Awareness, training, accountability; these three are still the keys to reducing incidents, and to catching internal theft early. Many companies are increasing their audit cadence this year so that issues can, hopefully, be identified earlier. Inspecting what we expect has always been a key to success in shrink reduction, but it is much more crucial today.

We face an up-hill battle against shrink, and we have to fight a tougher fight with fewer troops this year. Less eyes in the stores means more opportunities for theft.

Employees who feel the pressures of this down economy, including reduced payroll and benefits, are much more likely to steal from their employers. These thefts can range anywhere from simple time theft to multi-thousand dollar embezzlements. Loss Prevention MUST, not only expect this, but get out in front of this issue and be proactive in efforts to discourage disgruntled employees from causing a “bad to worse” scenario for retailers.

As always, comments are welcome

• War On Retail Shrink: Can We Hold The Line?
• Economic Impact On Shrink
• Economic Pressures Affect Retailers In Many Ways
• Shoplifting Not The Only Theft Increasing Since Recession Started
• Loss Prevention In Tough Economic Times

Most experts agree that approximately 30% of employees steal from their employers. 75% of those do it repeatedly. The average time it takes to catch an employee who steals is 18 months.

Just to give you an example, I had a case a few years ago where, after an investigation, I caught an employee in the act of taking merchandise out the back door. The employee then admitted to me that he had taken approximately $78,000.00 in merchandise. When that store took physical inventory, the losses were estimated to be more like $150,000.00. The employee stated that he had been stealing from the store for approximately a year. By the way, he was a trusted manager, who had keys, an alarm code, etc.

What does this all mean? It means that retailers, who are now suffering by and large from soft sales and increased costs, must be even more dilligent in their efforts to deter theft and fraud, and to recover losses whenever they do occur. This war is fought one battle at a time, and on many fronts. Loss prevention has to adapt quickly to the changing economic climate, and develop solutions to new theft methods. Also, awareness levels have to be raised through training, coaching, practical exercises, etc. Employees must share ownership of the shrink in their stores, and not just view it as LP’s problem.  Programs that educate employees about shrink and recognize those who help deter theft work best.

There is a lot at stake. $22 billion dollars is an astonomical figure that most of us can’t even really grasp. However, we can grasp our own losses, and we all know that those losses cost us dearly in profits.

• Refund Fraud – By The Numbers
• Economic Impact On Shrink
• Loss Prevention In Tough Economic Times
• War On Retail Shrink: Can We Hold The Line?
• Keys To Consistent Low Shrink – Part 7 – Set A Goal, Then Stick To It

• Specific Goal – Specifically, how much shrink is acceptable? Most of us would immediately answer, “None”, but that is not realistic in most cases. Businesses need to understand what shrink is, and then set a goal as to what is the acceptable number, in dollars, and as a percent to sales.
• Measurable Goal – This is where you need to know your current situation. You’ll need to take inventory to see what is “lost”. Spot checks throughout the year on high shrink items will help you measure progress, and then a follow up inventory, at least annually, will give you your results.
• Achievable Goal – Don’t set a goal that you don’t even believe you can reach. This is very important. If you have a high shrink level, an achievable goal may be to cut that shrink by 20% over the next year, or it may be achievable to cut it by 40%. If you believe it is possible, after identifying the causes, to reduce shrink by 40%, then it is.
• Reasonable Goal – It is not reasonable to expect to eliminate all shrink at once. Most of the time, shrink is reduced incrementally by eliminating the current causes, and then reacting to new causes as they arise. With the right plan, and a real commitment to reduction of losses, it is reasonable to expect to lose less than 1% of sales to shrink.
• Time-Based Goal – Set a date by which you want to achieve your shrink goal. Give yourself a year so that you have a full year of sales to compare with your losses and have a true read of your shrink as a percentage of your sales. However, you can also set “waypoint” dates where you can perform mini-inventories in high shrink areas so you can re-direct your efforts and revise your plan if necessary.

