Retail, being a high volume business, involves a diverse customer base, wide array of products that are theft susceptible, larger staff than most businesses, distinct stock/receiving areas from sales floor, access by delivery personnel, repairmen and salespersons, significant cash handling and myriad required controls and logistics to operate efficiently. This makes retail vulnerable to both theft and fraud.
Hours of operation
The stores that experience greatest external theft are also the stores that have the most extended hours. That is in part because some thieves operate in those very low volume periods but also that period is when the staff supervision and staff monitoring of an area is at its lowest. The hours that a store operates reflect the demand but also provide opportunity for theft.
Scoring (Low to High) 0-10
Pricing practices
Pricing has an impact on opportunity in a few ways. One way is if the style of pricing is ticketing, then ticket switching and inaccurate pricing, either intentionally or accidentally, by staff may occur. Failure to remove sale event pricing allows staff and other customers to demand the reduced price. Where staff recognize the lack of control over pricing changes, they may re-price items to their advantage. A regular check of item prices will detect many errors. Set up a weekly checklist of items to be verified.
Scoring (Low to High) 0-10
Customer relations
The ability to interact with a customer allows staff to gauge a customer. Simultaneously, it provides the customer with the knowledge that staff are aware of them. Anonymity is one of the key contributors in perception of the opportunity for theft. Where staff, customers or suppliers feel they are unnoticed, they are more likely to take advantage of any loopholes you may present. An operation that is more focused on discount pricing and volume sales than on customer service may create an atmosphere for customers that say that it’s OK to steal at lower or at large levels because the storage does not care about the customer. Volume and bulk displays or pricing also lowers the perceived value of a product.
Scoring (Low to High) 0-10
Service
Customer service, like customer relations, informs the customer of the degree of care about the customer’s needs. Where staff are not knowledgeable or seem indifferent to the customer, the customer may feel dissatisfied, may feel warranted in stealing or may take advantage of the apparent lack of knowledge to defraud the store. Indifference or incompetence also provides opportunity for customers to manipulate goods, whether it’s through false refunds, through general pricing at the checkouts or similar opportunities. Stores like Real Canadian Superstore generally experience more big-volume shoplifting than more family oriented stores that know their customers well.
Scoring (Low to High) 0-20
Refunds and returns
This is an area of a store’s operation that provides lots of opportunity, both for the staff and for the customer to commit fraud or theft. As an example, in one grocery store a number of years ago, the customer service desk handled deposits for drink bottles and drink cans. The customer service clerk routinely failed to ring up many of these refunds. Instead, she later rang them up for herself. Audits of refund deposits taken in versus credits from the supplier would have detected this discrepancy. In a second case, a cashier failed to record a sale of a carpet shampooer rental. In some cases, customers will fraudulently return items from a store that they have not actually bought. Rather, they have just picked up the items in the store and have immediately brought them to customer service for refunds. This may be in part because of a lack of control on bags and backpacks, allowing the customer to easily bag an item as if they had entered the store with it. One off-duty police officer was apprehended twice, in two different stores, doing precisely that. He adapted his technique, purchased an item, then used that receipt to pick up and return a duplicate from the store.
Scoring (Low to High) 0-20
Quality control issues
Quality control is essential to reduce costs but quality controls that fail to be consistent also lead to the opportunity for customers to switch packaging, switch labeling, switch pricing and so on. Discounted items with “percent off” tags often find that labels are switched onto similar prime merchandise. Customers may move regular priced items to clearance racks. Bags containing discounted produce may include fresh produce. Staff should daily check clearance and discount areas so that they can detect frauds and managers should be vigilant for staff who are fraudulently arranging for discount and clearance items for themselves.
Scoring (Low to High) 0-10
Seasonal changeovers
Seasonal goods and seasonal changeovers generally involve discount pricing that increases over short periods of time (e.g. Christmas clearance or seasonal gardening & outdoors). Staff may not be knowledgeable about these discounted items and allow for theft and fraud to inadvertently occur. At the same time, short season items like gardening, Valentine’s, Hallowe’en and other event-based products will have lower recognition by staff and are more vulnerable to price and package switching by customers.
Scoring (Low to High) 0-10
Management of high theft items
There are many items in any retail outlet that are more desirable than others from a theft perspective. Whether they are desirable for resale, desirable as ego items, desirable as items that the customer views as essential or whether they are simply high-priced items, they are more likely to be theft targets and therefore deserving of more attention by management. These items require specific attention as to layout, placement, tagging and inventory control. Customer service and cash personnel should be regularly updated on awareness of these items and to pay particular attention to customers who focus upon them.
