Retailers nationwide lose less to shoplifters and organized crime than they do to another group: Their own employees.
An employee working at a cash register is seen on a
surveillance monitor in a Dothan store on Friday afternoon
Thefts by employees accounted for about 45 percent of retail losses in 2010, according to the National Retail Security Survey. Shoplifting and organized retail crime made up about 31 percent of inventory shrinkage, the accounting term for loss of products between the point of purchase from a supplier and point of sale.
Administrative error accounted for 14 percent of shrinkage, vendor fraud accounted for 4 percent and the remaining 6 percent was attributed to “unknown” error. The shrinkage rate in 2010 was 1.49 percent.
Despite advances in technology and tactics to detect theft, stealing by employees is not a problem that’s easy to remedy.
“It’s something that’s obviously been going on for a long time and it’s going to keep going on because every time the stores and your retail associations come up with new technology to try and solve it, then you’ve got this one person out there coming up with a way to circumvent it,” said Sgt. Jeff Garrett of the Dothan Police Department’s Criminal Investigations Division.
Recent local cases include a former Dick’s Sporting Goods employee charged with second-degree theft of property for a series of thefts that occurred between July 2011 and January 2012 and two former Kohl’s employees charged with stealing $8,000 and $5,000 worth of clothing over the last year.
Garrett said employees have ways of stealing other than taking merchandise without paying for it. Office employees can take cash and items, but floor employees generally have more options.
Garrett said cashiers can load store debit and credit cards with cash amounts. The NRSS said about half of gift card losses in 2010 were attributed to dishonest employees, and about 18 percent of internal retail cases involve collusion.
Cashiers can do “different types of reversals, kind of make it look like they came back to a customer and they’ll pocket the money themselves,” Garrett said.
Employees can take regular priced merchandise and run it through the register as a sale priced item, either for themselves or for someone working with them. A $50 or $60 item can be purchased for much less if an employee knows how to work the system.
An employee can collaborate with a fellow employee or with a friend posing as a customer and get items at greatly reduced prices. Sometimes they bring the items back for refunds at the regular price. If customers claim an item was a gift, some stores allow them to return it without a receipt.
Garrett said accounting departments often find discrepancies in transactions, but loss prevention departments are another way stores detect thefts.
“We’ve had incidences where a loss prevention officer will just be watching security footage and go, ‘that doesn’t look right,’” Garrett said.
They back up the video and watch it again and again, then go back farther to see if the employee has done other questionable things.
In some cases, loss prevention departments do much of the work in tracking thefts and identifying suspects.
“Most of the time they’ve already done an investigation themselves, and then we come in,” Garrett said. “All we have to do is dot the ‘i’s and cross the ‘t’s and make sure things are in order, and then just lead them through the prosecution phase.”
Garrett said loss prevention officers who suspect wrongdoing start watching the employee. They also check the employee’s previous entries and transactions.
Employees often find creative ways to steal.
“If we can get them to use that for our purposes, we could do a lot of good,” Garrett said.
Frank Muscato, an expert on loss prevention who has written articles for LP Magazine, said theft by employees (internal theft) is all about opportunity.
“Most employers work very hard at controlling those opportunities, therefore controlling internal theft,” Muscato said. “I think there are very few people who take jobs with the primary purpose of stealing from that employer.”
He said it is important the retailer set standards and controls.
“I worked for two major retailers that take internal theft very seriously,” said Muscato, of The Muscato Group Investigations in Dallas. “All new hires receive explicit information regarding theft and that no level of theft is tolerated.”
The cause of most thefts, internal and external, is greed, not need, said Muscato, who retired from the Dallas Police Department’s Intelligence Division in 1993 to help create retail’s first organized retail crime division inside Walmart. After 11 years with Walmart, he went to Walgreens to help create its organized retail crime task force.
In an LP Magazine article about the Coalition of Law Enforcement and Retail (CLEAR), which was the brainchild of Muscato and Jack Gee (at the time a detective in the Fort Lauderdale Police Department), Muscato said the coalition would help him “network with others in our field, share prior experiences, learn new ideas and share information on these cases.”
Muscato said CLEAR “is a way to spread those methods and ideas around the nation.”
The NRSS said the average dollar loss per employee theft exceeds that in shoplifting incidents, partly because employee thefts can occur over extended periods of time. In 2010, employee theft cases averaged $996.32 while shoplifting cases averaged $337.50, according to the NRSS.
Security measures apparently have helped cut losses. Employee thefts have decreased from the recent five-year high of $2,672.95 in 2008, according to NRSS figures.