Because a reduction in shrink equates to a huge increase in profits, it is absolutely worth the time and effort to set a shrink goal and hold your business, and yourself, accountable for reaching it.

Technorati Tags: retail loss prevention,retail shrink,shrink reduction,shrink goal,lp best practices

• Keys To Consistent Low Shrink – Part 2 – Integration
• Every Dollar Counts When It Comes To Preventing Losses
• Employee Theft Increasing By 15%
• Keeping It REAL
• Keys To Consistent Low Shrink – Part 1 – Partnership

If you place high importance on a particular program, you will follow up regularly to ensure that it is running properly, and efficiently. Employees see that, and will take their cue from you, in most cases. For example, if you demonstrate great customer service skills, and demand that same level of customer service from your employees; and, you regularly review with them any opportunities and strengths to help them improve, they will “get it”. Essentially, they will become very good at customer service, and will thereby increase your sales.

By the same token, if your employees know that you are going to review your security policies and programs, and that you are going to follow up with them about any deficiencies or strengths you find, then of course, they will follow your lead, and make those programs important to themselves, too.

It’s really about managing people. You just have to apply the same principles you employ to increase your business to the programs that protect your assets. If you never check to see if the back door is locked, your employees will not think it is important to keep it locked.

Even small businesses can, and should, have a security audit in place. Depending on the size of the business, and the specific need, the audits could range from a simple checklist to a full-blown multi-area, detailed audit process. When it comes to security, here are some things that every business owner should be checking on a regular basis:

• Physical Security – Are your doors locked? Is your building secure? Is your alarm working properly? Including all motion sensors and door contacts? If you have cctv, is it working properly? Are the times correct on your video output?
• Cash Handling – Is your cash handling policy being followed? Are the proper signatures, dates, etc. in place? Is your safe always locked? Do you regularly remove cash from registers so that you limit your liability in case of theft or robbery? Are your daily/nightly deposits secured? How are your registers counted? By whom? Are the fail-safes being used consistently? Is there accountability for discrepancies?
• Merchandise Protection – Are your lockable cases kept locked at all times? Is your high theft or high risk merchandise protected from theft? If you use Inventory tags, are they being used to your expectation? Do your employees respond to alarm activations?
• Operations – Are you checking your receipts of goods for discrepancies? Are you following up with vendors on any issues to ensure you get credit for mistakes? Is your stock area clean and organized, so that any theft activity will be more obvious? Is there a process in place to verify all receipts?
• Safety – Are your customer areas free of any potential dangers? Are your fire exits clear and unobstructed? Are your back areas clean, organized, and a safe work environment for your employees? Do you have an emergency plan? And, do all of your employees understand it?

This is just an example of the basic items that any business owner should be auditing on a regular basis, be it monthly or weekly. Sometimes, a simple checklist will work. The key to the audit is the follow up. All discrepancies must be corrected, and reviewed with the employees to ensure that everyone understands the importance of the programs. If you inspect what you expect, you will find that you will see improvements in execution, and reductions in losses.

• Keys To Consistent Low Shrink – Part 4 – Customer Service
• Keys To Consistent Low Shrink – Part 3 – Open The Door
• Five Common Indicators Of Employee Theft
• Awareness Wins The Day
• Keys To Consistent Low Shrink – Part 2 – Integration

Most major retailers use electronic article surveillance, or inventory control tags, to help protect their inventory and deter theft. With this system is a set of pedestals that work as receivers and alarms at the front doors. The problem is that, when this system is not used effectively, it becomes dead weight to the business. Tags cost money, and so does the maintenance on the system. So, why not use it? If would-be thieves perceive that no one is going to even approach or question them if an alarm sounds, then the deterrent factor is lost. Every alarm should be followed by a response by an employee. It should be approached as a customer service issue, because if a tag is mistakenly left on product, it creates an inconvenience for the customer to come back to the store to have it removed without damaging their merchandise.

