12 Steps to Stop Retail Employee Theft: A Loss Prevention Guide

It is safe to say that retailers worldwide experience employee theft. Employee theft refers to the unlawful taking or misappropriating of company assets by employees for personal benefit. Untrustworthy employees are responsible for a whopping 90% of a business’s major losses.

You don’t want to foster a workplace culture that feels like a prison, but you also don’t want to be so lax that you allow dishonest activities to flourish. So, how do you know if your employees are stealing? In this guide, we’ll explore several measures you can take to detect and prevent theft, including loss prevention audits, access control, and other proactive measures.

1. Understand the Signs of Employee Theft

Even though all companies are targets for theft, small businesses are often more susceptible to unethical behavior from staff members. This vulnerability may stem from the fact that small businesses typically lack the budget or manpower that larger companies have to invest in effective retail loss prevention methods.

There is no specific profile for who steals; employees from all walks of life can become perpetrators, regardless of age, gender, race, or socio-economic background. In fact, over 60% of employees admit they would likely steal if they thought they could get away with it, often due to inadequate security measures or limited consequences.

Before jumping to conclusions about theft or scrutinizing employees too closely (which could lead to accusations of discrimination), it’s important to gather some insights. Here are some key telltale signs to help you determine if internal theft is an issue in your business, prompting further investigation if necessary.

Inventory Discrepancies

Frequent mismatches between recorded inventory and what’s physically available can signal theft. It’s often easier to conceal product theft at various points in the supply chain, especially before items are scanned into inventory or have barcodes attached. An employee might claim that the wrong amount was shipped when, in reality, products have been stolen.

Changes in Behavior

If an employee who was once trustworthy begins to act secretively or appears unusually defensive about their work, this could raise a red flag. For example, does a store manager make excuses to stay behind alone later than other employees? Are they frequently talking on the phone or FaceTiming while in the store? These behaviors warrant closer examination.

Frequent Discounts or Voids

Noticing an employee who frequently processes discounts or voids should prompt further investigation. This could indicate “sweethearting,” where employees offer unauthorized discounts or free items to friends, family, or preferred customers. Monitoring these transactions can help identify patterns of unethical behavior.

Cash Register Discrepancies

Businesses that involve cash handling are particularly vulnerable to internal theft. Cash is one of the most frequently stolen assets in small businesses. Discrepancies in cash registers—such as larceny, under-ringing, and skimming—can indicate theft and threaten your business’s inventory and financial integrity.

2. Foster a Culture of Honesty

When employees feel valued and part of a team, they’re less likely to engage in dishonest behavior. Here are some simple ways to build that culture:

• Open Communication: Encourage your team to voice their concerns and suggestions. An open-door policy can make them feel safe sharing any issues they notice.
• Recognition Programs: Acknowledge and reward employees who demonstrate integrity. This not only reinforces positive behavior but also sets a standard for everyone else.

3. Implement Regular Loss Prevention Audits

One effective way to see if employees are stealing is by conducting regular loss prevention audits. So, what’s a loss prevention audit? It’s basically a review of your business practices, inventory, and security measures.

• Identify Vulnerabilities: Look at how products are tracked and stored to find any weak spots where theft might happen.
• Analyze Transaction Patterns: Reviewing sales and returns can help uncover suspicious patterns that might indicate employee theft.
• Enhance Security Measures: Audits often lead to better security practices, like improved surveillance systems or access control.

Getting your team involved in the audit process is a smart move too. It creates transparency and helps them understand why safeguarding assets is important.

4. Utilize Technology and Security Cameras to Monitor Activity

Leveraging technology is key. Here’s how tech can help you keep an eye on things:

• Surveillance Cameras: Installing cameras in key areas acts as a deterrent and gives you video evidence if theft occurs.
• Point of Sale (POS) Systems: Modern POS systems can track sales and returns, making it easier to spot any discrepancies.
• Inventory Management Software: Using specialized software helps you maintain accurate inventory records and identify issues before they become big problems.
• Data Monitoring Tools: These tools can help protect against proprietary information theft by monitoring who accesses sensitive data.

5. Conduct Thorough Background Checks

Before bringing new employees on board, doing thorough background checks can help reduce the risk of internal theft. Here’s what to look for:

• Criminal History: A history of theft or fraud is a clear warning sign.
• Employment Verification: Make sure the candidate’s previous employment history checks out. About 40% of employees who steal have faced some disciplinary action in the past.
• References: Reach out to previous employers to get a feel for the candidate’s character and work ethic.
• Payroll Theft: Checking employment history can also help you spot any past involvement in payroll-related theft.

