Reducing Retail Shrinkage: How to Beef Up Security and Prevent Loss in Your Store

Shrinkage (aka Public Enemy #1 for a lot of retailers), can eat up a significant amount of your profits. According to the National Retail Federation, retail shrinkage cost “the overall U.S. retail economy $45.2 billion in 2015.”

That’s why it’s critical that you keep your systems up-to-date, be vigilant about spotting suspicious behavior, and ensure that your staff is adequately trained to deal with security issues.

To help you do all that, below are some of the most common causes of retail shrinkage along with security tips to help you prevent them.

Shoplifting

A common problem among retailers, you can prevent shoplifting with the following steps:

Recognize the signs

Educate yourself and your staff on how to spot shoplifters. Keep an eye out for people who:

  • Avoid eye contact
  • Spend a lot of time glancing towards associates or cashiers
  • Go in and out of the store repeatedly without completing a purchase
  • Wear bulky clothing (i.e. jackets or coats) when unnecessary
  • Enter with a large group

“You need to profile who come into the store,” says security expert Robert D. Sollars “While you should be suspicious of everyone, [pay very close attention to] those with baggy pants, women with oversized purses, and people with baby strollers and such. These clothes and such provide excellent cover to steal items and never be noticed.”

Sollars adds that retail employees should “watch anyone who is ‘dawdling’ in an aisle with a lot of small concealable items,” as well as “anyone who appears to be nervous and has entered the store with another. This frequently happens with younger people but occurs with all age groups. You have one as a lookout while the other steals.”

“And let’s not forget about cars driving around the building or ‘cruising’ the back alley near the loading/delivery gates,” he adds. “These people may be poised to awaiting a signal from an accomplice or the opportunity to take something off of the dock/truck.

Make sure your associates acknowledge and welcome people into your store

Instruct your associates to greet customers by telling them that they’re nearby if the shopper needs anything. Often, simply showing people that the staff is on top of things would be enough to deter those who are up to no good.

Keep your store tidy

Keep your shop properly organized so you can easily spot if anything is missing. Arrange products (especially theft-prone items) in such a way that most, if not all of them are visible to you at all times.

Use in-store analytics tools

You’ve likely heard about the benefits of in-store analytics when it comes to sales and marketing, but did you know that you can also use analytics solutions to improve store security? Video surveillance tools, for instance, will enable you to see where people lingering and why, while foot traffic information coupled with inventory and POS data can help you detect discrepancies or unusual stock patterns.

Return Fraud

Dealing with returns can be tricky. On the one hand, you need to enforce policies that prevent people from pulling a fast one on your business. However, being too uptight can alienate customers who have legitimate reasons to return their purchases.

There aren’t any hard and fast rules when it comes to handling returns. You’ll have to craft a policy that works for your particular business, and also strikes a balance between excellent customer service and loss prevention.

Here are some general best practices you should consider:

Request for proof of purchase

Ask customers to provide a receipt with their returns to prevent people from returning stolen goods.

Request for identification

If returns are a huge issue in your store, you may want to create customer profiles so you can track return frequency among your shoppers. Ask customers for their ID when they’re returning their purchases so you can check them against your database.

Keep your return policy visible

Prominently display your return policy in your store and have it on your receipts, so customers know your rules from the get-go.

Use fraud detection solutions

If creating customer profiles and tracking shopper returns becomes too time-consuming or inefficient, you should consider looking into third-party vendors that can do these things for you.

One of the biggest players in return fraud is a company called The Retail Equation (TRE) which has created customer profiles for more than 27,000 stores. TRE analyzes data points like return frequency, dollar amounts, and purchase history and notifies retailers of suspicious activities.

Employee Theft

Worried about theft being an inside job? The following steps should help you prevent sticky fingers among your staff:

Hire the right people

Improve your hiring process. See to it that every person you take on board meets your high standards–not just skill-wise, but (more importantly) in terms of character. Run background checks, call up their references, and be thorough with your interviews so you can effectively gauge if they’re the right fit.

Be a great place to work

A happy workplace encourages ethical behavior. Create an excellent environment by keeping communication lines open, promoting fair employment practices, and giving a ton of positive reinforcement.

