~ SHRINKAGE



Loss prevention in the retail industry is concerned with the

disappearance of merchandise and currency. Most retail

establishments take a physical inventory annually, while some

do it semiannually. When the count is completed, the difference

between the actual inventory on hand and what it should be

according to purchase and sales records is called shrinkage.



The causes of shrinkage are recognized as employee theft,

shoplifting, and paperwork error. Other reasons for business

losses, such as robbery, burglary, and vandalism, are separate

problems. Shoplifting and internal theft are actually untold

numbers of separate incidents of larceny adding up to billions

of dollars of losses which are not listed in crime reports, except

for the relatively few cases where arrests are made.



Even though shoplifting is more often publicized than employee

theft, security experts are of the opinion that the in-house

thief is responsible for at least 50% of the shrinkage.



~ INTERNAL THEFT



The retail industry attracts many unskilled people who work for

minimum wages. Whatever the motivation, a fair percentage of

workers succumb to temptation and steal. Many of these employees

can be persuaded or prevented from stealing. Positive programs

of employee relations built around fair compensation, proper

surroundings, and employer-sponsored activities can improve morale

and concern for the success of a company. The only way to reach

some employees is through a highly visible security program and

a rigid company policy of prosecuting any employee caught stealing

Prevention of theft requires simple but sophisticated systems for

handling merchandise and currency, which not only deter but

which leave a trail of documents when any stealing takes place.

One important step that industry can take to prevent or reduce

internal theft is to avoid hiring the potential thief or problem

employee to the outset.



~ PRE-EMPLOYMENT SCREENING



When applying for a new job most people are requested to provide

some details about their education and work experience. It is at

this state, before an individual is hired, that industry must

make the effort to determine whether or not the applicant may

pose future problems, including dishonesty. Pre-Employment

Investigations are very important and highly recommed.





~ DISCRIMINATION



The Civil Rights Act of 1964 and other laws aimed at guaranteeing

equal employment opportunities for everyone have directly affected

the amount of information that an employer may request from a job

applicant. Questions about age, health, marital status, arrests,

religion, and race cannot be asked. While it is permissible to

ask about criminal convictions, it may be discriminatory if the

criminal activity in question is totally unrelated to the job

environment and if the conviction itself is an absolute bar to

employment.



~ CRIMINAL RECORDS



Such background information is usually not available to employers.

Most police departments are prohibited by law from disseminating

such information outside of official channels. Federal law

prohibits any criminal justice agency that receives federal funds

from supplying such information. In spite of the foregoing, such

data very often does "leak out." Many Private Investigators having

access may supply this information with a consent release form.



~ FORMER EMPLOYERS



It is standard procedure to make inquiry from previous employers

regarding the job applicant. Since it is rare to get other than

positive responses, the reliability of such information is to be

suspected and weighed as a factor with other sources.



~ BACKGROUND CHECKS



A background check may be done in-house or through an outside

agency. However, since the job applicant is not required to

supply very much personal information these days, it may be

necessary to seek other sources. There are extensive accumulations

of private information about individuals who have credit cards,

bank accounts, hospital records, former employment, or paid taxes.

Obtaining such data may present problems with accuracy and

invasions of privacy. Many firms consider it foolish and useless

to pursue these sources, relying instead on the frankness of

personal references supplied by the candidate, which is not a very

good way to run any business.



~ CREDIT BUREAUS



Financial information about any individual is ordinarily not

supposed to be disseminated except in connection with credit

applications. Since the credit standing of anyone is a good

indicator of stability and other traits, there is no doubt that

such information is often sought as part of the screening

process. In our metropolitan areas, the major retailers have

for many years participated in mutual protective associations

where they maintain central records of their shoplifting and

dishonest employee cases. These files are used by the member stores

as part of the screening of new employees, as well as a background

source when deciding the course to pursue with an apprehended

shoplifter. Since these files fall within the jurisdiction of the

Fair Credit Reporting Act, they must be continuously purged of

any data that is over 7 years old.