Scoring (Low to High) 0-20
Managing customer volume and flow
Stores often are laid out fairly generically. A grocery store will be laid out in straight aisles with the perimeter of the big three–produce bakery and meats, or produce dairy and meats–around the perimeter, with then straight aisles that often have blind or secluded areas. Clothing stores often have racks and counters that obscure views from the innermost parts of the of the store. Hardware stores often are stocked with a lot of small easily concealed items. None of these store layouts are conducive to managing the flow in and out of those aisles or directing flows that mitigate against theft. Minor changes in design will reduce the opportunity for theft considerably, while only impacting sales potential modestly.
Scoring (Low to High) 0-10
Movement from floor to stockroom
Opportunities arise when items that can be stolen are freely moved without monitoring or control. While it is imperative that stock be brought out on demand and as needed to the sales floor, the movement of that stock should also have a paper trail. While I refer to a paper trail, contemporary computer inventory management offers the same, or better result. Systems and software are available that track goods coming in, goods going out, goods refunded, goods returned, goods in for repair and so on.
Scoring (Low to High) 0-10
Receiving area
In retail environments there are always receiving areas, even if the receiving area is the front door of a small kiosk style or boutique style store. When supplies come in or out they should not be held near the door. Rather, they should immediately be placed in an area where they can be counted immediately or where they are secure for later counting. The incoming merchandise should not be mixed with or adjacent to current stock, as intentional or accidental errors in counting may occur. They also should not be near where customers might select items prior to counting. Receiving areas should also be laid out so that there is no risk of mingling incoming and outgoing inventory, items for return or repair or garbage.
Scoring (Low to High) 0-20
Ticketing and pricing
While actual ticketing no longer occurs for many retailers, in favor of UPC and sometimes QR codes, accurate ticketing and pricing is critical.
One grocer’s department manager accidentally priced a dry goods item at $1.99, instead of $7.99 in the computer management system. The mistake went unnoticed for almost a year, until the item came on sale. That same retailer found that more than 120 of his items had sale event pricing from sales that had occurred as far back as eighteen months. Entering data into the computer that accurately reflects the pricing of the item should be ongoing, with cross-verification of every item in inventory at least every six months. If your store operates on a calculation of a uniform markup of every item in a category, a quick calculation in your spreadsheet will show if you have correctly priced the stock. In fact, setting up a routine weekly grouping of a number of items, varied each week to check their accuracy is critical to inventory management. Ticket pricing should reflect cost in versus price out so that you have both margin and markup prices calculated correctly.
Scoring (Low to High) 0-10
Doors and windows
The issue of effectiveness of doors and windows may seem irrelevant to a retail establishment. However, the value of having visibility from the outside of cash areas becomes clear when you consider that far fewer stores are robbed when their windows allow visibility of the cash area clearly from the outside. The risk of being caught or seen during a holdup deters robbers, but having an outsider observe a cashier stealing also deters their dishonesty. The same concept applies for merchandise in aisles. Where there are more windows or open visibility of an aisle, there is less likely to be theft. This is part of the funneling effect for deterring theft in a store, discussed elsewhere in this program. At the same time, having too many doors that allow a quick egress can offer an opportunity for grab-and-run thieves.
Scoring (Low to High) 0-10
Store location
Store location is important on a number of fronts. Prime thoroughfare or strategic community location drives traffic volume. A high visibility store is likely to have more customers, which is why that high visibility store also has higher per square footage rent levies. At the same time a store location that is on the main thoroughfare is more likely to have grab and run and non regular customers coming in to steal merchandise. So while this location provides an opportunity for sales it also provides an opportunity for theft. More suburban stores have more regular customers, but regular customers do more damage to your profitability than grab-and-run thieves in those locations.
Scoring (Low to High) 0-10
Taking sale event pricing on and off
It is imperative that a retailer, immediately upon the end of a sale, removes the shelf talkers and pricing of the sale item, followed by adjusting of the pricing in the computer system. To have some items still on sale and some of the prior week’s goods no longer on sale creates confusion among customers and the staff and allows for customers to claim that the merchandise is still ticketed as being on sale. Therefore, they may have a legitimate claim to the reduced pricing.
Scoring (Low to High) 0-10
Store to store transfers
In chain store operations, where merchandise is moved from store to store, the opportunity exists for inaccurate pricing. For example, if the pricing at one store is not the same as the pricing at the other or the wholesale pricing and purchase pricing are not the same, the loss due to this error can be significant. There should be consistency on the pricing policies and wholesale or inventory pricing as well as for store to store transfers. Lack of consistency opens the door for direct theft by the person or company that is doing the transfer.
