What Do We Cover In This Article?
What Are The Main Types of Shrinkage For Retailers?
Globally retail shrinkage costs brands up to £35 billion globally each year according to the British Retail Consortium. This recorded loss is when the stock doesn’t match what has been sold which can dramatically affect profits. The main reasons for shrinkage in retail are
- Customer shoplifting, this makes up about 40% of shrinkage
- Employee theft at 30%,
- Administrative errors at 20% and
- Vendor fraud and operational loss with each accounting for 10%.
As a retail security company in London we often speak with store managers who notice a spike in returns that don’t match sales, It often sparks an investigation that leads to finding out internal theft is the culprit. To tackle these kind of issues we assist retailers by helping them implement CCTV and inventory management controls to keep track of stock accurately. Partnering with Double Check Security who offer loss prevention services to spot suspicious behaviour and regularly auditing inventory can make a big difference. By retailers addressing each cause of shrinkage methodically they can protect their profits and create a better experience for both employees and customers. Investing in effective loss prevention strategies not only reduces financial losses but also builds a trustworthy environment, as evidenced by the 45% of UK retailers who have recently boosted their loss prevention budgets according to Michael Keenan for Shopify.
How Does Shoplifting Contribute To Retail Shrinkage?
Why Shoplifting Such a Problem In The UK?
Shoplifting in the UK is one of the main sources of retail shrinkage directly impacting the bottom line of retailers. Shoplifting can be of course be opportunistic, but many incidents are carried out by organised retail crime (ORC) groups who target high value or fast fashion stores in London or other large cities. Due to the amount and increase in shoplifting across the UK theft has become a significant concern for retailers across the UK, particularly with the rise in ORC. In the news it has even been documented that international gangs are flying in from abroad from the day to shoplift in London. We’ve include a video clip on Youtube from channel 4 news on this for informational purposes.
What Are the Common Tactics Used by Shoplifters?
Shoplifters use more and more original tactics to get away with it, such as concealing items in foil lined bags or foil lined jackets, using de-taggers, switching price tags, or working in groups to distract staff while members of their group steal. Organised shoplifting gangs often scout stores beforehand to identify easy snatches. Their methods have become more creative such as steaming which makes even more important for retail stores to have security measures like guards and surveillance in place.
This video is for information purposes only.
Which Items Are Most at Risk of Being Stolen?
The answer is anything of value that can be easily sold on. So that includes everything from jewellery, branded clothing, electronics, cosmetics, alcohol, meat and the list really going on. Generally what makes a item attractive for theft is accessibility, the size of the item and the value of the item. When retailers are performing loss prevention risk assessments then they should look at these three main elements to minimise theft risks.
How Does Shoplifting Impact Overall Retail Losses?
Shoplifting affects inventory levels and indirect costs such as increased security expenses , staff morale and turnover (as sometimes shoplifters can turn violent) and loss of customer trust. The British Retail Consortium has reported that the total cost of retail crime in the UK alone reached £1.9 billion in 2022. The vast proportion of this sum was due to shoplifting. We have personally found as a leading retail security company that trained retail security guards act as an effective deterrent, reducing shoplifting incidents and thus minimising overall losses.
How Does Internal Theft Affect Retail Losses?
What Types of Employee Theft Are The Most Common in Retail?
Employee theft can take many forms but the most common are stealing products via concealment when exiting work either on lunch breaks or at end of day, issuing fraudulent refunds, giving unauthorised discounts to friends or family or organising theft to occur at particular times when the store is unmanned. See each employee has insider knowledge, which makes their actions harder to detect compared to external theft. Employee theft is particularly damaging because of the breach of trust involved and the amount that can be lost over a short period of time and also the fact employees can cover their tracks somewhat so before the retailer realises something is amiss they are already down by thousands of pounds.
How Does Internal Theft Go Undetected?
Internal theft often goes undetected due to a lack of security protocols or inventory management. It ranges from not performing the proper background checks on staff which allows unscrupulous individuals to take a role in a position of trust giving them free reign to steal until they are caught: All retailers should seriously consider background checks during the hiring process for this very reason. Internal theft can also go undetected because of a lack of training meaning people don’t understand the policies that are in place to protect the business. Another and pressing reason why employee theft goes undetected is the failure to implement internal controls: Good financial practices and inventory management reduce opportunities for internal theft. It’s important to use a system of checks and balances. For example no one person should be allowed to cash up alone..
If there are proper monitoring systems in place such as a buddy system, stock auditing and CCTV it can help retailers review suspicious activity and catch improper practices.
How Can Internal Theft Be More Damaging Than Shoplifting?