Closed Circuit Television (CCTV) systems are extremely effective at deterring theft and at providing evidence in cases where deterrence efforts are ignored by thieves. Any store that uses CCTV should have a good, clear shot at all public entrance/exit door(s). The best identification video will always be the shot at the entrance. Along with that, it is worth the couple hundred dollars investment to loop that video into a public view monitor, which shows would-be thieves that you are monitoring your doors.

Finally, a greeter is a great idea for door control. Not only can the greeter help your customer service by being available for questions and to give customers direction, but they also show the would-be thief that there is a person at the door that they’ll have to pass to get out with your merchandise. It is a proven fact that no shoplifter wants to be noticed, let alone engaged in conversation by an employee. By greeting every customer, coming and going, your door greeter will deter more theft than you will probably ever realize. That person can also be available for EAS alarm responses.

Now to the receiving doors. It is imperative that these doors be secured at all times, and that a member of the management team is present any time they are open. Keys and alarm codes must be controlled, and only members of management should have access. One bad associate can take more merchandise than 20 shoplifters if allowed free access to the back doors. CCTV should also be used to monitor this area at all times.

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Technorati Tags: loss prevention,retail loss prevention,lp best practices,retail theft,shoplifting

• Perception Of Control
• Keys To Consistent Low Shrink – Part 6 – Inspect What You Expect
• Should Small Businesses Use CCTV?
• It Is A Matter Of Trust – When LP goes Bad
• Unbelievable $1.5 Million Embezzlement

Good customer service accomplishes two things related to the loss prevention strategy. First, it is the best deterrent to theft. No thief wants to be noticed, and if the employees are actively engaging the would-be thief in conversation, 9 in 10 will walk away without attempting to steal. Of the 10% who try anyway, 75% will get caught in the act if good customer service standards are being maintained. That’s a huge win for loss prevention, and it costs nothing, zero, nadda!

Second, good customer service boosts sales. Any loss prevention program that is not concerned with increasing sales is lacking a key element. It is possible to out-sell shrink, because shrink is a percentage of what? SALES! The more sales your company, region, district, store, etc. has, the less shrink based on the same amount in dollars! Here’s an example:

Say you have a store with $40,000.00 in shrink. If that store sells $5,000,000.00 that year, your shrink as a percent to sales is 0.8%. Now, say that same store maintains the same shrink for the next year, but increases its sales by 10%. The shrink, as a percent to sales, is decreased to 0.72%, for roughly a 10% decrease in shrink on the same number!

Now, let’s say you have a great customer service program, and at the same time you increase your sales by 10%, you decrease your shrink dollars by 10%. Your shrink of $36,000, as a percent of your sales of $5,500,000.00 is 0.65%! Never underestimate the power of great customer service. I know these numbers are wishful thinking for some, but there are companies out there who are posting shrink numbers right around this area (I know for a fact!).

• Economic Impact On Shrink
• Keys To Consistent Low Shrink – Introduction
• Keys To Consistent Low Shrink – Part 7 – Set A Goal, Then Stick To It
• Keys To Consistent Low Shrink – Part 2 – Integration
• Every Dollar Counts When It Comes To Preventing Losses

Become A Person

If you are to open the door to your employees, you have to take some time to build relationships. Early on in my career in LP, I had a district LP manager who insisted that I eat my lunch everyday in the store break room, with the other employees. I didn’t understand the logic at first, but I soon realized that I was having conversations with all the employees about our families, what we did for hobbies, etc. Suddenly, I was a person to the employees, and next thing I knew, I was getting calls and visits to my office from employees who wanted to help out. They were giving me tips on the employees who were stealing. They were telling me about their neighbors who were known to be shoplifters. There were even some whom I came to actually “trust”, and they were all great assets to my success.