Scoring (Low to High) 0-10
To-home deliveries
To-home deliveries Since Covid-19, the practice of home delivery of groceries has exploded in popularity. However, so has the opportunity for various types of theft to occur. One of the more prevalent ones is shortchanging the customer on goods received and having the driver pocket the extra merchandise. Another is sweet-hearting and delivering goods beyond what the order included to friends or family members. A third variation involves the ordering of goods that are to be picked up at the outside store parking lot location. The opportunity there is more limited if you have a good control on the loading doors. However, it still provides the opportunity for inaccuracies, either accidental or intentional.
Scoring (Low to High) 0-10
Order picking
Order picking for both at-store pickup and delivery opens an opportunity for inaccuracies in goods picked up. For instance, an order picker may pick up a low priced version of hot chocolate mix and then scan it followed by replacing it with a high-priced version. This can occur where the pricing and the item is indexed into the order right on site as the orders are being picked up in the aisle. If the order is not scanned again as it leaves the loading doors, while the cashier or employee is loading the order that’s being picked, additional items may be added into the mix.
Scoring (Low to High) 0-10
Staffing
Staffing and scheduling is not simply the act of plugging in employees during specific needs, hours and times. Staffing also requires that you balance staff that work together well or minimize scheduling staff that are too close to each other, to avoid collusion. Effective staffing also should encourage productivity and a good working environment. Staffing levels at various times need to be responsive, especially in seasonal demand times. Stores often now have extended hours and minimal staff beyond certain hours, calculated based on payroll as a percentage of revenues for each hour. This opens the door for theft to occur both from the employee side and from the customer side because of increased opportunity and minimal risk of detection. Where staffing is calculated as a percent of revenues, the number of staff should reflect increased efficiency when volumes of sales are higher, but allow for lower payroll ratios during slow times. The store owner can have great control over the staffing demands by scheduling when key events occur, such as the receiving of goods, when shipping of goods has to be ready to go out, when ordering has to take place and when specific sale events that will increase demand occur.
Scoring (Low to High) 0-10
Store layout
The layout of your business is integral to the issue of both maximizing sales and controlling theft. However, many times store layout is random and arbitrary and does not consider the layout of items that are high theft, the accessibility of items that are high demand, the specific location even within a shelving unit (whether it’s down low or up high to deter theft) While layout is a factor in determining how to increase sales, and while many suppliers pay extra for premium placing of their goods, this should not be the sole criterion. The location of items serves to funnel customers into strategic buying, but layout can also be used to funnel perceived theft opportunity into a specific area so that the thief may be more easily caught. This funnelling effect should be given high priority when devising layouts in a variety of retail settings, such as grocery stores, clothing stores and even hardware stores. Proximity of related goods and ease of finding goods also is important, both to increase sales and monitor for theft potential.
Scoring (Low to High) 0-20
Refunds and returns policy
In every business the process of handling refunds, discounts, returns and credits all open opportunities for manipulation either through fraud or direct theft. Proper, detailed processes and consistent tracking minimize risk of theft, fraudulent paperwork, cash or credit manipulation, accidental error or collusion.
Vulnerable times of day
In every business there are specific times of the day that are more prone to provide opportunities for theft. This includes just before shift change (when staffing levels are low), when supervisors are busy (for example, in meetings), when there is an abundance of activity wherein a person can become anonymous and during shift change when people are coming and going. The common element in all of these is lack of oversight. That lack of supervision creates anonymity and, therefore, opportunity.
Too many obvious security devices
This may seem counter intuitive because many people believe that the more security devices that are seen the less opportunity there is. However, once you reach a saturation point and there is a plethora of security devices, people begin to realize that in order for these security devices to be effective, the business must have staff to monitor them. This means that the odds now return to being in the favor of the thief. Others simply opt to steal, regardless of security systems in place. Too frequently, these are semi-professional thieves who are not averse to physical confrontation. Rather than having an excess of dummy operations or actual surveillance operations limited numbers of devices should be focused and funneled to maximize impact.
Ability of security staff and management to respond quickly
One major grocery store had several floor walkers on staff–sometimes multiples at one time. However, the monitoring area from which they checked cameras was at the rear of the store and if they spotted someone shoplifting, they had to come downstairs and catch up to the individual. This both impacts on continuity of observation and on the ability to keep up with grab and run artists. The same applies in warehouses. If your security personnel are located in a remote or distant office, then people are aware that they can get in and out quickly without being apprehended. One vehicle manufacturer had three adjacent buildings through which employees traversed. Security offices were at the rear of the most distant building, rendering them almost useless in catching employee theft.
