chapter seven retail security and loss prevention private sector issues 1
TRANSCRIPT
Chapter SevenRetail Security and Loss
Prevention
Private Sector Issues
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The Retail Shrinkage ProblemThe Retail Shrinkage Problem
Shrinkage is one of the most serious problems facing retail stores, with estimated annual losses of between $12 and $40 billion
Retailers use the term “Shrinkage” to describe the difference between inventory on hand at the beginning of the year and inventory on hand (minus sales) at year end
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The Retail Shrinkage ProblemThe Retail Shrinkage Problem
The Crime Prevention Service for Business of Rutgers University School of Criminal Justice defines “Shrinkage” as the difference between the inventory a business should have and what the business actually does have
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The Retail Shrinkage ProblemThe Retail Shrinkage Problem
The Crime Prevention Service for Business of Rutgers University School of Criminal Justice states “Shrinkage” is the result of four main factors:Administrative and Bookkeeping ErrorsEmployee TheftVendor or Delivery Person FraudShoplifting
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The Retail Shrinkage ProblemThe Retail Shrinkage Problem
The Rutgers study also states that higher than normal “Shrinkage” levels occur when:Overstocks and higher markdown ratiosMultifloor stores with many entrances and
exitsStores with supplementary storerooms and
warehousesStores that are sparsely staffed and are opened
long hours
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The Retail Shrinkage ProblemThe Retail Shrinkage Problem
The Rutgers study also states that higher than normal “Shrinkage” levels occur when:Stores with high personnel turnover ratesMall stores with a combination of:
Individual assistanceSelf serviceCentral check out counters
Stores with inadequate screening of employees
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The Retail Shrinkage ProblemThe Retail Shrinkage Problem
“Shrinkage” results in numerous losses:Revenue shortfallInventory shortageLoss of cash invested in the merchandiseFreight chargesProductivity on the part of the people
processing the shipmentsAny other fixed or variable costs incurred to
sell the items
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The Retail Shrinkage ProblemThe Retail Shrinkage Problem
The National Retail Security Survey reports an average U.S. “Shrinkage Rate” of 1.52% second lowest number since 1991
Shrinkage occurs due to:Employee theft and return fraud 47%Customer theft 32%Supplier of vendor theft 6%Administrative or paperwork error 15%
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The Retail Shrinkage ProblemThe Retail Shrinkage Problem
The National Retail Security Survey reports:Men shoplift more often then women8% of shoppers who enter a store will steal
somethingThe typical shoplifter falls between 35 and 54
year of age
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The Retail Shrinkage ProblemThe Retail Shrinkage Problem
The National Crime Victim Survey (NCVS) and Australian Institute of Criminology report:A large number of crimes committed against
businesses go unreported to the policeShoplifting and employee theft are
significantly underrepresented (handled informally)
The NCVS indicates that roughly 2/3rds of all thefts go unreported to the police
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The Retail Shrinkage ProblemThe Retail Shrinkage Problem
“Loss Prevention” refers to the use of methods to reduce the amount of shrinkage in retail storesManagement policy and operationsCrime prevention through environmental designInternal and external auditsStore detectives or loss prevention specialistsPeer reporting of suspicious or criminal activity
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The Retail Shrinkage ProblemThe Retail Shrinkage Problem
Loss Prevention TechnologyClosed Circuit TelevisionElectronic Article SurveillanceBenefit Denial Systems (Ink Tags break and
stain the garment)Source Tagging Computerized Inventory ControlRadio Frequency IdentificationDNA Tagging
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The Retail Shrinkage ProblemThe Retail Shrinkage Problem
Loss Prevention Non-TechnologyMirrorsLocking Antitheft Cables and WiresSecurity BarsSecurity Officers
OvertCovert
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The Retail Shrinkage ProblemThe Retail Shrinkage Problem
Stores can also look for signs of shoplifting activity:Hangers Lying on the FloorRipped Price Tags Merchandise Placed Where it Should Not BeProduct Packages Disposed of in Hidden Spaces
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The Retail Shrinkage ProblemThe Retail Shrinkage Problem
Sometimes there are other factors:Merchandise is more desirable by thievesUrban stores have more problems
More Suitable TargetsMore Motivated OffendersLack of Capable Guardians
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The Retail Shrinkage ProblemInternal Shrinkage
“Internal Shrinkage” has consistently been reported as more serious than external shrinkage
“Internal Shrinkage” is theft caused by a store or employer’s own employees
“Internal Shrinkage” includes:Theft by employeesCollusion between employees and othersCollusion between suppliers and vendorsAdministrative errors
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The Retail Shrinkage ProblemExternal Shrinkage
“External Shrinkage” is caused by theft by outsiders, generally shoplifters
A study analyzing 166,000 incidents from 101 stores discovered the most frequently stolen items were:CDsOver the counter medicationsHealth and Beauty products
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The Retail Shrinkage ProblemExternal Shrinkage
The same study found the following stores had the highest apprehension rates:DiscountDepartment storesSupermarkets
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The Retail Shrinkage ProblemExternal Shrinkage
