomes more than challenging to manage, inventory shrinkage will likely rise. Consider investing in the right tools to help you sympathise potential vulnerabilities and mitigate risk so you tin can turn a higher turn a profit for your business.

Examples of successful loss prevention

Now that we've covered all the basics, let'due south await at some successful loss prevention plans out there in the wild. Whether your budget is $100,000 or $0, every store can larn from these case studies.

Sears Canada

Although Sears Canada finished shutting all its doors in early 2018, we can all the same learn from its example on the loss prevention front.

Sears Canada focused on combining old standbys and cutting-edge applied science. It armed loss prevention personnel with the best tools, non merely the newest. It relied on video surveillance in all Sears Canada stores—only not to catch shoplifters after the fact.

The loss prevention team used data and video assay of in-store surveillance cameras to identify patterns, like areas of the store where customers spend a lot of fourth dimension. Past analyzing these patterns and sharing them across all stores, the team was better able to railroad train their focus on "hot spots," or areas decumbent to theft action, and catch shoplifting behaviors earlier information technology became a problem.

Target

One of the bigger retail developments of the past decade is the appearance of self-checkout lines at major chains. Eliminating the cashier (scanning each item, interacting with customers, observing beliefs) presents an obvious barrier to loss prevention efforts.

Target approached this problem past leaning hard into one of the anti-shoplifting tactics above: conspicuous surveillance. If you've gone through self-checkout at a Target shop recently, you might have noticed—right at eye level—your own face up staring back at y'all. "You're existence monitored," information technology reminds you. Target also trains surveillance on the scanner, so loss prevention personnel can see which items the customer scanned and which they didn't.

Meijer

It can exist cumbersome and time-consuming to find proof (or lack thereof) of both employee theft and ordinary shoplifting when it comes to surveillance. Loss prevention personnel may watch an employee'due south unabridged shift but to detect no evidence of theft—not exactly an efficient process.

Meijer's loss prevention team took a different approach. They use intelligent signal-of-auction monitoring to collect mounds of data. And then they let the software analyze it all to identify events that don't fall into the normal pattern of transactions. That means they spend more than time mitigating losses and eliminating the causes of retail compress that fall inside their control.

Burberry

The time to come of RFID tags is becoming more prevalent in the retail manufacture. It has the potential to rail items throughout the supply concatenation until final sale. Burberry uses RFID technology to identify products using radio signals. The RFID technology is found in a small tag typically in the swing ticket, and embedded into the product through a textile RFID label.

As Burberry explains on its website, "We have started to initiate the use of RFID technology throughout our Burberry product lines to assistance with stock and quality command, while also enhancing the customer experience in selected stores."

The RFID tag also holds bespoke multimedia content specific to the product for customers to watch on in-store display screens or phones. Burberry's tags communicate with consumers' phones and give data about where the production was fabricated and recommended design options.

Create a loss prevention plan for your shop

In the retail globe, shrinkage is a function of life—simply that doesn't mean you have to settle for throwing abroad your sales each year.

Any fashion you add it upwardly, it's a large result for retailers, particularly those with tight margins already. Electronic item tags, high-tech surveillance and facial recognition, you lot name it—retailers continue to search for a i-and-washed slam-douse fashion to adjourn inventory loss.

Only the reality is that an effective loss prevention program is your best bet to limit your retail store's losses. It'south the only manner to effectively fight problems like shoplifting and employee theft.

Source: https://www.shopify.com/retail/loss-prevention-retail-shrinkage

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