Reducing shrinkage by targeting internal theft

Anna Arwidi

Retail is going through a period of significant change. With competition from online retailers and changes to in-store shopping habits, securing margin is becoming more important than ever. Through this change, video surveillance has persisted as the go-to tool for loss prevention professionals – according to IHS Markit’s Retail Security Report 2017.

Loss through theft is an issue for all retailers and, sadly, one of the most significant areas of shrinkage is through theft by staff. Employees can misappropriate goods in a staggering variety of ways: the consumption of consumables, sticky fingers in the cash register, in a bag and out the back door, ‘sweet-hearting’… the list goes on. And many of these offences have one thing in common: they take place in areas that lack proper video surveillance.

According to the report, employee theft could cost retailers up to seven times as much as theft by an external agent. Video surveillance is widely accepted by loss prevention professionals as a powerful deterrent to shoplifters, and accordingly the majority of retail space is covered to some degree by cameras. However, be it through ignorance to the facts or complacency, key areas in which employee theft takes place are regularly overlooked.

Employee theft at the point of sale (POS)

Staff members, in collusion with customers, can facilitate theft at the POS. Misleadingly known as ‘sweet-hearting’, this method of stealing could involve failing to scan the entire basket or ringing low-cost items through the till in place of the high value goods leaving the store.

The challenge is compounded by the increasing prevalence of mobile POS units, meaning sweet-hearting no longer has to take place behind a service counter.

There is also the ever-present risk of the straight theft of cash from the till. Without the deterrent of appropriately placed, suitable and high definition video surveillance equipment – there is often little chance of employees being caught and so the behaviour persists.

Lack of video surveillance in staff-only areas

In a comparable way to the PoS, back of house areas in retail are often insufficiently covered by video surveillance equipment. Unsurprisingly, goods often leave through the back door to avoid the shop floor and its plethora of cameras.

In addition to the back exits themselves, goods can also be concealed out of camera shot in staff-specific areas and smuggled out the front – without any evidence being captured on camera. Both routes represent preventable stock shrinkage. In this case, video surveillance can be supported by the use of other loss prevention systems such as electronic article surveillance (EAS).

With the theft of goods and cash by employees being rated the first and third biggest area of store loss respectively in the 2015 US retail fraud survey (with admin and bookkeeping errors coming in second), and each recorded incident of employee theft costing an average of $585 (2.9 times) more than the average for shoplifting according to a recent US survey, it is clear that measures must be taken in order to curtail this dishonest practise. Management must recognise the potential gains in profitability to be made through addressing this key aspect of loss prevention.

Analytics assisting loss prevention

In recent years, largely due to the extensive use of network cameras in retail, there has been an increase in the availability of video analytics software targeted at loss prevention. Video analytics can carry out automatic shopping basket analysis to identify items that have entered the basket but not been paid for at the PoS. There is also the possibility of using clever algorithms to detect incidents at self-service checkouts where shoppers avoid scanning items. These types of solution are rapidly gaining traction with loss prevention professionals in retail.

An integrated approach

While video is still the most utilized form of physical loss prevention technology, taking an integrated approach will yield the greatest rewards. For example, combining effective PoS video surveillance with exemption-based reporting – analyzing PoS sales transactions and picking out abnormal behavior – and electronic article surveillance (EAS) is an incredibly effective deterrent.

As retail continues to change and evolve, loss prevention professionals must adapt too. By taking advantage of all the modern technology available there is huge scope for reducing shrinkage.

With Axis’ fleet of advanced network security solutions, loss prevention managers have at their disposal the means to both discourage this activity in the first place and to increase the chances of successful prosecution. Find out more about Axis solutions for retailers here.