Security executives report that at least 1/3rd of their inventory losses result form shoplifting incidentsThe average shoplifter is apprehended with
about $200 worth of merchandiseThe National Retail Federation estimates about
$10 billion in losses due to shoplifting each year
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The Retail Shrinkage ProblemExternal Shrinkage
Common Techniques Used by Shoplifters:“Palming” or grabbing the product by hand
Simplest and most common methodMay be aided by a package, handkerchief or
glovePurses and pockets are common places to
conceal the itemsPlacing stolen objects between their legs
(AKA “The Crotch Carry”)
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The Retail Shrinkage ProblemExternal Shrinkage
Common Techniques Used by Shoplifters:Wearing shoplifted items out of the store (hats
gloves, coats, sweaters or carrying purses out)Price SwitchingDistracting sales personsSee Exhibit 7.2, page 167
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The Retail Shrinkage ProblemExternal Shrinkage
The Food Market Institute’s list of the 50 most stolen items from supermarkets:Baby Formula (Similac)
Powder is 7thCans are 8th
It has long been an attractive item for shoplifters, who then sell it on the “Black Market”
Sometimes items are shoplifted and then returned for cash
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The Retail Shrinkage ProblemOrganized Retail Crime
The FBI estimates that retailers lose $30 billion a year from Organized Retail Crime or Organized Retail TheftGangs target high value consumer goods and
over the counter medicines that are in high demand and easily concealable
Later sold at flea markets, swap meets and through the internet
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The Retail Shrinkage ProblemOrganized Retail Crime
In 2008 three bills were introduced into the U.S. Congress to fight Organized Retail CrimeThe Organized Retail Crime ActE-Fencing Enforcement ActThe Combating Organized Retail Crime Act
These Organized Retail Crime legislation would assist with the prosecution for crimes that occur across jurisdictional lines
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The Retail Shrinkage ProblemOrganized Retail Crime
Law Enforcement Retail Partnership Network (LERPnet) developed an information sharing protocol with collaboration between industry associations, law enforcement and the retail community has experienced a large increase in the incidents reported into itBuilt a national database of retail theft incidentsAllows sharing of information with each other
and law enforcement
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The Retail Shrinkage ProblemOrganized Retail Crime
Loss Prevention surveys found that the average retailer spends approximately $230,000/year on labor costs associated with loss prevention and many large retailers can spend up to $1 million/year
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Reducing the Shrinkage Problems
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Management PolicyAggressive management policies that emphasize
employee awareness and participation in dealing with the problem are valuable in reducing shrinkage
Reducing the Shrinkage Problems
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Management PolicyInterviews of 1,500 shoplifters revealed:
Active, random threats to shoplifters like moving, alert staff, can be very effective in preventing shrinkage
Having motivated store personnel regularly approach and acknowledge customers
Knowing that the store employs plainclothes detectives or loss prevention specialists are working
Read Exhibit 7.3 Page 170
Reducing the Shrinkage Problems
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Management PolicyLippman and McGraw write that employee theft
cannot be eliminated, but it can be controlled by good management techniques and intelligent use of acceptable security proceduresHonest people, stay honest (good backgrounds)Employees should be made to feel that they are part of
the firm and their contributions are important to its future
Instill a company police or code of ethicsHave adequate security measures in place
Reducing the Shrinkage Problems
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Crime Prevention thru Environmental DesignCPTED involves using and designing the space
inside and outside of buildings, entrances, exits, landscaping and lighting to present the least opportunity for a criminal to avoid detection
There are three main strategies used for CPTED:Natural SurveillanceNatural Access ControlTerritorial Reinforcement
Reducing the Shrinkage Problems
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Crime Prevention thru Environmental Design“Natural Surveillance” involves designing
windows, lighting and landscaping to improve the ability to observe what is going on inside and around the business
“Natural Access Control” refers to the use of doors, fences and gates to control access to the business or property and to make the business look like a riskier crime target
Reducing the Shrinkage Problems
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Crime Prevention thru Environmental Design“Territorial Reinforcement” uses sidewalks,
landscaping and process to create a border between private and public property to create a feeling of territoriality and send a message to offenders that the property belongs to someone and the offender should keep out
Reducing the Shrinkage Problems
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Crime Prevention thru Environmental DesignClosely related is the concept of “Crime Reduction
through Product Design”CRTPD involves the integration of protective
features into products in order to reduce their potential to become targets of criminal activity, as well as preventing their use as instruments of crime
Reducing the Shrinkage Problems
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AuditsAudits and inventories are extremely important in