Employee theft can be more damaging to the bottom line than shoplifting because internals generally involve a larger quantities of goods and can continue for an extended period of time before they are detected. An employee who understands store procedures is also able to exploit the system more effectively. By having security guards in place it will serve as a deterrent and a detection mechanism for internal theft. Retailers often change security guards every so often to ensure there can be no collusion between staff and security.
What Operational Errors Can Lead To Shrinkage?
How Do Inventory Management Mistakes Contribute to Shrinkage?
Inventory management mistakes can contribute to shrinkage in four main ways which are administrative errors, supply chain errors, inefficient layout and storage, accounting and tax miscalculations. All of these ways cause discrepancies between what the actual stock levels are and what has been recorded leading to lost or unaccounted items.
What Are the Most Common Operational Errors in Retail?
The most common operational errors include incorrect product pricing, failure to scan items, and administrative errors when reconciling stock levels. A good example of this is if items are incorrectly tagged they can lead to customers being charged less than the actual value which will result in loss of profit. Training staff and implementing inventory checks can help in minimising these errors.
How Can Security Guards Help Reduce Operational Errors?
Security guards can play an indirect role in reducing operational errors by assisting in inventory checks and act as a second layer of oversight during restocking to ensure inventory counts are accurate. The vigilance of a security guard can help prevent certain mistakes that contribute to shrinkage.
How Do Security Guards Help In Loss Prevention?
Why Is a Visible Security Presence Important?
When a potential shoplifter see’s a guard in a store they want to target they will often reconsider if the security is switched on and looks the part. A vigilant and visible security guard will make eye contact with the shoplifter and a guard should know that if someone is watching them it is because they are likely planning to get up to something. It is basic training retail 101. If stealing is more risky for the shoplifter then they are indeed more likely to move on and target somewhere easier.
How Does Proactive Behaviour from Guards Prevent Theft?
A proactive guard will observe, anticipate, and act before a situation escalates. They will move around the store and offer to get a member of the floor team for assistance or just make their presence felt to shoppers in a reassuring way. By not giving a opportunity for someone to steal discreetly it will stamp out theft and helps create a safe and secure and service first environment for genuine customers.
How Does Engaging with Customers Reduce Theft Risks?
Engaging customers with a simple “Can I help you find something?” serves two purposes. 1. It enhances customer service while subtly making potential thieves aware that they are being watched. And 2. If you are actively engaged with customers it is a lot hard for them to steal. An experienced retail security guard understands that providing excellent customer service is often one of the best and simplest forms of loss prevention.
How Do Guards Prevent Employee Theft?
What Areas Are High Risk To Monitor For Internal Theft?
High risk areas in the retail setting are stockrooms, delivery bays, cash registers and staff check out areas. (We have often found items stashed in the ceiling of a check out area that is in a CCTV blind spot). By focusing and monitoring these high risk areas will be key in any strategy to prevent internal theft. As guard can effectively monitor all areas they also serve as a reminder that the store is being closely watched, and any suspicious actions will not go unnoticed.
How Do Guards Spot Unusual Employee Behaviour?
Spotting unusual behaviour is an art unto itself and takes years of experience. Some tale tale signs that something isn’t right is if they are working unusual hours outside of their schedule, try sending the security guard away are particular times of the day or telling them to leave early so they can close up alone, under performing at work, make unjustified complaints to management, are defensive when reporting about the work they do, have unexplained close relationships with staff, customers or suppliers … or simply a personal lifestyle that doesn’t match up to their salary.
How Can Retailers Make The Most of Security Guards?
What Retail Specific Training Is There For Security?
Companies like Double Check Security Group offer retail specific training that helps brands get the most out of their security. The training covers the brands individual security procedures, how to identify suspicious behaviour, how to successfully perform a stop with complete knowledge of A.S.C.O.N.E procedures as well as report writing and follow up. Customer service, conflict management, first aid and physical intervention training comes as standard with all retail security officers so there is a lot of value added there for retailers.
How Does Customer Service Training Improve Security Guard Performance?
Customer service training for security guard improves performance because it helps position the right perspective on the job at hand. The security guard is hired by the shop in an enabling role. They are there to enable the customers to happily shop with ease and also to enable staff to work without the threat of suffering violence at work. A customer service approach to security such as a simple opening of the door or a smile and a hello will make it clear to people that they are approachable and their to make the shopping experience better. Of course a beneficial by product of this is that it deters both internal and external criminal activities..
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This article is provided for informational purposes only and does not constitute legal advice. The practices and strategies discussed may not be suitable for all businesses or compliant with local laws. We recommend consulting with legal experts to ensure that any security measures you implement meet legal requirements and are appropriate for your specific circumstances and country. The statistics and scenarios mentioned are based on generalised information and should not be taken as specific advice or insights tailored to individual cases. The implementation of security personnel and surveillance measures must comply with the regulations applicable in your location.
