How to recover from theft, fraud and poor inventory management

Find any empty Bible boxes in your store lately? Notice that new jewelry rack is suddenly empty? Discover that the stack of new DVDs that just arrived is disappearing faster than you thought?

All of these are typical signs of theft that Christian retailers deal with every day. Worst of all, an even bigger threat lurks and strikes when and where you least expect it. One out of every 36 employees in the retail industry is caught stealing from their employer; when you factor in an estimate for those who are never caught, this number increases to one out of every 15. Add payment fraud to all of this, losses due to damaged goods and waste associated with poor inventory management, and you have a huge problem that the industry calls “shrinkage.”

Shrinkage is best dealt with by keeping honest people honest.  Even though you will have to deal with some shrink, there are best practices you can put into place.

Power up your POS. Make sure you have policies in place and know how to use the data provided by your POS to spot fraud and deal with it.

Start with your return policy. You likely already do not give refunds without a receipt, but if not, start this immediately. Next, emphasize that a second employee must approve every return. If staffing does not allow this, have the customer provide his or her name, address and phone number and then sign the refund slip. Inspect the goods to ensure they are in resalable condition and that they do not have stickers from another retailer on them.

Institute a strong check policy. Thankfully, customers are writing fewer checks than ever before, but if you still accept them, make sure your staff knows how to handle them, and that will go a long way to reducing fraud. First, look for low check numbers. Second, be sure to record the customer’s ID number. Finally, keep a list of those who have written bad checks and reference it at the POS.

Keep track. Check your POS data or end-of-day summary to spot transactions that take place before or after the store opens and closes; track the number of no-sales that enable the employee to open the cash drawer; and track price discounts and returns by employee. All of these disciplines can help you spot unusual behavior that, more often than not, warrants deeper investigation.

Eliminate blind spots. Rearrange fixtures to open up the line of sight to most of your store’s layout. Make sure, too, that your lighting is adequate and appropriate for every area of your store. Not only will doing so help minimize shoplifting, but it also helps customers quickly find what they are looking for—and can increase your sales.

Take away temptation. Higher-risk items—like jewelry and popular CDs and DVDs—should not be placed near the front door. Make it harder for the intentional thief to grab and go. Install inexpensive mirrors and fake security cameras so that the staff does not know where and how they are being monitored. Make sure that these security instruments are clearly visible to the customer. Consider a decal for the front door that alerts potential thieves that your store is under surveillance.

Keep the doors locked. Just as the White House recently learned the value of keeping the front door locked, the retailer should never allow the receiving door to remain unlocked during business hours. Far too often I see back doors propped open, especially in warmer weather. Not only is this a quick way to lose merchandise, but the practice also can create a potentially dangerous situation for your employees. It’s important to keep your office door locked as well.

Train your backroom staff and spot-check their work. Sloppy receiving practices can allow them to sign off on a packing list that does not represent the goods you actually received. Likewise, watch your returns carefully. Sending back goods to the wrong supplier or returning goods that are not in resalable condition is a waste of payroll and delivery charges. On average, retailers receive approximately 1% fewer goods than were on the packing list, and they discover approximately 3% of their returns are rejected by the supplier, making these two costly areas to overlook.

Find hidden treasure. You may need to talk with your accountant, but slippage—the amount of older gift cards that is not redeemed—could possibly be reclaimed to help offset shrink in other areas.

Consider your customer. At the end of the day, make sure that you do not take an approach that is too burdensome to your customers. As a good loss-prevention expert I know says, you might want to put up guard towers and barbed wire around the store, but then no one would shop with you. Just put in place reasonable policies, train your staff and remain diligent, and you can reap the benefits of seeing your shrink go down while your profits go up!

Bill Nielsen is a 25-year Christian retail veteran having served in C-level positions with Family Christian Stores, LifeWay Christian Stores and Berean Christian Stores. Nielsen is now president of The Equation Team, a consulting firm that specializes in retail and publishing.

• Next