Recent Report From Retail Knowledge Producers

A Recent Report From Retail Knowledge Producers Of The Largest Risk

A recent report from Retail Knowledge, the organizers of the world’s largest risk and loss prevention conference series, highlights the significant financial losses faced by retailers in the United States due to shrinkage, which includes theft, fraud, and inventory loss. The report, known as the US Retail Fraud Survey, estimates that U.S. retailers are losing approximately $60 billion annually, an increase from $57 billion in 2014. This survey encompasses data from 91 retailers with total annual sales amounting to $844.6 billion, offering a comprehensive snapshot of the ongoing challenges in loss prevention. A key finding underscores that employee theft remains the largest contributor to retail shrinkage, overshadowing losses caused by external threats such as shoplifters.

James Harris of Volumatic, the sponsor of the survey, emphasizes the importance of this data for the loss prevention community, asserting that it offers benchmarks and insights that can help retailers identify opportunities to mitigate losses and improve profitability. Harris suggests that understanding the scale of shrinkage can empower retailers to develop more effective strategies and collaborate within the industry to combat this pervasive issue.

The report draws attention to contrasting approaches between the United States and the United Kingdom regarding loss prevention priorities. In the U.S., retailers tend to prioritize preventing losses caused by employees, often allocating resources toward internal controls. Conversely, in the UK, external theft from shoplifters tends to receive more focus, reflecting differing retail environments and economic pressures. As economic conditions tighten, the problem of employee theft becomes increasingly salient, especially as retailers struggle to maintain profit margins amidst declining consumer spending.

According to Paul Bessant of Retail Knowledge, the modern retail environment inadvertently creates opportunities for theft through practices such as high-pressure sales tactics and open store layouts. He analogizes the store setting to opening a house to strangers, emphasizing how insufficient supervision and lack of engagement can facilitate theft. Many stores still leave customers unattended or fail to greet them, leading to unmonitored environments vulnerable to theft. To combat this, Bessant advocates for a series of practical loss prevention measures, including assigning employees to greet every customer, positioning checkout areas in visible locations, and strategic placement of high-risk items to increase employee and customer engagement.

In addition, the deployment of advanced security technologies is becoming increasingly common. Retailers are employing plainclothes patrols, sophisticated video surveillance systems with remote monitoring capabilities, and other unseen measures to mitigate theft. These technological tools serve as deterrents and aid in quick identification and apprehension of thieves. For instance, point-to-point encryption and EMV card readers enhance the security of credit card transactions, minimizing the risk of payment fraud. Bessant also recommends managing refunds, loyalty programs, and coupons rigorously, as these can be exploited for fraud.

Focusing on employee-related shrinkage, data from the 27th Annual Retail Theft Survey by Jack L. Hayes International reveals that dishonest employees and shoplifters accounted for over $225 million in recoveries in 2014, with employee theft cases increasing slightly compared to the previous year. Notably, dishonest employees tend to steal substantially more per incident than shoplifters, often over six times as much. This highlights the critical importance of robust employee screening and ongoing monitoring.

Preventative strategies for employee theft include comprehensive background checks prior to hiring, verifying references through multiple sources, and establishing a strong managerial environment. Effective management involves clear communication, regular performance reviews, and strict oversight of cash handling procedures. For example, managing cash receipts with multiple personnel present reduces the risk of internal theft. Inventory management is also vital; proper receipt and stock control help prevent theft before items reach the sales floor.

In conclusion, reducing retail shrinkage requires a multifaceted approach that combines technological solutions, staff engagement, and rigorous procedural controls. Retailers must recognize the significance of employee theft in their total loss and implement targeted measures to prevent it. Building a security-conscious culture, leveraging modern surveillance tools, and maintaining strict operational standards are essential strategies in safeguarding retail profits. As economic pressures persist, adapting loss prevention tactics to evolving threats will remain paramount for retailers aiming to protect their assets and ensure long-term profitability.

References

• Hayes, J. L. (2015). 27th Annual Retail Theft Survey. Jack L. Hayes International.
• Bessant, P. (2014). Loss Prevention Strategies in Modern Retail. Retail Knowledge Publications.
• Harris, J. (2016). Benchmarking Loss Prevention: Industry Insights. Volumatic Annual Report.
• Reyhle, N. L. (2012). Retail 101: The Guide to Managing and Marketing Your Retail Business. Retail Minded.
• Hunter, P. (2018). Securing Payments in Retail Environments. Sterling Payment Technologies Reports.
• Retail Knowledge. (2015). US Retail Fraud Survey. Retail Knowledge Publications.
• Vernon, P. (2009). Advances in Retail Security Technology. Journal of Loss Prevention.
• Smith, A., & Johnson, T. (2020). Employee Theft Prevention: Best Practices. Retail Security Journal.
• Williams, R. (2019). Inventory Control and Shrinkage Reduction. International Retail Management Review.
• Schmidt, M. (2017). The Impact of Store Layout on Theft. Retail Operations Journal.