~ POLYGRAPHS



Retailing is one industry that uses the polygraph to a significant

extent both for screening applicants and investigating suspected

crimes. The continued use of the polygraph in industry has

come under attack in the U.S. Congress and state legislative

bodies during recent years. Today, some 15 states either limit

or entirely restrict such testing. Conversely there are 19

states which officially recognize the polygraph as a necessary

tool for commercial purposes, and they have enacted licensing

and regulatory laws.



Herewith listed are some of the arguments that have been advanced

by both sides in the controversy over the polygraph:



1. The value of the polygraph

a.Reasonalbe to administer

b.Fast results

c.Licensing generates confidence in examiners and in credibility

d.Dependable findings in most instances



2. Obstacles to use of polygraphs

a. Claims that it is self-incriminating

b. Violates right of privacy

c. Unions oppose and advise members not to sumbit to testing



~ OTHER LIE-DETECTION DEVICES AND TESTS



In recent years voice-stress measuring devices have been used

with success in that they have shown strong correlation with the

polygraph in their results. Opponents of lie-detection devices

have been active in opposing the use of such instruments on the

grounds that they are particularly incriminating, since they can

test for stress in the voice without the subject being aware

of it. This stress is the result of physiological changes in

the voice. The results are unlike voice prints, which are used for

other purposes. There are also a number of paper-and-pencil

tests available which are designed to predict or measure

trustworthiness and stability. The continued increase in the

rate of employee dishonesty has created a vast market for any

form of test that can offer reliability in spotting poor-risk

applicants for jobs, But remember some states restrict testing.



~ PREVENTION OF MERCHANDISE THEFT



The extent of employee theft can only be approximated since

inventory shrinkage reflects the losses from all causes. There

are so many ways that merchandise can be stolen by employees

that the imagination is the limit. The most successful way to

combat such theft is to prevent or discourage it. A concerned

company must have thorough systems of control and accountability

over merchandise from the moment it is received through the

various stages of preparing it for sale, displaying it to shoppers,

and finally handing it over to delivering it to the purchaser.

Rigid adherence to these controls requires dedication by executives,

supervision by middle management, interest and concern by staff

employees, and some security presence as a form of insurance.

Measures that should be taken to prevent some of the common means

that employees use to steal merchandise are mentioned later. Some

of these measurers require the employment of security personnel,

and oftentimes their use results in direct observation of attempts

at theft.



~ EMPLOYEES' ENTRANCE



Wherever possible, employees should be required to use a

designated entrance when coming to or leaving work. In large

establishments this is usually the case. Locker, cafeteria, and

lounge facilities should be located in close proximity to the

entrance. The time-clock area should be set up between these

facilities and the store proper. A security person should be

posted here. Personal parcels and overcoats, and so on, should

not be carried into the selling or stock areas. Anything that

is carried through the time-clock area should be subject to

inspection. Female employees may be supplied with a clear

plastic purse for personal articles they wish to have with them

at work. Employees should be encouraged to keep small valuables

and money on their person. The right to frisk and even search

may be reserved by a company under certain conditions. The

employment application should so state, the requirement should

be publicized and fully explained, and this practice must be

enforced in a nondiscriminatory manner. The rule should also

apply to repair workers, contractors, salespersons, and others

who enter the store through this area.



~ PORTERS



Maintenance people and porters who must work within the store

during non business hours should be accompanied by security people.

Plainclothes detectives should occasionally be assigned to conduct

observations of such work.



~ GARBAGE



A favorite method of theft is to hide merchandise among the

refuse before it is removed from the store. This material must

be carefully inspected before it is removed.



~ STOCKROOMS



Employees can find remote corners to idle time away or to hide

stolen merchandise on their persons. Very often they will discard

their own articles of clothing and wear the pilfered items in

their place. Once the price tickets have been removed, unless

there is a direct observation, proof of theft is difficult to

establish. Whenever possible the stockrooms should be kept locked

as a security precaution and as a means of keeping employees on

the selling floor to improve customer service. Employees should

request identification of any persons entering stock areas who

are not readily recognized.