loss prevention effortsAudits and inventories will reveal the amount of
shrinkage occurring in the store and often can give clues as to who is responsible for such losses and thefts
The more often audits are conducted, the quicker the business will detect and investigate shrinkage
Reducing the Shrinkage Problems
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Store Detectives/Loss Prevention Specialists“Loss Prevention Specialists” supervise and
manage loss prevention or security programs and conduct loss prevention investigationsAre usually in the middle or upper management
level in the corporate or business structureInternal and ExternalThink of them as internal police for retailers1/3rd now have college degrees
Reducing the Shrinkage Problems
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Store Detectives/Loss Prevention SpecialistsAs often happens in the Criminal Justice field
“Loss Prevention Specialists” in addition to their “Loss Prevention” duties, are assigned a broad scope of responsibility for dealing with non-crime issues that may ultimately dilute their “Loss Control” effectiveness
Reducing the Shrinkage Problems
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Store Detectives/Loss Prevention SpecialistsLoss prevention personnel interview suspected
shoplifters and internal theft suspectsThere are several training programs to assist
personnel in interviewing techniques including the Wicklander-Zulawski Associates Inc. a program that is designed to improve their ability to obtain the truth through proper interviewing techniques
Reducing the Shrinkage Problems
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Store Detectives/Loss Prevention SpecialistsIn a survey of 40 U.S. retail stores employing store
detectives, most retailers reported that they currently assign their store agents:To patrol for shopliftersAudit store asset protection initiativesCreate loss prevention awareness among all store
staffDetectives are selected for their ethical, decision
making criteria
Reducing the Shrinkage Problems
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Store Detectives/Loss Prevention SpecialistsThe survey also revealed:
The use of force is the highest ranked training topicRemember private security officers are not
restricted or protected by the U.S. Constitution66% indicated they were concerned about civil
liability (and subsequently changed their training)Remember the legal justification for store
detectives is “Merchant’s Privilege”
Reducing the Shrinkage Problems
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Store Detectives/Loss Prevention SpecialistsThe Doctrine of Merchant’s Privilege holds that
even if it is later found that no crime took place the detention is proper if based on the following conditions:Detention:
Doesn’t have to be physical, can be by words, conduct, gestures or threats
As long as the detainee believes that they are not free to leave the premises
Reducing the Shrinkage Problems
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Store Detectives/Loss Prevention SpecialistsThe Doctrine of Merchant’s Privilege holds that
even if it is later found that no crime took place the detention is proper if based on the following conditions:Probable Cause
The detention of the suspect must be based on probable cause
ReasonableThe detention of the suspect must be
reasonable
Reducing the Shrinkage Problems
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Store Detectives/Loss Prevention SpecialistsThe Doctrine of Merchant’s Privilege holds that
even if it is later found that no crime took place the detention is proper if based on the following conditions:Consistency
Retailers must have policies that are applied evenhandedly without regard to the subject’s race or other personal factors
Reducing the Shrinkage Problems
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Store Detectives/Loss Prevention SpecialistsRather than use the Criminal Justice System some
retail stores use “Civil Recovery” or “Civil Demand Programs”
Using these programs, the store initiates civil court proceedings against thieves to recovery monetary damages
Reducing the Shrinkage Problems
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Store Detectives/Loss Prevention SpecialistsSome businesses will contract private investigative
firms to help them in their loss prevention programs“Integrity or Mystery Shopper” make discrete
observations in stores to:Deter inventory shrinkageDetect dishonest employeesProvide evidence for prosecuting employeesObserve performance and operations of store
personnel (attitude, appearance, knowledge…)
Reducing the Shrinkage Problems
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Peer Reporting“Peer Reporting” involves employees monitoring
and reporting suspicious, illegal or unethical behavior by other employees within the company
“Peer Reporting” is one of the most effective techniques to detect and prevent employee theftAnonymous toll free “Hot Lines”Financial incentives
Reducing the Shrinkage Problems
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Emerging TechnologySource Tagging
Manufactures attach tracking tags to products before they reach stores
Tracking tags are disposable security labels that are imbedded at the point of manufacture or package
Eliminates labor costs for in store tagging, reduces training requirements and discourages employee thefts
Reducing the Shrinkage Problems
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Emerging TechnologyComputerized Inventory Control
Computer models that predict which items are more prone to theft
How many are in stockWhen they were soldHow many were sold in a day/week/month
Reducing the Shrinkage Problems
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Emerging TechnologyRadio Frequency Identification
Distinctive information can be written to “Radio Frequency Identification” devices and retrieved by scanners
Works on the same concept as “E-Z Pass”Automatically keeps inventory, receiving,
shipping, sales…