Money down the drain: Washing away internal theft
'High street retail freeze-out', 'plunge in sales adds to retailers' woes', 'retailers braced for 'horrible' year' These are just a few of the headlines we've seen this year highlighting the current plight of the British retail industry. By Doug Hargrove
With this in mind, it’s little wonder that many retailers are doing all they can to keep their businesses afloat, offering affordable deals to compete with rival stores and encouraging customer loyalty within their shops. However, one activity which threatens to undermine retailers’ efforts is slipping under the radar: internal losses. Theft is crippling many retailers, with shrinkage currently representing almost 1.5% of retail turnover and half of this being attributable to human error or the dishonest activities of employees. With this in mind, what steps can retailers take to help to ensure profits are not drained away by the actions of disloyal employees?
We’d all like to believe our staff would never steal from our businesses and for the most part, this confidence is justified. However, in order to protect revenues, it’s crucial to be aware of the ways staff can steal from their workplace, and the circumstances necessary for this to occur.With fewer colleagues on the shop floor as retailers make staff cut backs, many employees looking to take money from their workplace concentrate on small sums, believing a few pounds here and there will go unnoticed. It's clear the recession is driving a return to cash-based payments as an easier way for customers to control spending. But with more cash in the POS, the temptation – and opportunity – is even greater for dishonest staff to pocket small sums of money. While holding less cash is a sensible precaution, it’s not a failsafe way of preventing this crime.
As well as opportune petty crime, ‘sweethearting’ is still rife. This involves a member of staff working in cahoots with a customer, applying illegal discretionary discounts or passing items over the scanner but not actually scanning them. It requires discretion, only applying irregular discounts sporadically to disguise any pattern to their habits, but with large retailers processing thousands of transactions a day, this stealth approach can easily go unnoticed by in-store management and colleagues.As there will never be enough surveillance by management on the ground to tackle these underhand activities, technology can play a vital role in protecting a store from internal losses. It can prove invaluable for managing employee numbers, uncovering criminal activity and providing concrete proof of it.
Business analysis systems such as Torex Business Analysis Loss Prevention can identify regular drops in sales when a particular member of staff operates a POS. These systems scrutinise millions of transactions to automatically identify anomalies, producing reports which alert head office to any inconsistencies when they develop. For this reason, they are also useful for identifying and correcting errors by inadequately trained associates, unknowingly misusing a POS.
The system can be integrated with a company’s CCTV, allowing managers to verify suspicions regarding unusual activity in-store. Once accounted for, the culprits can be brought to prosecution as the video footage combined with the POS data provides valid evidence in a court of law. With a regulated system in place, senior staff are not faced with the difficult situation of knowing money or stock is being unlawfully taken, but not being able to identify the culprit. And with unquestionable evidence of those involved, the risk of wrongful accusation and a general decrease in staff morale can be avoided.
Another advantage to loss prevention tools is the speed at which unlawful activity can be identified. Within just a few days of monitoring and reporting, suspicious trends can be spotted and the appropriate action carried out. The importance of a rapid response cannot be under estimated. If criminals go undetected, they will quickly grow in confidence and further dent a retailer’s profits, and a swift response to any incidents is also likely to deter other employees from considering following suit and engaging in internal theft.
It’s important that retailers consider a holistic approach to their loss prevention strategy, ensuring data captured from POS systems in individual stores is collated centrally. As a result, auditors can access all relevant POS information in a format they can analyse quickly and intuitively. This is also an important factor for the related issue of PCI DSS compliance. Particularly for retailers with multiple stores, a centralised back office system whereby all data is collected in the same location will make compliance simpler.
Workforce management tools, adopted by many retailers to optimise staffing costs, can also help in addressing the issue of internal theft by ensuring that sufficient numbers of staff are in place at times when the store is likely to be excessively busy, and blatant crimes may otherwise go unnoticed. It works by providing core business data such as labour costs, budgeting and customer sales trends, which are all accounted for in the production of staff rotas, ensuring there are enough employees working at peak times.
Precautionary measures such as storing less cash in the POS, offering staff thorough training in POS use and adopting a scrutinising approach to unusual staff activities are all essential steps in preventing internal theft. However, technologies such as business analysis and workforce management systems provide invaluable support to dealing with this issue, helping retailers track all aspects of their sales, including internal theft, more effectively. They can respond quickly and save money that would otherwise be revenue down the drain. With internal theft accounting for over $38 billion in losses from 1,000 retailers in 36 countries, the return on investment that these steps can bring is really brought into perspective.
Doug Hargrove is Chief Marketing Officer at Torex
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