~ KEYS AND LOCKS



All doors should be equipped with strong tamper-resistant locks.

Where there are many doors within a structure a master key system

with changeable cores is recommended. Access to various areas

can be provided on an individual basis according to job require-

ments. Employees should be cautioned to safeguard their keys. In

the event of a lost key it may be necessary to change some cores.

This is relatively inexpensive when compared the changing locks or

cylinders. All keys should be collected and accounted for at the

end of the working day, except for those which are used to close

and open the premises. There are many keyless access control

systems available today which offer computer-related features

and technology.



~ STASHING MERCHANDISE



Boxes, packages, and bundles of merchandise may be placed in various

places to be later taken away by the employee or a friend. Such

packages may be found in secure places on the selling floor. If

refuse is not thoroughly checked, the garbage containers may

become frequently used for such thefts. When such caches are

discovered, the recommended procedure is to establish surveillance

over the suspected packages.



~ UNAUTHORIZED MARKDOWNS



A favorite method of "theft" that most employees regard as

practically guiltless is to purchase articles at self-determined

discounts. Marking down the price of merchandise at the proper

time is an important factor in successful retailing. When

markdowns are taken, various records must be adjusted to reflect

the lower value in the inventory records lest a fictitious

shortage be created. Those employees who desire an item at the

height of the season, and certainly before discounts are in order,

create their own price changes in one way or another. One way

to discourage such activity is to frequently inspect goods that

are held or laid away for employees. Alert sales people or

cashiers may spot such price changes, but it may not be practical

to expect them to deny the markdown to coworkers.



~ RECEIVING AND SHIPPING



Platform and shipping employees can falsify the various receiving

and delivery documents. Sometimes this is done in conspiracy

with truck drivers. Incoming shipments should be physically

counted and verified against the accompanying documents. Receipts

given to delivery people should indicate any shortages found.

Shipments should be verified again for completeness when they are

unpacked and processed for the selling department. Valuable or

easily concealable items should be transferred in security bins

or racks. Test counts can be done randomly as a security

measure. The documents which match the merchandise must be checked

for detail, particularly as to retail price. Incorrect ticketing

will create shortage whether it is mistakenly or deliberately done.



~ WAREHOUSE



Large companies may have one or more warehouses where incoming

merchandise is received for storage and transshipment to retail

outlets. Sometimes the ticketing operations are done in such

warehouses. Theoretically, a warehouse should be easier to control

than a store from a security viewpoint, since the environment is

closed to the public. Truck drivers should not be permitted

within the warehouse. Separate facilities should be maintained

for them outside the perimeter, where feasible. Receiving

platforms and shipping platforms should be physically separated.

Cargo documents and purchase orders should be matched, so that

proper bookkeeping is ensured. Cargo areas of trucks should be

locked and sealed when transporting merchandise. Drivers should

not have access to the goods. It is a good idea to inspect the

trucks from time to time to ensure that they are sound. Within

the warehouse there should be separate storage facilities for

merchandise which is most often or easily stolen. Such areas

may be specially safeguarded with locks, alarms, or even closed

circuit television. If possible, management should reserve the

right to search packages and persons. Typical warehouse

environments are conducive to such activities as organized

gambling or narcotics selling. These practices can easily lead

to necessity for theft. If the pushers and bookies can be

singled out, efforts should be made to discharge them. This type

of problem is never permanently solved. If management does not

stay alert, it will shortly return.



~ THEFT OF CASH



The theft of cash also presents a major problem to the retailer.

The case thieves are ordinarily those persons whose jobs require

them to handle money.