Become A Mentor

Employees can pick out a fake, and they will come to you for answers and partnership. If you don’t know the answer, don’t lie or try to come up with something that will placate them. That will destroy the relationship you are trying to build. Tell them honestly that you don’t know, and then find out for them. Always follow up, as this builds credibility. Employees will learn to trust you because they know that you will either have the right answer, or you will get if for them. Loss prevention should be a credible source of information to the employees, and should give direction based on good business decisions. We have to understand that sometimes, it just doesn’t make sense to “lock it up”. So, we have to work with our employees on work-arounds that do make sense for the business, and still protect our profits. Give your associates sound direction that makes sense to them, and they’ll trust your judgment.

Build Awareness

Once loss prevention is established as part of the team, whether at the store level or above; then that door can swing wide open. That means communications are going both ways, and awareness-building can be accomplished. The level of awareness in the stores is directly linked to one thing above all: “How good is the relationship between LP and everyone else?” If managers and employees don’t trust, respect, nor like the loss prevention person or people, then you can preach all you want, and it will not be heard. I have often said that people don’t work for companies, they work for people. If your employees see you as credible, respectable, and reasonable, then they will be open to your ideas. They’ll listen to you. Once you establish that, you can have very high awareness levels because your employees will help you “spread the word” about loss prevention programs.

One of the most gratifying things I’ve seen or heard in a store was when I overheard an employee telling a newly hired employee about the loss prevention programs in their store. She said, “Joe knows what he’s doing, and since we started doing this, we haven’t seen nearly as many thefts.”

That’s a buy-in, and it’s priceless. As long as I have a few of those employees in every one of my stores, I don’t have to worry much about whether my programs are being communicated to the other employees. This is achieved by communicating to your employees, not only the specifics of the program, but the “why”. Why does one thing work over another? Why do we do one thing in one store, but something different in another? Why should I care whether or not the store is profitable? Loss prevention has to be able to credibly answer these questions, along with many more, and you just can’t do that through a closed door.

Technorati Tags: loss prevention,retail loss prevention,lp best practices,asset protection,retail profit protection,retail security,retail shrink,retail management

• Keys To Consistent Low Shrink – Part 5 – Control Your Entrances / Exits
• Keys To Consistent Low Shrink – Part 6 – Inspect What You Expect
• Where Should Retailers Focus: Shoplifters Or Employees?
• Keys To Consistent Low Shrink – Part 2 – Integration
• Employee Theft Increasing By 15%

Integration means that everything includes loss prevention. LP is part of every program. LP has a place in every call, every meeting, on every bulletin board. What good does it do to have a great new product if you lose as much or more of it than you sell? Or, even if you do have a plan in place to protect it, nobody knows about it? Everybody has to buy into the loss prevention program if it is to be successful. Everybody must be educated on the benefits of the LP programs, and the consequences for not executing them correctly.

Integration also must include distribution, allocations, merchants, etc. Operations may be more directly involved, but these other areas must be educated in the same areas so that they can be part of the solution to shrink.

Finally, all documents pertaining to training, policies, procedures, and programs must contain elements of the loss prevention program. For example, in the company SOP pertaining to merchandising, the tagging, or exposure standards must be included, as necessary steps for completion of the task. Training manuals or CBTs (Computer Based Training) must include the loss prevention mission statement, goals, and programs.

If a company wants its employees to take shrink reduction seriously, it is essential that the shrink reduction strategy be integrated into every part of the business. Loss Prevention is not just about catching thieves, it’s also about inspecting what you expect, training and educating, and instilling a strong awareness of shrink-causing factors into your employees.

A good loss prevention agent or manager will become integrated into the business, also. He or she will be a selling partner, and an essential part of the staff. This is crucial. Integration means that LP becomes part of the team, working toward the same goals as the rest of the team. Too often, the loss prevention team is deliberately separated, which usually results in the LP team getting “tunnel vision”, and focusing on investigations or audits instead of looking at the big picture and using investigations, audits, training, and awareness as tools that help the company reach their sales and shrink goals.

