The most recent National Retail Security Survey (NRSS), led by Dr. Richard Hollinger of the University of Florida, uses empirical retail loss prevention data to break down the annual $44 billion in retail shrinkage for 2014 as follows:
• Shoplifting –38% or $16.7 billion
• Employee theft – 34.5% or $15.2 billion
• Administrative and paperwork error – 16.5% or $7.3 billion
• Vendor theft and error – 6.8% or $3 billion
• Unknown – 6.1% or $2.7 billion
Shoplifting is often cut and dried. Some is as simple as a high school student stealing on a dare. Others are sophisticated schemes involving professional organized retail crime perpetrators. But in the end, shoplifting is basically taking merchandise from a retail store without paying for it.
Some employee theft is that simple, too. Concealing merchandise under clothing or handing it off to a friend is easy to understand and often easy to catch. We don’t know what percentage of the annual $15 billion in employee theft is that simple, but we do know that a lot of employee theft schemes are complicated and extremely well thought out and executed. Those types of employee thefts cost retailers much greater dollar loss than a casual employee theft.
Other components of retail shrinkage are more complicated, too. Administrative and paperwork errors take on numerous forms: some are innocent mistakes, and some “errors” are made on purpose. Vendor theft is often complicated, too. It can result from collusion, doctored paperwork or false or partial deliveries.
Any dedicated retail loss prevention professional wants to be as good at their job as they can possibly be. In today’s complicated retail environment, it takes a lot more than detecting and catching simple theft to be an effective professional. It takes an in-depth knowledge of all aspects of the retail business. What are the inner workings of a store? What procedures and policies are in place and how do they work, in detail? How are margins and profits calculated? How is inventory shrink determined? And much more. That is the primary reason that, when the curriculum for the Loss Prevention Foundation’s certification programs was developed, general retail knowledge was deemed to be a critical component.
How much do you really know about the various components that make up retail shrinkage beyond simple internal theft and shoplifting? Be honest with yourself. If you do not feel fully confident that your overall retail knowledge is “very good” to “excellent,” make it a point to learn all you can. The following list is not meant to teach everything you need to know, but it serves as a roadmap to guide you to the subjects that are major components of and contributors to retail shrinkage and other threats to profit. Doing so will put you on a path to be recognized as a true retail loss prevention professional.
Work to learn the following retail subjects in detail and how they work at your company:
1. Return policy and procedure – return fraud costs retailers $9.1 billion dollars annually
2. Mark out of stocks
3. Receiving and merchandise transfers
4. Retail math – gross margin calculations, cost of goods, mark ups, mark downs, inventory turnover
5. All facets of credit card transactions and fraud
6. The complete workings of your POS system
7. Vendor delivery and stocking process and it’s paperwork
8. External deliveries by store or contract personnel
9. All inventory control paper work
10. All aspects of cash handling
11. Retail shrinkage calculations.
12. Pricing protocols
13. Display merchandise controls
14. Merchandise return to vendors (RTV’s)
15. Consignment merchandise
16. Special orders
17. Gift cards
This list is only the beginning. A true retail loss prevention professional will make it their goal to learn as much about the retail environment they work in as possible. If you do not truly understand the retail business, in depth, it’s hard to detect where the possible leaks are. Get started today, and good luck!