6. Train Your Employees

Investing time in employee training can really cut down on theft. Make sure your team knows the company policies regarding theft and the consequences of dishonest behavior. Here are some ideas for training:

• Ethics Training: Workshops on workplace ethics can help reinforce the importance of integrity.
• Policy Review: Regularly go over company policies related to theft and loss prevention.
• Role-Playing Scenarios: Engage employees in discussions or scenarios to help them recognize and handle potential theft situations.
• Theft Prevention Strategies: Teach proactive measures, like thorough pre-employment screening and fostering a culture of trust and accountability.

7. Create a Whistleblower Policy

Encourage employees to report suspicious behavior by having a whistleblower policy. Theft by one employee can affect everyone, so it’s important to have a policy that protects everyone’s interests. Here’s what to include:

• Confidential Reporting Channels: Employees should have confidential ways to report concerns without fear of retaliation.
• Clear Procedures: Make sure everyone knows what to do if they suspect theft.
• Reassurance: Let employees know that their reports will be taken seriously and investigated promptly.

8. Restrict Access to High-Value Merchandise

Restricting access to high-value merchandise is a smart way to prevent employee theft. By limiting access to these valuable items, you significantly reduce opportunities for theft. Here are some effective strategies to implement:

• Access Control Solutions: Consider utilizing systems like Smart Locks from InVue. These solutions allow you to manage who has access to specific merchandise, ensuring only authorized personnel can handle high-value items.
• Clean Desk Policy: Encourage a policy that keeps sensitive merchandise and information out of sight and secure. This minimizes the risk of unauthorized access.
• Security Measures: Ensure that valuable inventory is locked away and stored securely. Use cabinets or display cases that are difficult to access without proper authorization.
• Security Cameras and Alarms: Installing surveillance systems can deter potential thieves and provide real-time alerts if suspicious activity occurs.

9. Conduct Investigations When Theft is Suspected

If you suspect employee theft, conducting a thorough investigation is important. Start by gathering evidence, interviewing witnesses, and reviewing transaction data to get a clear picture. It’s also a good idea to consult a loss prevention expert or legal counsel to make sure everything is handled properly.

• Watch Employee Behavior: Pay attention to any suspicious activity during the investigation.
• Confidentiality Matters: Keep the investigation confidential to avoid tipping off the suspected employee.

By conducting a comprehensive investigation, you can find out how extensive the theft is and take appropriate action to prevent it in the future.

10. Implement Consequences for Theft

Having clear consequences for theft is a vital step in prevention. Make sure there’s a well-defined policy outlining the repercussions, like disciplinary action or termination. A progressive discipline system, where consequences get more severe for repeat offenses, can be effective too.

• Training on Consequences: Make sure employees understand what’s at stake and the importance of maintaining a culture of honesty.
• Fair Application: Ensure that consequences are applied fairly across the board. This helps deter theft and fosters a positive work environment.

11. Monitor Employee Activity

Keeping an eye on employee activity can help you stay ahead of potential theft. Here are some methods to consider:

• Access Control Solutions: Implement these to track who enters and exits restricted areas, adding an extra layer of security.
• Routine Audits of Employee Transactions: Regularly review transactions made by employees, especially in high-risk areas.

12. Invest in Asset Protection Products

In addition to monitoring employee behavior, investing in asset protection products can help safeguard your physical assets from both internal and external theft. Here are a few products to consider:

• EAS-Compatible Security Tags: Many retailers rely on EAS gates that trigger alarms when tagged products pass through. Unfortunately, the magnetic tags used often fall short and can be easily defeated. Consider upgrading to tags that aren’t affected by magnets for better protection.

• Merchandise-Specific Anti-Theft Devices: When it comes to security, one size doesn’t fit all. The tags that work for clothing or handbags might not cut it for high-value items like laptops or smartphones. Everyday products, from razors to laundry detergent, are also common theft targets. So, make sure you choose merchandise security solutions tailored to your specific merchandise instead of settling on a band aid solution.

Determining if your employees are stealing can feel daunting, but with the right measures in place, you can significantly reduce the risk of theft. Regular loss prevention audits, combined with a strong company culture, employee training, and technological solutions, can create an environment that discourages dishonesty.

Strengthen your Defense Against Employee Theft with InVue

To tackle employee theft effectively, having the right tools and strategies makes all the difference. At InVue, we’re here to help you with your loss prevention efforts. Our downloadable checklist can guide you through conducting a loss prevention audit, helping you spot which products are most vulnerable.

Plus, our innovative asset protection and access control solutions give you a complete audit trail of who accesses high-value merchandise. This way, only authorized staff can handle high-value items, boosting both security and accountability. By integrating InVue’s technologies, you can foster a culture of honesty and vigilance, making your retail environment much more secure.