When I visit stores, I talk to my managers about sales, we talk about goals and trends, and we tie loss prevention into that. I talk to employees as much about customer service and active selling as much as I do about exposure standards and risks. That way, it all ties in together so that the line gets intentionally blurred, and I am viewed as a business partner, and not a gunslinger.

A lot of LP guys and gals may disagree with this approach, but I haven’t missed my shrink goal in 4 years, and they are tough goals, in a tough market at that. It works. In today’s retail world, LP can’t just be investigators or auditors. We have to be business partners to our stores and division managers.

Technorati Tags: retail loss prevention,loss prevention,lp best practices,lp,shrink,shrink reduction,asset Protection

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• Keys To Consistent Low Shrink – Part 7 – Set A Goal, Then Stick To It
• Keys To Consistent Low Shrink – Part 1 – Partnership
• Keeping It REAL
• Keys To Consistent Low Shrink – Introduction
• Keys To Consistent Low Shrink – Part 4 – Customer Service

I thank God that I have a strong partner on the operations side of the business in my real-life job. We don’t have any trouble communicating, and we partner on every important decision, no matter whether it is directly related to LP or not. Also, he treats me as a true partner, both in private, and in the company of our peers and subordinates. This has been a huge win in our fight against shrink. My stores know that if I ask for something, I have the complete backing of their managers.

Partnership must exist at the highest levels of the organization, too. If the upper management is involved in the shrink reduction strategy, and make it important, then it will be important to all levels of management. If they don’t, it won’t. Companies who view loss prevention as a beneficial partnership within their organization see positive results. Loss prevention is not forced to constantly “sell” programs, because loss prevention is included in the company measurables for everyone, not just the LP team.

For example, my DM partner is rated annually on shrink, just as I am rated annually on sales performance for our district. We are forced by the company’s model to work together to accomplish common goals that benefit the whole team. It’s not just about shoplifters and internals. Nor is it just about audits, checklists, and training. It’s about all of this, plus sales, presentation, merchandising, pricing, signing, etc. Both of us view the entire package as a whole, although we focus on our individual areas.

Partnership goes two ways, though. Loss Prevention can’t be “Sales Prevention”. That means that we, as LP professionals, must understand our role, and be willing to do our part to help our stores, districts, regions, etc. make their sales goals. That can mean a variety of things, but it almost always means being willing to listen to problems and possible solutions, and to provide realistic input so that LP is part of the solution.

Partnership also must exist at store level. Although I have the “authority” to make changes to the LP programs in my stores, I never do so until I get the “buy-in” from the store manager. That means I have to educate him or her on the benefit of the program in question, or the potential change. It also means showing them the negative impact that would be caused by failure to make the necessary changes. If the manager believes in the program, it will be implemented and maintained. If they don’t, you will constantly be circling back to pick up the pieces of your broken programs in that store.

My team knows that they can call at any time, and that I will be a partner to them. I do give direction as is necessary, but I discuss the matter, and the possible solutions, with the managers so that we agree on the best course of action. Some may think of this as weak management, but I have great shrink numbers, and great relationships with all my partners, peers, and stores.

If a company allows their LP department to be directed by those who do not understand, nor “buy into” the company’s LP model, then that company simply is not serious about reducing shrink. It takes partnership at all levels of the organization to reduce shrink. If partnerships between loss prevention and operations don’t exist, then the model is broken.

Tags: Loss Prevention, Asset Protection, Retail Loss Prevention, Retail Theft, Shoplifting

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• Keys To Consistent Low Shrink – Part 2 – Integration
• Keys To Consistent Low Shrink – Part 3 – Open The Door
• Economic Impact On Shrink
• Keys To Consistent Low Shrink – Part 4 – Customer Service
• Keys To Consistent Low Shrink – Introduction