Emerging Issues in Security

Shrinkage or Shoplifting? Theft by Many Names

According to the 2018 National Retail Federation report, total shrinkage of retail goods in 2017 was 1.33% of total sales, or $46.8 billion. How much of that theft is internal, from employees, and how much is from outside shoplifters is hard to estimate.

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Some retailers won’t admit to an internal theft issue because it’s embarrassing, it questions their supervisory style, or their ability to hire correctly. The annual figure for shrinkage in general has always ranged from less than 1% of total sales to nearly 2%, depending on the strength of the economy. Some employees steal because they simply want those items for themselves or their friends or family, like gasoline, food, or liquor. Other merchandise gets stolen because it can be easily resold, like clothing, cigarettes, men’s razor blades, baby formula, toiletries, cosmetics, or over-the-counter medicines.

Retailers can make it seem that they appear not to care about internal shrinkage, like not having reliable inventory controls and processes, camera systems, or strict cash-handling policies. All this makes it easier for internal shrinkage to happen in the retail environment by allowing employees to rationalize their theft behaviors. They say, “If management doesn’t care about the theft of their products, why should I?” Low pay; lack of praise for good, reliable, and honest work; along with a harsh management style can give some employees plenty of excuses to steal.

Inventory controls, ranging from hard counts to the use of scanners and similar technology, are critical. Retail management always wants to demonstrate to its employees that they can and will keep physical track of goods as the products enter the store upon delivery and leave the store after sale. Supervisors need to be vigilant about scams like underringing—when the employee’s friends buy expensive goods for pennies on the dollar at their register—or giving fraudulent refunds to the employee’s friends who have previously stolen the goods.

Retailers should use legal and appropriate background checks and vetting techniques during the hiring process to help curb internal shrinkage. A good predictor of a potential new employee’s future poor performance is his or her past poor performance. This means every employer should have a background check done before an offer of employment. Dig deeper during interviews to find out why they left their last retail jobs, and get written permission from them for you to call past employers to get a full and legal reference check on any theft behaviors. Don’t be in a hurry to hire just because you’re shorthanded. Wait for the right applicant, not the only one available.

The right technology in the right places can help retailers with lessening internal shrinkage. Cameras the employees know about can offer deterrence value, along with hidden cameras they don’t see, as long as they aren’t in places where employees have valid expectation of privacy, like restrooms or changing rooms. Security investigators can also look at sites like eBay or Craigslist to see if their stolen merchandise is being sold there by employees.