Light Fingers Squeeze Store Profits*

“If there’s a weakness in your system somebody’ll get you-whether it’s a shoplifter or internal,” says Jack McKinnon, regional director/east for Lansing Buildall in Toronto,. His views echo those of many industry members, when he says retailers have to watch for both light-fingered customers and dishonest employees.

Shrinkage owing to consumer or employee theft and paper error is costing Canadian retailers about $2 billion annually, sending store owners in search of better security methods and hardware. Securing merchandise can be as simple as posting signs warning that shoplifters will be prosecuted or as sophisticated as close-circuit television, dummy cameras, electronic article protection tags, surveillance cameras and computerized inventory control systems.

“There is a trend out there that says retailers are realizing how much shrinkage is costing. Once you get to three, 4 ½ percent, you’ve got a problem on your hands,” explains Art Good, director, Retail and Distribution Services, Ernst & Young, Toronto. “There’s always got to be some shrinkage but if you can get it under one percent you’re in good shape.”

How do retailers reduce shrinkage? By creating employee awareness programs and informing both staff and potential shoplifters that they will be prosecuted. Good suggests that retailers deal with the culture and develop employee awareness training on an ongoing basis.” He advises retailers to get a shrinkage department, then use consultants for input. Finally, let employees know that theft will not be tolerated—even senior staff.

In many ways, a retail organization’s loss prevention strategy is dependent upon its employees’ honest and ability to detect dishonest behavior among coworkers. According to a Canadian Retail Hardware Association training videotape, called Counterattack: Strategies for Loss Prevention, dishonest staff members steal up to five times as much as shoplifters.

Caught in the ever-tightening squeeze of the recession, combined with frozen wages, many employees feel underpaid and turn to theft. Often they rationalize that their company can afford the loss. They may even steal merchandise simply because they’re mad at their boss.

Pat Delesalle, managing director, retailing at Lumberland Building Materials Ltd. In Burnaby, B.C., says his company has a lot of shrinkage in the yard.” Internal theft has been a big problem in the last year,” says Delesalle, whose family owns 18 stores and employs about 1,000 people.

All stores are alarmed and, in some locations, there is camera surveillance. Yet, DeleSalle says customers have often notified management to watch someone who “didn’t ring it in properly, left the money outside the till or “asked if I wanted to buy the product for 50 cents off the dollar.”

Although Lumberland uses outside people to shop the staff, an alert customer recently informed management of a cheating cashier. It turned out that she had helped herself to $50,000 over the course of a year. Charges have been laid against the individual who began stealing within a month of being hired.

At Eves Do-it Center in Newmarket, Ont., owner Ron Sarjeant admits to feeling betrayed by employees who steal.

“I give them a very good purchase price on product but I also make them put that through on a charge account. Then I can keep track of what they’re buying to discourage theft.

“We’ve got wage cuts and people aren’t as satisfied now , as they once were, with getting increases every six months,” he adds, aware that the economy has affected retail employees’ spirits.

A disgruntled staff member is more likely to take advantage of any opportunity to steal, so it’s important to screen employees for honesty in the interview. After the employee is hired, management should train that individual to watch for pilferage.

“Our biggest thing is just keeping the staff alert to theft and to be on the lookout for it,” explains Sarjeant, when he’s asked how he deters shoplifters. “I believe that’s the best way to keep everybody aware of it and be on the lookout.

“We know that it’s happening,” says Sarjeant, “and we’re not catching them, because we find empty packages around the store—small hardware items, packaged plumbing, electrical packages.” The store’s 22 full and part-time employees are taught by supervisors to be on the lookout for suspicious or shifty-eyed individuals and strangers carrying a bag or large coat.

However, Delesalle at Lumberland says even the familiar faces have to be scrutinized. “Our floor walkers catch more regular customers than anybody else. They know our system, our weaknesses. They rationalize it and say they don’t get enough of a discount.”

Meanwhile, Good at Ernst & Young believes the only way to combat shrinkage is to constantly work on it and respond to suggestions. “People don’t steal if they’re being watched–and when they know the company won’t tolerate it.”

Jim Flewit of Jim Flewitt & Associates, a security mirror supplier, believes with the trend toward warehouse-style retailing, consisting of “larger buildings and not a lot of staff–security mirrors create an awareness. You don’t’ find the staff you used to, so the mirrors are filling for lost staff.”

Mel Fruitman, vice-president of the Retail Council of Canada, says mirrors are ubiquitous in retail stores, yet “You never see (retail employees) glancing up at the mirrors to see anything.” He suggests that employees “look in those things occasionally, particularly if you’ve noticed someone go down that aisle and can’t see them. Just glance up there and see what they’re doing.”

Says McKinnon of Lansing Buildall: “Security people go both ways on mirrors. Usually the thief watches for blind spots in them and that’s where they head with merchandise.”

