When it comes to retail shrinkage, external theft and organized retail crime (ORC) often get the most attention. But employee theft (also known as internal theft) also results in significant losses.
According to the National Retail Federation's 2023 Retail Security Survey, internal theft accounts for 29% of total shrink losses in the United States, a far cry from external theft at 36% of total shrink losses. Considering these statistics, it's no surprise that nearly half of U.S. retailers have reported internal theft prevention as a higher priority in the past few years.
Canadian retailers are noticing 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 misconduct, including employee theft tactics.
start with the basics
Many internal fraud techniques are well known. These include refund fraud, gift card fraud, and collusion with friends such as lovers and sliding. Some retailers consider these activities to be an unavoidable cost of doing business.
The new vulnerabilities stem from the continuous access retail employees have to a variety of sales, inventory, and security systems. It's not uncommon for employees to exploit gaps in the process.
To thwart these efforts, retailers can educate employees on how to use retail technology responsibly and how to spot internal theft schemes. Including employees as part of the solution can be the first line of prevention. You can also provide an anonymous tip line to report suspicious activity.
Let technology do the heavy lifting
To further prevent internal theft, consider a unified security platform that brings together disparate systems. Integration is at the heart of today's most effective security technologies to combat internal theft.
When video surveillance is integrated with data analytics and reporting, retailers can also correlate videos and transactions to create evidence of fraud and stop fraud in progress. For example, retailers can pinpoint discrepancies between video and customer receipts to understand gift card schemes.
Exception-based reporting can also help identify discrepancies at the point of sale (POS), where employee theft often occurs. By defining search criteria and filtering transactions of interest, security teams can send alerts and notifications to catch crime at the register. Exception-based reporting is also useful for forensic investigations to verify suspicious transactions with associated videos.
Video, data analytics, exception-based reporting, and other security features are most effective when integrated into one centralized platform. When operators can view and interact with the system from a single user interface, they can more quickly and easily identify and respond to theft in progress. It also helps loss prevention teams create detailed documentation to conduct internal investigations more efficiently.
Adapting technology to the retail landscape
Once you have established a baseline for your security technology platform, additional technologies can be used to provide protection for specific retail situations. A unified open architecture platform allows you to add new security features as your needs evolve.
For example, retailers selling high-value items can use radio frequency identification (RFID) technology to detect unauthorized movement of goods. For that you need to paste her RFID tag on each item. It may be more cost-effective for retailers who already use RFID tags for inventory management. The integrated platform and his use of RFID allow store personnel and loss prevention teams to quickly locate items, allowing for faster intervention.
Retailers selling low-priced items may consider adding cameras to the POS checkout area. A top-down camera view of transactions helps spot suspicious activity. When the camera and her POS system are connected within an integrated security platform, the system can trigger automatic register lockdowns to thwart theft in progress.
Retailers of all types can use exception-based reporting (EBR) to set up alerts that match the types of theft that occur most frequently. By combining EBR and security technologies within an integrated platform, retailers and investigators can quickly identify trends and intervene more effectively. You also have the option to customize notifications based on store-level or organization-wide security trend analysis.
Open architecture solutions allow you to add these technologies as needed to meet your current and future security needs.
Prepare for evolving threats
Losses from internal fraud can add up quickly. According to NRF's 2023 Retail Security Survey, the average loss for internal theft investigations in the United States was $2,180 per incident. More sophisticated theft tactics are certainly evolving, and average losses are likely to continue to rise.
Retailers who invest in integrated security solutions are in the best position to quickly respond to ongoing thefts, analyze data trends, and gather evidence needed for a more thorough investigation. A single security platform with an open architecture provides anti-theft capabilities and adds capabilities to address evolving threats.
Employees are also a key resource for dealing with internal theft. Train employees on the proper use of technology and provide tools such as internal reporting lines to anonymously report employee theft.
By using a multi-layered approach appropriate for your retail business, you can take steps to reduce internal theft and reduce the primary cause of shrink loss.