Perform audits

Regularly (or even randomly) going through your company’s financials will enable you to spot discrepancies and suspicious behavior. It also discourages potential fraudsters from attempting to do shady things in your store.

Further reading

stafftrainingguideNeed more staffing tips and insights? Check out The Ultimate Guide to Training and Motivating Retail Employees, an in-depth resource packed with actionable takeaways for motivating employees and boosting staff productivity.

This free resource is chock-full of advice and insights that can help you empower your staff and increase your store’s productivity. Specifically, you’ll learn about:

  • Hiring and training retail employees
  • Using a mix of learning tools to improve staff knowledge
  • Inspiring team members to be top performers

Get it free here

Vendor Fraud

Vendor fraud, which accounts for about 5% of retail shrinkage, isn’t as common as shoplifting or employee theft. But that doesn’t mean you shouldn’t be vigilant about preventing it. Here are some of the things you can do:

Mind the paper trail

This may sound basic, but you’d be surprised at the number of people who fail to get things in writing. When dealing with vendors, have all your agreements on paper. Also log all the delivery and shipment details — i.e. time, quantity, the person who signed for it, etc. — so you’ll always have documentation to refer to.

Have your experienced employees accommodate deliveries

See to it that whoever signs for shipments knows your products and your vendors well. This will make it easier for them to notice if something isn’t right.

Don’t schedule multiple deliveries at once

This enables you to stay focused on one vendor at a time and see to it that everything’s in order.

All-around retail security tips

The pointers mentioned above will help you prevent specific types of theft and fraud. At a more general level though, here are additional retail security tips to help you prevent loss across your business:

Conduct regular inventory counts

The first step to reducing shrinkage to measure it; and you can’t do that if you’re not on top of your inventory counts. That’s why it pays to conduct stock counts on a regular basis. See to it that every item in your store is counted at least once every quarter so you can catch discrepancies early and take immediate action.

Tip

Want to make inventory counts easier for yourself and your staff? Check out Scanner by Vend, a nifty mobile app that lets you conduct physical inventory counts using your iPhone, iPad or iPod Touch.

Just scan an item’s barcode using your phone’s camera and Scanner will automatically record the SKU for you. Scanner also syncs completed counts with your Vend account, so once you’re done counting, you can easily update your stock levels. 

Not a Vend user? Scanner will create a CSV file that you can easily email to you and your staff. 

Stay on top of your data

In addition to shrinkage, keeping an eye on metrics like comparable sales and returns will allow you to spot trends and uncover suspicious behavior. For example, have your rate of returns been unusually high lately? You might want to investigate.

To effectively track these metrics, get yourself a reliable retail analytics software that lets you access key business data easily.  

Use the right tools

We’ve talked about the importance of retail security tools in the past, but it’s worth mentioning again: arming yourself with loss prevention tools such as cameras, signage, and mirrors can prevent shoplifting and employee theft.

And be sure to keep up with the latest security technology. Take cameras, for example. According to Greg Hartzell, the Director of Toshiba Surveillance & IP Video Group, “cameras installed as little as five years ago may have ten times less resolution than today’s IP surveillance technology. Low resolution and grainy dark video aid a defense attorney’s call to dismiss the video as evidence, especially when witness testimony is weak or nonexistent, as is often the case in retail.”

Bottom line

Don’t let those darned fraudsters and wrongdoers get the best of your biz. Make your store more secure and profitable by implementing the tips above and reducing retail shrinkage.

We’d also love to hear from you. Leave a comment and tell us how you’re preventing fraud and theft in your store.

About Francesca Nicasio

Francesca Nicasio is Vend's Retail Expert and Content Strategist. She writes about trends, tips, and other cool things that enable retailers to increase sales, serve customers better, and be more awesome overall. She's also the author of Retail Survival of the Fittest, a free eBook to help retailers future-proof their stores. Connect with her on LinkedIn, Twitter, or Google+.

  • yamini

    Great Article..It was very informative..I need more details from your side..include some tips..I am working in Erp In India