Staff awareness
Staff awareness and training staff as to the proper responses to potential theft and fraud situations are two of the most effective tools to reduce and prevent theft. Staff training is very cost effective. Even if the staff do not respond by apprehending, there are enough staff that are aware and willing to report suspicions that the increase in risk to other staff and outside thieves deters loss. Increased risk is the converse of increased opportunity. Increased risk deters and eliminates theft.
Swappable packaging
Whenever packaging can easily be opened, or is not sealed, or whenever a smaller item can be added to another box or container, opportunity is created. Packages that are similar but contain different items offer the opportunity to steal. A client lost several pricey televisions but still had the correct number of pieces of inventory. He had far more low-end sets than he should have and none of his high-end inventory. An employee had been swapping the packages and selling the items to friends as if they were the cheaper items. Because she was repackaging the items in the warehouse part of the store, the cameras on the cash area did not catch the discrepancies.
Backpacks and large purses or bags
This opportunity is a variation of the old meme, where the lunch kit crowd fills their lunch kits with factory supplies. When they leave at the end of their shifts, their backpacks and large purses are heavier than when they arrived. If belongings are allowed at the workstation or near the workstation, this creates multiple opportunities for theft.
Layout
Poor or improper layout in every business contributes to theft, creating opportunity both for incidental or accidental loss, as well as intentional theft of goods. There are myriad ways in which layouts can be changed at no cost to significantly decreased the risk of theft.
High theft items in remote locations
High theft items that are highly desirable or are prone to being stolen that are located in remote locations will more likely be stolen than those that are in controlled environments, mostly because of the privacy afforded to either conceal repackage, reprice or relocate these items.
Obscure or hidden aisles and blind spots
Hidden aisles, blind spots and dead ends all provide opportunity for theft. These concerns are generally remedied quite easily. Those areas should have very low theft items such as storage for items like garbage bags and cleaning supplies and other low-desirability items. The more obscure the area the more that you should ensure that only low value items are located there.
Small packages
Small packages are especially susceptible to theft and concealment. One of the major reasons why blister packs have become the norm in hardware stores is the ability of customers or workers to hide small packages within larger packages or on their person.
Very small items, even if they are not highly desirable theft items, will be stolen frequently simply because the risk is low (and opportunity high). It is the critical mass balance of risk and motive that will determine whether an item is stolen.
No security or excess security
Either situation can stimulate theft opportunities. Having excess and excessive amount of security is comparable to the prior discussion about having an excessive amount of security devices. it tells the people that the likelihood of being caught by anyone individual is low. No security, as well, obviously creates risk situations and is the greater problem than having too much security. Saving money by having no security is not a saving at all when you consider that the loss that occurs with no security is greater than the loss of the savings from no staff.
Employee demographics
There are specific groups and specific types of people that are more prone to theft. Staff that are overly cynical or opinionated often believe that they are entitled, or that they can overcome any security programs. If your staffing demographic includes a number of close friends or relatives, the likelihood of collusion substantially increases. A business in an impoverished area also is a greater risk. If the staff feel that they are not being respected and treated fairly, theft may occur. This concept is equally applicable to motivation.
Outside visibility
Windows that increase visibility from the outside of a premise is a deterrent to theft and, conversely, no windows provides opportunity. This is particularly true in evening winter hours when interiors are backlit against the darkened exterior. This spotlights the employees’ activities. However, most warehouses do not have an abundance of outside visibility. This is where perimeter patrols for supervisors and security become more valuable.
Resale and ego items
These are the two most dominant and common areas of loss. Ego items are those items that enhance a person’s self-image. In a pharmacy, for example, it may be cosmetics. In a grocery store, it may be high-end meat. In a factory, it may be brand name tools such as Snap-on Mac or even Gray. Ego items are the more common theft items for regular customers and staff, which means that they are more frequently stolen than grab-and-run or semi-professional thief targets. However, resale items can be a target, too, if the value of those items is significant and the items can be easily sold. This may again include such things as tools or finished products that the factory or warehouse makes.
Opportunity to relocate items
Whether it’s lack of supervision, abundant time, mobility of the staff, lots of open areas ,the staff duties that have them moving from department to department (such as a forklift operator), all contribute to the opportunity to steal goods
Label swap
Anytime that a worker can easily swap out identifying labels, price stickers or bills of lading an opportunity exists for theft or fraud by that employee.
Easy and quick access or egress
It’s the ability to quickly and easily exit an area or a building that means that the employee’s risk of being caught is decreased. There should be a designated employee exit area and it should funnel the employee in in the same way that a cattle chute funnels cattle. This allows for easier monitoring of large items being carried out by the staff member, as the number of employees leaving at the same time increases the risk of being detected by one another or a supervisor.