At Eves Do-It Center, employees keep an eye on the mirror in the hardware area of their store’s 8,500 square foot space. “Ours is an L-shaped store and there’s an area that’s a blind spot to us from the service desk,” says Sarjeant. “We have to keep wandering through the area.”

Greenwood Home Hardware is located at Halifax’s largest mall. The store has low ceilings, so owner Gordon Squires doesn’t rely on security mirrors to catch shoplifters. Customers enter through a turnstile—where they are always greeted by a staff member—and exit via a cashier. Employees count on good service to deter thieves.

Squires’ advice on handling shoplifters? “Help them to death.” A suspected shoplifter in Greenwood Home Hardware quickly discovers that down every aisle and around every corner yet another eager and friendly salesperson is waiting to offer assistance. Squires laughs, “You either have a ticked-off shoplifter or an impressed customer.”

With shrinkage amounting to less than two percent, Squires hopes to reduce paper worker errors when he installs a computerized inventory control system some time next year. To further discourage shoplifters, Squires has wired his tools to an alarm system.

“Our displays are all open with an electronic alarm set up. It’s physically impossible to take them more than six inches away.” Squires lost two, $200 drills before installing the wire that secures the tools,

Although retailers often secure merchandise such measures can have a negative impact on sales. “Some people kept the power tools displayed behind the glass case,” says Mike Dorschner, national accounts manager, Milwaukee Electric Tool (Canada) Ltd. “Then you have some people, and I’ll use Aikenhead’s as an example, who are more hands-on oriented. They want people when they come in to try a tool before they buy it.”

Dorschner adds, “Our tools are the kind of tools that if you can feel them hear them, see them, touch them, smell them—that kind of thing—you know you have a quality product in your hands. It’s hard to convey that message to a prospective customer when it’s caged off or behind the counter.”

Yet, in the long run, a secured power tool may offer more protection from shoplifters than a timid staff member. Says McKinnon of Lansing Buildall: “It’s hard for employees to play police officer. They don’t want to get involved. They see something but the majority of them will never say anything.”

Police Constable  Ed Przbylo forMetro Police, 14 Division, in Toronto says, “You have the right to stop shoplifters and hold them for the police. Once people are caught they’re pretty passive. “But he advises personnel to be on their guard. The shoplifter may be armed.

Experiences at Lumberland in B.C. confirm the officer’s warning. Pat Delesalle says violent situations appear to be increasing. “Our security people have been punched, knives have been drawn and when you get a ring of people stealing merchandise for resale to buy drugs, these people are not at their best.”

Delesalle claims his company’s full-time security team enjoys nothing better than to catch a thief: “We have two security people. One’s an ex-policeman and one’s a certified private investigator. “They’re like Wyatt Earp, to them it’s like making a big sale.”

Employee Screening

Would you Hire This Person?

It’s possible to separate the bad apples from the good in an interview situation simply by checking all your information.

Bob Thomas, national manager, Resources Protection at Sears Canada Inc., says job applicants have been known to lie about their educational training and even conjure up a non-existent address for their resumes.

Thomas suggests that employers use pre-employment screening, which, he says, is as simple as “looking over the application for vague information and time gaps–they could have been in jail or fired from their job.

“You should always call the previous employers and ask, ‘Would you rehire this person?” That’s basic, basic stuff that’s so important to do.”

At Lumberland Materials Ltd., Pat Delesalle, managing director, retailing, says job candidates are given a voluntary integrity test. This questionnaire, known as the Reed Test, is designed to gauge the subjective quality of personal integrity. “It’s important that we have honest people on our staff,” explains Delesalle. “Dishonesty breeds dishonesty.”

Applicants aren’t told the test’s purpose and according to Delesalle, most people aren’t aware that they’re filling out an honesty test. “The cost of getting rid of people is so expensive these days—you might as well put the money up front,” he reasons.

“Honesty testing isn’t widely used in Canada,” says Thomas at Sears. “Because our legislation is different, our questions have to be framed differently. Management is leery of going that far.

Assessment testing has been around for almost 2,000 years, according to Marijane Terry, director of assessments at The Toronto firm of Geller, Shedletsky & Weiss, where industrial psychologists have conducted assessment tests since the late ’70s.

Applicants are screened to help establish the skills and behaviours needed for the position and other job-relevant criteria.

“Through interviewing and a questionnaire,” says Terry, “It’s possible to determine how the person sees themselves and their achievements.”

Btu she is dubious of the effectiveness of honesty screening. “None of that works,” says Terry. “We haven’t been satisfied when they’ve provided validity.”

But Ann Frech, an account manager with London House, a Macmillan/McGraw-Hill company in Rosemont, Ill., which specializes in human resource assessments, disagrees. She reasons: “These tests impact shrinkage and turnover rates and save the company a lot of money.”

The tests are said to have an accuracy rate of over 80 percent and according to Frech, they’re used by large retailers across the United States and in Canada.

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