~ HOW CASHIERS STEAL



Without a program of prevention, there are numerous opportunities

for cashier theft, among them the following;

• 1. Helping self to cash from common drawer register
• 
  
• 
  
• 
  
• 2. Failing to give receipt to customer and voiding the sale after
• 
  
• customer leaves.
• 
  
• 
  
• 
  
• 3. Avoiding ringing the sale; pocketing the cash
• 
  
• 
  
• 
  
• 4. Under-ringing the sale; pocketing the difference
• 
  
• 
  
• 
  
• 5. Failing to close register drawer after each sale
• 
  
• 
  
• 
  
• 6. Imprinting more than one charge on a credit card transaction;
• 
  
• exchanging surplus charge slip for cash
• 
  
• 
  
• 
  
• 7. Allowing accomplice to remove cash; reporting the theft later
• 
  
• 
  
• 
  
• 8. Raising the amount of a check taken from a purchaser;
• 
  
• pocketing the difference
• 
  
• 
  
• 
  
• 9. Accepting bad checks from accomplice
• 
  
• 
  
• 
  
• 10. Selling to friends at discount
• 
  
• 
  
• 
  

• 1. If shortages exist in common drawer registers, switch cashiers
• 
  
• daily and keep "over and short" records to track individual
• 
  
• performance.
• 
  
• 
  
• 
  
• 2. Frequent voids, no sales, or reports of till tapping should
• 
  
• initiate surveillance of suspect at work. Results may be
• 
  
• obtained by polygraph examination.
• 
  
• 
  
• 
  
• 3. Spot checks of cashier's funds during working day
• 
  
• 
  
• 
  
• 4. Integrity shopping
• 
  
• 
  
• 
  

• 1. Thoroughly audit the entire room
• 
  
• 
  
• 
  
• 2. Create deliberate error or shortage to test for reaction
• 
  
• 
  
• 
  
• 3. Compare individual working schedules against times when
• 
  
• shortages occur
• 
  
• 
  
• 
  
• 4. Determine life-styles of employees
• 
  
• 
  
• 
  
• 5. Since these shortages may be substantial, do not overlook
• 
  
• possibility of recovering losses from insurance company.

• 1. Security Guards
• 
  
• 
  
• 
  
• 2. Plainclothes Detectives / Private Investigators
• 
  
• 
  
• 
  
• 3. Fitting-Room Attendants
• 
  
• 
  
• 
  
• 4. Shopping Services
• 
  
• 
  
• 
  
• 5. CCTV Servaillance Systems
• 
  
• 
  
• 
  
• 6. Employee Incentive Programs

• 1. Articles of high value and easily pilfered should be safeguarded
• 
  
• under glass or locked away.
• 
  
• 
  
• 
  
• 2. Article surveillance or chains should be properly used.
• 
  
• 
  
• 
  
• 3. Merchandise should be returned to stock after showing it to
• 
  
• customers.
• 
  
• 
  
• 
  
• 4. Displays should be set up so that they do not clock easy
• 
  
• viewing by employees.
• 
  
• 
  
• 
  
• 5. Before being handed over to purchasers, contents of preboxed
• 
  
• merchandise should be inspected.
• 
  
• 
  
• 
  
• 6. ID should be requested of any strangers in nonselling areas.
• 
  
• 
  
• 
  
• 7. Price tags should not be loose or easily removed.
• 
  
• 
  
• 
  
• 8. Prompt attention should be paid to customers, always.
• 
  
• 
  
• 
  
• 9. Salespeople should not to turn their backs to customers.
• 
  
• 
  
• 
  
• 10. Legitimate purchases should be easily differentiated from
• 
  
• other packages.
• 
  
• 
  
• 
  
• 11. All discarded sales receipts found on floor or anywhere else
• 
  
• should be picked up.
• 
  
• 
  
• 
  
• 12. Salespeople should be alert to the fact that luggage, when
• 
  
• purchased, may be filled with stolen merchandise.
• 
  
• 
  
• 
  
• 13. Frequent inventories of expensive or desirable merchandise
• 
  
• should be taken to detect the existence of a problem, so that
• 
  
• immediate measures can be invoked.
• 
  
• 
  
• 
  
• 14. Premises should not become a hangout. Employees should be
• 
  
• alert to possibility of mass shoplifting.
• 
  
• 
  
• 
  
• 15. There should be frequent inspections for empty boxes or
• 
  
• containers. The foregoing procedures are but a sampling of the
• 
  
• many steps that can be taken to combat losses. Other parts of
• 
  
• this chapter on loss prevention offer additional recommendations.

