Do you experience losses in your shop due to theft? If YES, here are 20 iron-clad ways to permanently stop employee theft and shoplifting in your retail store.

To a lot of retail store owners, the main threat they face is the prevalence of shoplifting which can greatly impact profitability of their store. The idea that some customers are simply taking goods worth hundreds of dollars from your store without paying for them can be quite terrifying. However, there is still another threat that is just as or even more dire than shoplifting, which is employee theft.

A global study of retail theft found out that employees who steal from retailers average $1,890 in theft, while the average shoplifter will only take about $438. This is a very shocking data. Granted only a small minority of your employees will likely steal from you.

However, a nefarious minority can deal a blow to your business. It is also good to note that many of your well-meaning employees may also accidentally contribute to your losses by making errors during inventory count or misunderstanding policies or discounts and giving them at the wrong time.

5 Types of Employee Theft in a Retail

There are many ways employees can steal from a retailer. Here are some of those ways.

  • Stealing products: an employee can steal goods from your store for either personal use or to resell it to another person for a profit. A very popular way of stealing in retail store is to hide something in the trash when they take it out, which they will retrieve from the dumpster later. Employees may also hide small items on their person or in their bags.
  • Gift card theft: the theft of gift cards by employees has risen in popularity in recent years due to the fact that it is hard to detect. There are various methods to pull off this scam, but typically, employees will issue fake refunds to gift cards they will keep. They may also give a customer purchasing a gift card a blank gift card while keeping the loaded one. This form of fraud is dangerous.
  • “Sweethearting”: “Sweethearting” occurs when a cashier in a retail store opts to not ring up goods that a friend or family member wishes to take from the store. It can also be when a cashier falsely gives their store discount to their friends or family members.
  • Identity theft: even though this theft method does not directly affect your store, it still has the potential to cost your retail store its reputation. Retail employees have ample opportunities to steal customers’ identities.
  • Skimming: Employees have been skimming off the top of the cash drawer for years. Employees who know that you won’t care about a discrepancy of a few dollars in the cash drawer may take advantage of you by slowly skimming quite a large amount of cash over time, and the more they feel that they can get away with it, the bolder they will become thus leading to fleecing the cash drawer of larger amounts.

Why Do Employees Steal?

The reason that could lead an employee to steal from your business are very many, however, in a lot of cases, it can be linked to a disgruntled employee. Perhaps they’re stealing for revenge on the store for some reason. Maybe it’s because they think they deserve a raise that they haven’t gotten.

Maybe it’s because they are in a bad way financially and really need help. In some cases, you may have an employee who is a kleptomaniac and can’t just help him or herself. But not all employees steal for these reasons either. Some, like those who participate in “sweethearting,” may believe that they’re just helping out a friend with their employment perks.

20 Ways to Permanently Stop Employee Theft in your Retail Store

The saying that prevention is better than cure holds very true in this situation. Once an employee is actually stealing, it can be a tricky situation to handle. Sometimes, confronting the thief can get out of hand and turn violent or breed further resentment that can lead to violence against the owner of the store or the manager.

Employee theft costs businesses $50 billion each year, with the average company losing around $1.13 million. And, a startling 75% of workers admit to stealing from their employer or workplace on at least one or two occasions. If you want to protect yourself from retail employee theft and fraud, here are some tips you can follow.

1. Run background checks on all new employees: a background check is the very first step that you can take which will help you to weed out the bad eggs even before they get the chance to work for you. When you use background checks, don’t use “the box.”

That means, don’t ask someone if they have a criminal background on their paper application just to weed people out. Conduct interviews first and get to know someone first to avoid unnecessary discrimination.

Be consistent and run the same process on each applicant. Look for patterns, rather than a single good or bad act. Someone who has had multiple cases of theft against him or he is not fit to work in a store where the temptation for stealing things will be much. If you can afford it, it is best to hand over this task to professional agencies.

2. Ensure that all employees are well-trained on policy to prevent accidental loss: sometimes, the innocent actions of an employee can result in loss on the part of the retail store owner. Whether it’s entering the wrong number of inventory or giving the wrong discount, mistakes happen and they can really add up. Work with your employees so that they know your policies and check their work.

3. Institute modern inventory management and POS software to make it easier to monitor discrepancies: it is very important that you audit receipts every day or week or month to try to discover patterns of loss in your store.

