Store Employee Theft – How to Prevent Internal Theft in Retail Stores?

Employee theft is a Profit Killer

Employee theft can occur just like shoplifting by concealing merchandise in a purse, pocket, or bag and removing it from the store. It can also occur by stealing cash, allowing others to steal merchandise, eating food, and by refund, credit card, or check fraud. Employee theft can sometimes be charged as embezzlement due to the trusted fiduciary status of the employee. All of these methods lead to loss of inventory (shrinkage) and/or profit for the merchant.

Employee theft is an insidious crime because the merchant is paying a wage and benefits to the thief on top of paying for the cost of their dishonesty. Studies have shown that employees can do a lot more damage than shoplifters because they are trusted and have an insider’s knowledge of store security measures.

Store Employee Theft Profile

There is no real physical profile for a dishonest employee. Dishonest employees come in all shapes, sizes, ages, sexes, ethnic backgrounds, religions, levels of education, and economic status. You simply cannot accurately determine who is likely to steal based on their demographic status alone. However, an employer can make reasonable assessments based on their conduct, integrity, and judgment. A person’s past conduct, integrity, and judgment often provide the best indication of their future behavior.

Retail store employees have a constant opportunity to steal cash or merchandise…all they need is the desire and sufficient motivation to do so. What keeps most employees honest is a moral character, loyalty, respect for the law and their employer, and the desire to be viewed as trustworthy. Studies support this by proving that shrinkage is significantly less in stores with reduced employee turnover and fewer part-time workers.

For others, the only barrier to dishonesty is the fear of getting caught. The employee thief risks getting fired, being arrested, jailed, and paying restitution. The criminal record and bad job reference will have a compounding effect that will follow them for years. Merchants must not be sending a clear message to their employees because most employee thieves that I have encountered never thought they would be caught.

Store Employee Theft: What’s Does it Cost the Industry

According to the University of Florida 2005 National Retail Security Survey, employee theft was estimated to be responsible for 47% of store inventory shrinkage. That represents an estimated employee theft price tag of about 17.6-billion dollars per year. This astounding figure makes employee dishonesty the greatest single threat to profitability at the store level.

The 2003 study found the average dollar loss per employee theft case to be $1,762.00 compared to $265.40 for the average shoplifting incident. Despite these facts, most retailers mistakenly focus their loss prevention budgets on shoplifting.

Store Employee Theft: Loss Prevention

Preventing employee theft is a constant challenge for retailers. The industry knows that it must put systems in place to prevent or deter internal theft. To be effective, loss prevention systems must be designed to reduce the opportunity, desire, and motivation for employee theft.

One way of reducing employee theft motivation is to show a deep commitment to preventing losses at every level and a policy to prosecute dishonest employees if warranted. Having systems in place to control shoplifting takes away the excuse that external theft is responsible for store inventory shrinkage and not employee theft.

Basic loss prevention steps involve good procedures for hiring, training, and supervision of employees and managers. Procedures that are clearly defined, articulated, and fully implemented will reduce the opportunity, desire, and motivation for employees to steal. I will talk about each of these concepts in future articles.