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Neighbo(u)rly Perspectives: Using Technology to Mitigate Employee Theft

External theft and organized retail crime (ORC) often get the most attention when it comes to retailers’ shrink loss. Yet employee theft, also known as internal theft, results in significant losses too.

According to the National Retail Federation’s 2023 Retail Security Survey, internal theft accounted for 29 percent of total shrink loss in the United States, not far behind the 36 percent of total shrink loss attributed to external theft. Given these statistics, it’s not surprising that internal theft prevention was reported as a higher priority during the past few years for nearly half of US retailers.

Canadian retailers notice similar trends. In fact, March is designated as Fraud Prevention Month. This public awareness campaign provides tips and best practices to help Canadians recognize, reject, and report fraudulent behavior, including employee theft tactics.

Start with the Basics

Many internal fraud tactics are well known. They include refund fraud, gift card fraud, and collusion with friends, such as sweethearting and sliding. Some retailers consider these activities to be unavoidable costs of doing business.

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Newer vulnerabilities stem from retail employees’ ongoing access to disparate sales, inventory, and security systems. It’s not uncommon for employees to exploit gaps in processes.

To thwart these efforts, retailers can educate employees on how to use retail technology responsibly and to spot internal theft schemes. Including employees as part of the solution can be a first line of prevention. You can even provide an anonymous tip line to report suspicious activities.

Let Tech Do the Heavy Lifting

To further protect against internal theft, consider a unified security platform that brings together your disparate systems. Unification is at the center of today’s most effective security technologies to combat internal theft.

When video monitoring is unified with data analysis and reporting, retailers can correlate video with transactions to produce evidence of fraud and even stop it in progress. For example, retailers can pinpoint inconsistencies between video and customer receipts to catch gift card schemes.

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Exception-based reporting also helps spot discrepancies at the point of sale (POS), a common location for employee theft. By defining search criteria and filtering transactions of interest, security teams can send alerts and notifications to catch crimes at the register. Exception-based reports also aid forensic investigations to validate suspicious transactions with associated video.

Video, data analysis, exception-based reporting, and other security functions are most effective when unified into one centralized platform. When operators can view and interact with their systems from a single user interface, it’s faster and easier to identify and respond to thefts in progress. It also helps loss prevention teams create detailed dossiers for more efficient internal investigations.

Adapt Technology to Your Retail Situation

Once you’ve established a baseline for your security technology platform, additional technologies can offer protection for your specific retail situation. A unified, open architecture platform allows you to add new security capabilities as your needs evolve.

For example, retailers that sell higher value goods can detect the unauthorized movement of goods by using radio frequency identification (RFID) technology. This requires affixing RFID tags to each item. It may be more cost effective for retailers who already use RFID tags for inventory management. With a unified platform and the use of RFID, in-store personnel and loss prevention teams can quickly identify the location of the products, allowing a faster intervention.

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Retailers who sell lower value items might consider adding cameras to POS checkout areas. A top-down camera view of transactions helps spot suspicious activities. When the camera and the POS system are connected within a unified security platform, the system can trigger an automatic register lockdown to thwart a theft in progress.

Retailers of any kind may use exception-based reporting (EBR) to configure alerts to match the types of theft they see most frequently. Using EBR and security technologies combined within a unified platform, retailers and investigators can quickly identify trends and intervene more effectively. They also have the option to customize notifications based on their analysis of security trends at a store level or throughout an organization.

With an open architecture solution, these technologies can be added as needed so you can meet your security needs both now and in the future.

Be Prepared for Evolving Threats

The losses from internal fraud schemes add up quickly. The average dollar loss for an internal theft investigation was $2,180 per investigation in the US, according to NRF’s 2023 Retail Security Survey. More sophisticated theft tactics are sure to evolve, and those average losses may trend higher.

Retailers that invest in unified security solutions are in the best position to react quickly to thefts in progress, analyze data for trends, and gather evidence needed for more thorough investigations. A single security platform with an open architecture provides theft protection now and the ability to add capabilities to address evolving threats.

Your employees are also a key resource for addressing internal theft. Train them on the proper use of technology and provide them with tools, like an internal tip line, to report employee theft anonymously.

With a multi-layered approach that fits your retail business, you can take steps to lessen internal theft and reduce this major cause of shrink loss.

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