Recession-Proof Your Business with the Right Barriers to Theft and Loss

By  Andrew Wren, president, Wren and Keith Aubele, director of retail business development, Wren — November 25, 2008

Today's headlines ring out like 9-1-1 calls for retailers: Home Depot, Starbucks, Linen's 'N Things - just a few that are closing stores, reporting losses, laying off workers or filing for bankruptcy. This year, retailers suffered through the weakest October in at least 39 years.

While the bad news is that shoppers are expected to remain skittish, the good news is that you can strategically create barriers that will minimize your risk of loss in the face of an impending recession.

Barrier 1: Recognize the Economic Ticks That Increase Loss
In a bad economy, the greatest loss retailers will experience is increased cash theft. Whether the culprits are professional thieves or every day people hard pressed to pay for groceries or gas, stealing cold hard cash is much easier than stealing merchandise. The bigger concern is professional thieves who come on board as retail employees with the intent to steal. Knowing they'll eventually be caught, they steal as much as they can in the first three to four weeks of being hired, and in many cases, transition out of the store before being discovered.

Retailers must blunt the loss where it happens: at the cash register. Are your cashiers shortchanging customers? Are certain cashiers using more 'exceptional' coupons and pulling cash out? If so, minimize cash theft at the source by more closely monitoring cashiers between cash pulls throughout the day as well as at the end-of-day close-out. Recognize other major point of sale steals like under-ringing where a cashier runs $250 worth of goods, but only scans a few items. Items can then be returned by the perpetrators and refunded at full value, to the store's loss.

Create an extra buffer zone by using technology to monitor cashiers. Many retailers have video surveillance onsite, but much of the footage is never viewed. While human eyes can't monitor every corner of the store 24/7, you can set up a video surveillance to monitor new employees to determine if they are stealing within the first two weeks of employment. A retailer's window of opportunity for detecting this type of 'hired to steal' activity is short and potentially damaging, so resources applied to the effort sooner rather than later are well worth the investment.

Another economic tick: retailers cutting back staff and incurring operational sources of loss as a result. A leaner work force for office-based businesses increases the bottom line. That approach can have a different effect on the retail floor when it equates to reducing the hands on deck to make price changes on products. When items aren't marked down correctly, and are rung up at incorrect prices, shrink results. The more price reductions that are done (many in response to drive in customers for greater savings), the more opportunities there are for paper shrink. Fewer people on the payroll also equal fewer people with less time that are filing claims or correctly checking in new products. Fewer managers may also mean that high-risk transactions such as customer returns and hand-keyed credit cards are not being completely reviewed or supervised.

Barrier 2: Stop the gaps by mapping a measure-objective-action plan
Every retail LP professional has a plan in mind on how to best guard against loss. The trick to implementing a functional plan like the best-in-class retailers is to stop the gaps that occur between the idea and the action step. This can be accomplished by outlining metrics, creating objectives and clarifying the necessary action step to put it all in motion.

Mapping a plan that connects your barriers to loss involves identifying gaps between the ideas collected from best-in-class retailers and your retail store. While most steps can be cost-effectively implemented, there may be some tactical measures or modest equipment investments. Instituting the most significant steps will involve training, consistent management, and changes in behavior.

Understanding that retailers need to cost-effectively address loss, managers will need to get creative. To save money on surveillance cameras but still deter theft, some retailers can purchase a small base of movable cameras. Because today's cameras are smaller, lighter and much more mobile that in years past, retailers can quickly reposition them into existing housings, moving them around the store to cover hot spots as needed. Signage stating that the building is under surveillance serves as a low-cost substitute for public view monitors.

Barrier 3: Get buy-in for implementation
Getting buy-in is critical for constructing barriers to theft and loss. Nearly every measure will require management, training and oversight provided by managers and employees on the floor. These will be the individuals who will implement the policies and determine the consistency with which they are followed.

The best way to present the case is to get buy-in from managers and employees in the store. To do that, show them what these policies will do for them. For example, increased profitability may mean a bigger bonus for store managers. Or a reduction in incidences could mean more time for loss prevention associates to focus on prevention. By enrolling employees in the process early, you'll not only help them understand how they are essential to the program's success, but you'll ensure they put their best foot forward. Some of them will even suggest good ideas of their own.

Staying one step ahead of loss is truly the mission of loss prevention. Utilizing effective plans and gap analysis data, your theft loss barrier measures will need to continuously evolve to recession-proof your ability to positively affect the bottom line.

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