How To Combat Shoplifting, Employee Theft, and 5-Finger Discounts


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Updated for relevance September 5, 2023

Shoplifting and employee theft are rising; they make up what retailers call "shrink."

Loss prevention is a broad category used to encompass disappearing merchandise from shoplifting customers and employees not ringing up merch correctly, not checking invoices to packing lists, and giving their employee discounts to friends and family, plus transfers that are sent to another store but never taken out of the original store's inventory.

And shoplifting is making the news in densely populated urban locations. Walgreens  (WBA) , for example, has taken to chaining up some of the high-interest items it sees stolen in cities like San Francisco. The drugstore also launched a 2023 program whereby only two aisles of essentials are available for in-person shopping, and you order the rest via a kiosk and wait for an employee to bring you the items.

But you can't just lock up your whole store, or you'll flood online retailers with your customers. 

Here are five causes with actionable strategies to combat shoplifting in your stores:

1. Lack of Employee Vigilance and Presence

Why It's Happening: Shoplifting often occurs when there is a lack of employee presence and attention on the sales floor. Criminals take advantage of blind spots and minimal staff. A JC Penney loss prevention officer once told me she caught a woman trying to walk out the doors with a comforter under her coat. Someone should have noticed. 

How to Fix It: Ensure sufficient staffing during peak hours to cover the entire store. Implement a floor-walking strategy where employees are trained to engage customers and be attentive to any suspicious behavior. Regularly rotate employees' positions to prevent patterns that thieves may exploit.

2. Poor Store Layout

Why It's Happening: Poor store layout and arrangement can create hiding spots, obstructed views, and limited visibility, making it easier for shoplifters to operate unnoticed. 

How to Fix It: Design your store layout with clear sightlines and unobstructed views. Avoid creating blind corners or densely packed merchandise displays. Use mirrors and open spaces strategically to increase visibility across the store.

3. Careless Merchandise Display

Why It's Happening: Merchandise that is easily accessible and not properly secured can be an attractive target for shoplifters. Items within reach encourage quick grabs.

How to Fix It: Use locked display cases for high-value or small items. Opt for open shelving that allows clear visibility while minimizing hiding spots. Keep high-risk items closer to checkout counters and under staff supervision.

4. Missing Technology Solutions

Why It's Happening: Outdated or insufficient security technology can make it challenging to monitor and deter shoplifting effectively.

How to Fix It: Implement modern security systems such as CCTV cameras with advanced analytics to track suspicious behavior. Use electronic article surveillance (EAS) tags on merchandise to trigger alarms at exit points. Invest in RFID technology for accurate inventory management, which can help identify discrepancies and potential theft.

5. Non-existent Customer Service

Why It's Happening: Unattended customers are more likely to commit theft. A lack of engagement with store staff makes it easier for shoplifters to operate unnoticed.

How to Fix It: Train employees to offer proactive customer assistance, creating a helpful and engaging environment. Just making eye contact can go a long way to stopping the shoplifter. Greet and engage with every customer who enters the store. A friendly and attentive staff presence can deter potential thieves by signaling that the store is well-monitored.

And yes, I'm not naive enough to think there aren't sophisticated retail crime networks targeting retailers right now. NRF estimates the overall shrink at $100 billion

But beyond criminals and strangers shoplifting, the one problem most retailers ignore is their employees stealing from them.

Yes, employees stealing.

According to the 2021 National Retail Security Survey from the National Retail Federation, retailers' average loss per employee theft incident is more than $1,500 compared to $460 per shoplifting incident. Half of the survey respondents reported an average dollar loss of at least $1,000 per employee theft case.

That means an employee theft incident costs retailers 3x as much as a shoplifting incident.

Oh, I know, not yours. I used to think so myself until...

I was working with a small boutique hotel and had to meet with the Front Desk manager and the owner. When we told the manager the plan, he immediately became fearful, "Why?, What's up?"

By the time we were all seated, the color had drained from his face - which I thought was strange. The owner began by talking about occupancy and rates when the manager butted in, "So you aren't going to fire me?" The owner and the manager looked at me, "No, why?" He answered, "Oh, it just seemed the way you guys wanted to meet with me, something was wrong."

That meeting was so odd we decided to review the daily night audit, the report that showed every transaction that took place each day. And that's when we found it.

In the past week, rooms were being refunded in the morning, yet the charges were still going through on the guest's credit card. It was one of the oldest ways to steal, issuing fraudulent credits and pocketing the rest. Shame on us for not monitoring daily.

When times are tough employees feel emboldened to take the raise they feel they deserve, especially if they are part-timers.

The new way to do this is to credit a gift card for the return. The New York Times covered the phenomenon. One of the most shocking figures they presented was that "larcenous employees averaged $1,890 in theft, compared with $438 for shoplifters."

Yet when was the last time you checked your systems for theft?

Here are six ways to combat employee theft:

  • Never let someone take out the trash themselves; it's one of the most accessible places to conceal stolen products. At the very least, occasionally check.

  • Monitor your reports for gift card sales; unless it's near the holidays, you should easily be able to catch extremes.

  • Make random counts of your cash drawers; if they are over or short, write them up quickly.

  • If you use coupons, have a system to keep them from being used repeatedly, like disgruntled employees are likely to do for friends and family.

  • Limit paper at the registers that cashiers could use to copy down information; better yet, let the customer swipe their card on a terminal facing the customer so the card is in clear view of the owners at all times. Then have the cashier check that the last four numbers match the front of the card.

  • If you have overhead cameras, check that the number of items on a receipt matches the number in the bag.

  • Limit your number of part-timers; the more hours they work, the more bonded they'll be to your operation.

And always match your store counts to your registers. It's easy to say, "Oh, they're never right," and correct the database but don't. Transfer any shortages to store 99 so you have a record of your shrink.

In Sum

I'm not advocating going overboard on this, but I am advocating that "ignorance is bliss" is untrue regarding shrink. And it isn't always cash. I've heard of cases of frozen dough, milk, and samples of window coverings - the works - being lifted.