Alternatively, you can take the easy route by implementing a modern inventory management and POS system that will pull reports for you every day. These reports will make it easy for you to notice patterns (like if the cash register has been consistently down a few dollars) and will make it noticeable when you do inventory checks what exactly is missing.

4. Count your cash drawers every day: You should count your cash drawers every day to keep full tab on how much cash is in them at all times. Running these counts will deter skimming and help you detect it as well.

5. Use a buddy system for the trash: due to the fact that the trash is a very popular method of stealing from the store, you can have your employees take the trash out together. Thieves are less likely to try to stuff something in the trash bag when someone is there watching them.

6. Have employees check each other’s bags before they leave for the day: even though this tip can be awkward when it is executed, in some places it is a necessity. You can have a system where whenever an employee leaves the store, he or she will first have his bag checked by the manager. At closing, the employee left with the manager would also check the manager’s bag.

7. Implement surveillance software: these days, surveillance software goes beyond have video cameras installed in your retail store. Now the cameras are equipped with software that can help them detect such activities as “sweethearting” and alert you to the problem. It’s pretty incredible. These systems are especially good for documenting instances of employee theft.

8. Keep your employees happy: the importance of keeping your employees happy cannot be overemphasized. Happy employees are just better for your business. They’re more productive and less likely to steal from you. The retail industry is filled with stores that do not treat their employees the right way, however, Starbucks and Costco stand out.

Starbucks, for instance, has eliminated the gender pay gap at their US stores and they help pay for their employees’ college educations.

Costco starts their employees at $11.50 an hour and hires almost exclusively from within. As a small business, you owe it to your employees to provide fair pay (even if you cannot provide Costco-level pay) and to do what you can to provide them with a happy work environment.

9. Draft A Digital Policy To Keep Online Activity Safe And Secure: if your store is also an online retail store, then you want to draft a digital policy. Ideally, this should outline the guidelines and protocols of acceptable and unacceptable behaviour when using the company Internet and computers.

This is a valuable practice because it has many benefits. Not only will it keep your employees safer when browsing the Internet, which leads to fewer data leaks and other security issues, but it also gives your network security and IT staff an understanding of what employees can and cannot do on the company network.

Digital policy outlines the guidelines and protocols of acceptable and unacceptable behaviour when using the company Internet and computers. From a theft perspective, this is really important because it will allow the people that monitor your network to know what to look out for and how to prevent potential employee theft and fraud cases.

10. Develop Internal Security Procedures: A digital policy is not the only integral security procedure you can use to help reduce the risk of employee theft. Other steps that can help you to tighten your internal security include:

  • Update passwords and login credentials regularly
  • Restrict access to sensitive areas/documents and record who accesses, when and why
  • Closely monitor activity on company credit cards and expense accounts
  • Lock up expensive items and valuables
  • Install employee-facing cameras, particularly in areas with valuables or POS systems.

11. Know Potential Warning Signs For Employee Fraud And Theft: yet another point for improving your internal security is to create a company culture that understands the warning signs for employee theft. At times, it may be possible to prevent employee theft by noticing the behaviours and situations that heighten a person’s likelihood to steal. These are some of the prevalent attitudes that can make a person more likely to commit employee theft:                                                                                                                 

  • Money issues, especially when they are fuelled by an underlying problem such as gambling or drug addiction.
  • Angry or disgruntled as a result of a recent event at work, like not receiving a large enough raise or being disciplined for performance or recent actions
  • Personal problems are hardest to detect and could be caused by some problems in an employee’s at-home life.

Money problems can make a person more likely to commit employee theft. It is good to encourage your employees to communicate when they notice these types of attitudes and behaviours in their co-workers. The more communicative your company culture is, the easier it will be to share what’s going on in each individual’s life, especially the problems that could lead to employee theft.

12. Invest In The Latest Point-Of-Sale System Technology: in retail stores where employees work directly at the POS systems, the temptation for theft can be even higher because they are physically and directly handling money.

If your POS system is out of date, it can make it very difficult or even impossible to detect theft, unless you physically see an employee stealing cash or purposefully overcharging a customer. These newest systems and software are designed to close loopholes that fraudulent individuals can exploit to steal money.

Some systems are sophisticated enough to monitor and track inventory and sales data to detect anomalies that could be the result of malicious behaviours. A proper POS system will also be able to track inventory coming into and out of a store location. You should always bear in mind that employee theft is not limited to money only, they can also steal inventory.

