Retail theft is a huge and costly problem for the industry. According to the "Global Retail Theft Barometer 2013-2014," released by Checkpoint Systems in October 2014, total shrinkage among retailers in North America was $42 billion for the time period covered by the report.
North American companies had the highest shrinkage rate in the world, "as it has the highest concentration of retail stores and significantly lower retail loss prevention spend" than other regions, the study notes. U.S.-based discounters, pharmacies/drug stores and supermarkets/grocery retailers had the highest shrinkage rates, stemming from shoplifting, dishonest employee theft and organized retail crime.
Nearly all types of retail stores in the U.S. were affected by dishonest employee theft and shoplifting, according to the report.
Retailers can take steps to try to prevent or at least reduce losses due to theft at point of sale (POS) and shrink. Here are some suggestions from experts in the field.
Leverage the latest technologies. Fortunately for retailers, there's no shortage of technology tools to deter theft and shrink. The use of electronic article surveillance (EAS) technology remains a viable part of retailer's efforts in shrink reduction, says Curtis Baillie, an independent security management consultant specializing in retail security/loss prevention.
This includes using anti-theft tags, spider wraps and technology that detects foil-lined bags and EAS jammers that some shoplifters use to try to bypass surveillance systems, Baillie says. Theft denial systems are also popular with retailers. For example benefit denial systems include ink tags and various other devices such as magnetic stainless steel clips designed to protect neckwear, eyewear and lingerie, he says.
Radio Frequency Identification (RFID) systems, which use tags and readers that enable retailers to track items as they're moved within and outside of a store, can help deter theft and provide information about the type of merchandise that's being taken. Retailers can use EPC tags to identify individual items uniquely.
By combining EAS and RFID systems, retailers can have real-time information about missing items. Dual EAS and RFID tags can provide security as well as inventory visibility, enabling retailers to better track inventory.
Other technology tools that can be used to prevent theft are video systems such as closed-circuit television (CCTV), which can be used at the point of sale or elsewhere in stores; and facial recognition systems, which retailers can use to capture images of offenders.
The use of video analytics with overhead CCTV observation of the sales counter "can be a real-time deterrent to incidents of internal shrink," says Bob Moraca, vice president of loss prevention at the National Retail Federation (NRF), the world's largest retail trade association.
"Video analytics is the capability of automatically analyzing video to detect and determine if an anomaly has taken place based on a set of instructions built into the video software," Moraca says. "The technology is able to count items, superimpose the register receipt over the video and then track things like item count compared to the register receipt, voids, returns and even instances where the cash register drawer has been open too long."
Tracking the variances of these type of irregularities can be an indicator that something might be amiss at the POS and can be followed up with an internal inquiry by management or the loss prevention team, Moraca says.
Train your employees well. The people who work in stores can do a lot to help prevent theft.
"A successful program to reduce shrink at POS leverages both technology and training," says Lisa LaBruno, senior vice president for retail operations at the Retail Industry Leaders Association (RILA), an industry organization.
Among the key components of associate training is making every employee feel like he or she has a responsibility to prevent shrink from occurring," LaBruno says. "Associates are trained to be vigilant, check inside large containers to prevent package stuffing and to exercise good customer service when they suspect theft."
In addition, employees should be encouraged to develop strong product knowledge. "If associates have a strong familiarity with the product they sell and the prices, they are more likely to be able to identify things like UPC [universal product code] switching schemes," LaBruno says.
For some retailers, "many of the loss prevention procedures enacted at the point-of-sale are a result of a more stringent loss prevention program that starts with the hiring process as companies look for qualified candidates for all available positions," Moraca says.
"This also includes offering employee orientation and training opportunities for new hires and even current employees," Moraca says. "For many companies, reminding all employees to keep their eyes open to detect and report potential breakdowns in procedures is a big part of any loss prevention program."
Interact more with customers. In a sort of reverse social engineering tactic, retailers can help stop theft by engaging more with clients while they're in the store.
"The most effective deterrent to a potential shoplifter is good customer service, Baillie says. "Making eye contact and acknowledging customers as they enter the store. The last thing a shoplifter wants is interaction with a store employee."
The shoplifter's goal is to enter and exit the store with unpaid for merchandise, without being noticed, Baillie says, and this type of engagement can help work against that.
Consider diversionary tactics. A company called Corrective Education Company (CEC) offers a program to first-time offenders who've been apprehended for shoplifting.
The way the program works, once an offender is apprehended, he is given the opportunity to hear about CEC and the merchant's voluntary education program. The individual's personal information is gathered and verified through public records databases to determine qualification for the program based on retailer protocol, local law enforcement and the local prosecutor.
After agreeing to learn about the program, the offender is shown a four-minute video about CEC's, and can stop the process at any time and not participate. At the conclusion of the video the offender is given the opportunity to participate in a six-hour program, at his own expense, in lieu of having the case referred to the criminal justice system.
If the offender fails to complete the program the retailer has the option to file a criminal complaint. If the offender doesn't want to participate in the retailer's program or is ineligible due to prior illegal conduct, the matter is referred by the retailer to the criminal justice system, a company spokesman says.
CEC encourages participating retailers to reach out to local law enforcement before implementing the program, in an effort to keep them informed and to gain their support, the company says. Since its inception more than 20,000 participants have gone through the program.
Create the right corporate culture. Anti-theft technologies and tactics are helpful, but they're not enough.
"All the tools in the world are not a replacement for the most critical foundation needed to prevent, isolate and resolve retail losses, and that is a corporate culture focused on mitigating loss," says Keith Aubele, president & CEO of Retail Loss Prevention Group, a consulting firm.
"When a top down ownership/executive C-suite culture exists that truly understands loss impact via shrink to profitability, as well as the many negative societal outcomes from retail crime, then true prevention can occur," Aubele says.
This cultural element "is key, in that once the basic barriers to loss are mitigated by employees who understand the impact of loss through training, awareness, reinforcement, and partnership, it's then that sound tools can be deployed with greater impact," Aubele says. "Essentially, get your house in order first before looking for external help."