September 12th, 2018 | Vincenza Caruso-Valente, Sterling Talent Solutions

The Best Practices for Counteracting Loss in the Retail Industry

Best Practices for Counteracting Loss in the Retail Industry

It is hard to believe, but the busiest season for the retail industry is just around the corner. Store hiring managers and HR teams are starting now to bring in their seasonal employees to beat the rush and be fully prepared for the upcoming holiday season. With the considerable number of temporary employees being employed over a very short amount of time, the chances for loss prevention increase. Loss prevention has always been an issue for retail businesses and has continued to be a concern as the industry adapts to changing shopping patterns and needs.

Retail Loss Prevention Numbers

2017 National Retail Federation (NRF) Security Survey determined the average loss prevention (shrink) rate in 2016 was 1.44% with an overall cost to the US retail economy of $48.9 billion. The survey found many factors that determine a store’s shrink number. The overall findings were:

  • Shoplifting-36.5%
  • Employee/Internal Theft-30%
  • Administrative/Paperwork Error-21.3%
  • Vendor Error-5.4%
  • Unknown Error-6.8%

Apparel retail stores have higher overall shrink compared to other types of brick and mortar locations. In breaking down the types of shrink, both the rates of shoplifting (41.0%) and employee theft (35.5%) were higher than the overall average.

Employee theft can come in many forms from “shorting the till” to giving friends and family discounts to stealing credit card numbers or gift cards to not paying for merchandise. The average loss per dishonest employee was $1,922.80 and there was an average of 345.6 employee apprehensions in 2017. While shoplifting is the biggest part of a store’s shrink numbers, the actual dollar amount of employee thefts is up to five times (or more) of the amount of what an average shoplifter will take.

Best Practices to Help Prevent Employee Theft

There are many manuals and websites explaining processes that retailers can follow to help prevent internal theft. Here are just a few of the tips:

  • Background Screening: Retail stores should run background checks on their employees. Vend HQ recommends that employers get to know the applicant via interviews, be consistent and run the same background check process for every applicant and use a professional agency to conduct the checks.
  • Monitor Gift Card Sales: Keep an eye on gift card sales reports and look for anything that seems extreme and above the average gift card sales totals.
  • Procedure Training: Make sure cashiers know how to properly ring up sales, coupons and discounts.
  • Cash Drawer Counts: Perform random cash drawer counts to check on your cashiers. If the employee’s drawer is over/short detail the situation and talk to or write up the cashier as soon as possible. Drawers should also be counted every day before the store opens, in between shifts and after the store closes.
  • Trash Duty: Have two people take out the trash. Stashing items in the trash to collect later is one of the most common and easiest methods of employee theft. Also, use clear, plastic bags that can easily be checked.
  • Bag Checks: Make a policy that employees should have bags, purses and lunch bags checks when they leave the store. This will help prevent them stashing items in the bags.

The key to making these best practices work goes back to training the employee from their first day on the importance of deterring internal theft and the repercussions when it does happen.

Background Screening Policy

The 2017 NRF Security Survey also asked retailers what their top method for verifying employee integrity. 91% of the employers said they perform multiple interviews as a verification factor, 85.1% perform criminal record searches, 73.1% conduct employee verifications, 58.2% do personal reference checks, 43.3% do education verifications and 40.3% run drug screening on their employees. Having a proper background screening policy is crucial in helping retail hire and retain the right employees.

High turnover rates, tight time to hire demands, employee shrinkage, and customer risk are making hiring for retail tougher than ever. With so much competition and readily available positions, it is key for employers to be able to conduct background checks on their employees quickly and accurately, so new employees can get started and onboarded easily. Using the right technology for your employment background checks can affect how quickly you can get your new hire onboarded and started at their new job. Sterling’ cost-effective and comprehensive¬†retail background check solution¬†will allow companies to meet the time-to-hire requirements with the fastest turnaround times in the industry, give real-time risk alerts and post-employment monitoring, all while managing a business’s adverse action process.

Sterling is not a law firm. This publication is for informational purposes only and nothing contained in it should be construed as legal advice. We expressly disclaim any warranty or responsibility for damages arising out this information. We encourage you to consult with legal counsel regarding your specific needs. We do not undertake any duty to update previously posted materials.