With advanced inventory management software, you’ll be able to track where every item in the store is, which makes it easier to determine when the product has gone missing and from what location. If a product is disappearing from the back-of-house, instead of on the sales floor, then it is a clear indication of employee theft.

13. Integrated Payments: a scenario where an employee can be ripping you off can go like this: A customer has an open tab, or even a credit card on file, yet intends to pay with cash. However, your employee can always pocket the cash, yet processes payment on the credit card.

Unfortunately, this situation is all-too-common. With an integrated POS system in place, you will be able to trace every transaction or order to the employee managing the sale.

With integrated payments on your POS, you can effectively prevent employees from pocketing cash while processing credit cards. If your business is lacking the proper POS features to prevent such fraud, you’re exposing yourself to a potential avenue of employee theft.

14. Encourage employees to own their success: in the retail business, it is easy for employees who are honest to think that employee theft is neither their problem nor their business. However, in a scenario where a cashier steals $150 out of the till. That’s $150 less that goes to the company. If the retailer offers bonus checks based on store profits, theft ultimately hurts the honest employees’ bank accounts and you should let them know it.

15. Create a culture of honesty: You can put a poster in the break room that reads: See criminal behaviour? Notify your manager. Or set up an anonymous hotline managed by store headquarters or a third-party company. In order to encourage people who have viable information to come forward, you can offer rewards, especially if the information is true. The reward could be a flat amount or a percentage of what’s recovered.

16. Display crime: If you do have a problem and are quite sure who the offender is, make a quick and public show of the consequences. For instance, make an announcement about the situation at a meeting. Tell employees that the offender is no longer with the team because he was caught stealing. That way, there’ll be no doubt about what happens when an employee steals. The good employees will cheer you on, and any remaining bad ones may move on before they get caught.

17. Do not condone theft in any way: if your staff get to know that a thieving employee was prosecuted, then it can go a long way to deter them from stealing from the store. For honest employees, it can be a validation that if they should report crimes and that bad behaviour will be punished.

18. Reward good employees: it is very important to continually and positively stress the benefits of good behaviour in terms that are meaningful to employees. Wages can increase, benefits can be more generous and so on. You should do more than just telling them that if they should stay on track they won’t lose their jobs.

What Happens After Someone Steals from your Retail Store?

Even after you put a lot of measure to checkmate theft in your retail store by your employees, there is still a possible that theft can still occur. Once that happens, what do you do?

a. Collect and document as much evidence as possible: it is never advisable to accuse someone of theft when you do not have enough proof. If you take the chance and end up being wrong, you business can face a legal retribution. Instead, carefully document everything that you can.

Run audits, collect receipts, and put together the correct video footage. At times, it may be best to allow the employee to steal a few more times so as to gather enough evidence before you go ahead to confront him or her. This will ensure that you have an airtight case.

b. Call your local police station for advice: Your local police station can provide you with advice on how to document employee theft and even give you interviewing tips. Don’t pass up this help.

c. Interview the employee: when you have finally collected all the evidence you need, it is now time to conform them with your evidence. Be sure to do it when others are in the store and do not tip your employee off beforehand on the subject matter. Prepare all the paperwork in advance, including their dismissal paperwork and, if possible, their final check. Keep a witness in the room. Ideally, another store manager or HR person.

Begin the interview by telling the employee you just wish to review some LP procedures. Though you should already know as much as you can ahead of time, don’t tip your cards. Using various tactics, you may be able to get the employee to confess to crimes you didn’t know they had committed.

If you are going to prosecute the employee legally, call the cops after the employee has confessed, but continue the interview until the police arrive. And do note: your employee is legally allowed to get up and leave the meeting with you at any time, and you must do nothing to prevent them from doing so.

d. Fire them: lastly, you need to fire the employee who was involved in the theft. This will send a clear message to your staff that you will not tolerate any form of theft in your store. If the product or money that was stolen is meager, you can forgo prosecuting the employee, however, even if the theft is marginal, this should not be a reason to keep someone who you do not trust in your employ.

In conclusion, even with all the faith and trust you put in your employees, there may still be some of them who have a broken moral compass. Sometimes, people are negatively influenced to make the wrong decisions, and those bad choices could be costing your business thousands of dollars. These tips will help you prevent employee theft in your retail store and thus improve your profit.