Employee Theft

IN AN UNCERTAIN ECONOMY and an extremely competitive retail climate, companies face a significant challenge to improve profitability — and shrinkage continues to be one of the most significant costs that retailers incur. With that in mind, Ernst & Young LLP has released the results of its “Study of Retail Loss Prevention” survey.

“Retailers have more to fear from dishonest employees than they do from shoplifters,” says Jay McIntosh, Ernst & Young’s director of retail and consumer products. The survey results clearly bear that out. Asked about estimated sources of shrinkage, nearly half of respondents — 46.6% — cited employee theft; shoplifting came in a distant second, at 31.8%. The remaining sources were administrative and paperwork errors, 12.8%; vendor error/issues, 7.2%; and other, 1.6%.

“The best anti-theft programs vary quite a bit from company to company, business to business,” says McIntosh, whose group put the survey together. He notes that employee screening “is not done as effectively as it could be.” But in a retail setting, the expense of thorough background checks seems out of whack when weighed against floor staff who are typically at the low end of the pay scale.

Still, the value of such spending is clear when seen in the context of these survey results: retailers report the average number of shoplifters apprehended in the most recent fiscal year was 11,648, while the average number of employees apprehended was 1,053. Yet they also report that the average value of merchandise recovered per apprehension of shoplifters was $223, while the average recovered per apprehension of employees was $1,525.

So, what are retailers to do? “Think about some kind of technology to help monitor the register more,” McIntosh says. And use simple things like surveillance technology — also a first line of defense in back rooms, distribution centers, and warehouses.

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