• 1. Merchandise is concealed in boxes, bags or purses. Professionals
• 
  
• may carry booster boxes.
• 
  
• 
  
• 
  
• 2. Merchandise is concealed in clothing. Professionals may wear
• 
  
• garments fitted with large pockets or hooks. Oversized garments
• 
  
• may be worn to afford easy concealment.
• 
  
• 
  
• 
  
• 3. Stolen garments are worn in plain sight and out of the store.
• 
  
• 
  
• 
  
• 4. Merchandise is carried between thighs and hidden by long
• 
  
• skirt or overcoat.
• 
  
• 
  
• 
  
• 5. Professionals wrap garments around the legs and tuck them
• 
  
• into tops of socks.
• 
  
• 
  
• 
  
• 6. Small articles may be carried out hidden in the palm of the hand.
• 
  
• 
  
• 
  
• 7. Some thieves snatch articles and run out of the store.

• 1. People wearing overcoats out of season, or raincoats on a
• 
  
• clear day.
• 
  
• 
  
• 
  
• 2. People carrying boxes, bags, or umbrellas which could be
• 
  
• used to conceal merchandise.
• 
  
• 
  
• 
  
• 3. Nervous-looking people who are constantly touching the backs
• 
  
• of their heads, tugging at sleeves, or adjusting socks.
• 
  
• 
  
• 
  
• 4. Exceptionally fussy people who cannot seem to make up their
• 
  
• minds about a purchase, or do not appear interested in purchasing
• 
  
• an article that they have been examining.
• 
  
• 
  
• 
  
• 5. People who walk around and constantly keep one hand in a pocket.
• 
  
• 
  
• 
  
• 6. People who come back to the same area of a store several times.
• 
  
• 
  
• 
  
• 7. People who are busy looking about, rather than at merchandise.
• 
  
• People who appear to be nervous.
• 
  
• 
  
• 
  
• 8. People who walk into stockrooms or behind counters and have
• 
  
• no business in such places.
• 
  
• 
  
• 
  
• 9. Men who carry shopping bags.

