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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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