The Threat From Within
By Mark Kalaygian



Mark Kalaygian
Editor in Chief




Is there a serious threat with a friendly face lurking in your aisles?

Unfortunately, the answer for many retailers is yes. Even worse, that threat may not only be in your aisles, it could be on your payroll.

The loss of inventory (shrinkage) is a real problem in just about every channel, with some estimates putting the total cost to U.S. retailers at about $35 billion per year. But what may be even more disturbing is that employee theft accounts for approximately 44 percent ($15 billion) of those losses, according to a 2012 National Retail Federation report.

Strategies to battle shoplifting may be somewhat intuitive—keeping the sales floor well staffed, putting security tags on merchandise and displaying high-risk items in secure fixtures are all tried-and-true methods of reducing this type of loss. However, reducing the shrinkage threat from within can be much trickier. After all, retailers have to place a certain amount of trust in their employees in order for their businesses to be successful. But how do you make sure that this trust is not being taken advantage of by a few bad apples?

The first step is to try to weed out those bad apples before they even join your team. While doing formal background checks on, and following up with past employers and supplied references of all applicants does not guarantee success in keeping potential thieves off the payroll, such practices go a long way in helping storeowners avoid high-risk new hires.

Another step that retailers can take to discourage internal pilferage is to make sure that the company’s policy on employee theft is made clear to the staff. Making such a policy a prominent part of a store’s employee handbook or new-hire packet will serve two purposes: it will make it clear that the storeowner takes the problem seriously, and it will set up a formal procedure for how the company will deal with internal pilferage.

Finally, it does not hurt to keep employees engaged in the business, including seeking ideas from them on how to reduce shrinkage. Making a pet store’s staff feel like they have a real stake and an important role in the success of the business should help to deter them from feeling like they are entitled to a ‘five-finger discount’ and foster a sense of accountability when it comes to reporting abuses by other employees.

Of course, even the best loss-prevention plans do not have a 100-percent success rate. The simple fact is that there is no way for a storeowner to be all-knowing and all-seeing. However, a proactive approach to preventing employee theft, as opposed to dealing with the problem when it rears its ugly head, can give retailers confidence that they really know what those friendly faces on their staff are costing them.