• 1. Examples of bad checks
• 
  
• a. Drawn on a nonexistent or closed account.
• 
  
• b. A forged check drawn on a legitimate account.
• 
  
• c. A counterfeit check.
• 
  
• 
  
• 
  
• 2. Acceptance procedures
• 
  
• a. Accept only personal checks payable to the store.
• 
  
• b. Inspect the check:
• 
  
• 
  
• 
  
• 1. No postdated or undated checks
• 
  
• 2. If out-of-town bank, use extra care.
• 
  
• 3. Must be written in ink; no erasures or corrections.
• 
  
• 4. Numerical amount and written amount must agree.
• 
  
• 5. Should be for exact amount of purchase.
• 
  
• 6. Be careful of "starter" checks.
• 
  
• 7. Be careful when customer appears unconcerned about price.
• 
  
• 8. Company should maintain a listing of previous bad check
• 
  
• passers; consult list
• 
  
• 9. Call bank if amount is over a predetermined amount or
• 
  
• out-of-state.
• 
  
• 10. If bank is closed, suggest delivery of merchandise.
• 
  
• 11. Do not be pressured into accepting check too fast.
• 
  
• 12. Require valid identification.
• 
  
• 13. Compare signature and photograph.
• 
  
• 14. Record all information on back of check.
• 
  
• 
  
• 
  
• 3. Acceptable identification
• 
  
• a. Two forms of ID should be required.
• 
  
• b. Legitimate driver's license.
• 
  
• c. Licenses (pistol, and so on), permits or ID cards with
• 
  
• photos.
• 
  
• d. Local Bank Card.
• 
  
• e. Medicare cards for elderly customers who do not have
• 
  
• drivers licenses.
• 
  

• 1. Insufficient funds
• 
  
• a. Re deposit and notify maker.
• 
  
• b. If still insufficient, request immediate payment; turn over
• 
  
• to collection agency, or debt recovery service.
• 
  
• c. Final alternative is prosecution.
• 
  
• d. Check with police on local practice and procedure.
• 
  
• 
  
• 
  
• 2. Closed accounts and forgeries
• 
  
• a. Identify the check passer. This may be difficult or
• 
  
• impossible because the check may have been stolen or the clerk
• 
  
• may not recall the individual
• 
  
• b. police reports and notification to banks, motor vehicle
• 
  
• bureau, credit card companies tend to verify the depositor's
• 
  
• statements in connection with the whereabouts of the check.
• 
  
• c. Interview cashiers to get leads.
• 
  
• d. Publicize current names or aliases being used.
• 
  
• e. Communicate with other retailers and the police.
• 
  
• f. Alert refund departments.
• 
  
• g. Prosecute when absolute identification has been made.

• 1. Examine card for authenticity; expiration date. Imprinted
• 
  
• name and signature must match.
• 
  
• 
  
• 
  
• 2. Use terminal or telephone to obtain authorization.
• 
  
• 
  
• 
  
• 3. Follow instructions according to code. If "hot card," confiscate
• 
  
• if possible. If above floor limit, may need additional ID.
• 
  
• Customer may be advised "cash only".
• 
  
• 
  
• 
  
• 4. Be aware that lost or stolen cards issued by out-of-state
• 
  
• banks experience unusual time lag in appearing on "hot list".
• 
  
• 
  
• 
  
• 5. Examine ID carefully; compare signatures.
• 
  
• 
  
• 
  
• 6. Be wary of customers who appear unconcerned about price of
• 
  
• merchandise.
• 
  
• 
  
• 
  
• 7. Watch out for customers in a hurry, particularly at closing time.

• 1. Know the merchandise; prices; number of pieces.
• 
  
• 
  
• 
  
• 2. Do not turn away from an open register drawer; keep it closed
• 
  
• between transactions.
• 
  
• 
  
• 
  
• 3. Do not count the contents of register on the selling floor.
• 
  
• 
  
• 
  
• 4. Do not leave register unlocked; take the key.
• 
  
• 
  
• 
  
• 5. If unusual amount of cash has been taken in, request it be
• 
  
• collected.
• 
  
• 
  
• 
  
• 6. If customer claims to be shortchanged, request assistance.
• 
  
• 
  
• 
  
• 7. Allow only properly identified persons behind showcases and
• 
  
• counters.
• 
  
• 
  
• 
  
• 8. Be alert to detect counterfeit bills.
• 
  
• 
  
• 
  
• a. Portrait appears lifeless and background lines not distinct.
• 
  
• b. Treasury seal may have uneven points.
• 
  
• c. Border lines are not clear and distinct.
• 
  
• d. May be printed on bond paper without red and blue fibers;
• 
  
• or printed with red and blue lines to resemble fibers.
• 
  
• e. Strip in $10, 20,50, 100.
• 
  
• 
  
• 
  
• 9. Be alert for till tappers.
• 
  
• 
  
• 
  
• a. They create confusion, drop change, start an argument,
• 
  
• divert attention while accomplice steals from register.
• 
  
• b. On any suspicion, close the drawer.
• 
  

• 
  
• 1. Make refunds payable by check in the mail.
• 
  
• 2. Insist on price tickets and sales receipts.
• 
  
• 3. Verify merchandise and price in appropriate selling department.
• 
  
• 4. Examine documents for alterations or erasures.
• 
  
• 5. If purchase was made by check, allow time to clear.
• 
  
• 6. Make refunds on credit card purchases through account.
• 
  
• 7. Steal an item of merchandise, return same item for a refund without
• 
  
• sales slip.