Ounce of Prevention

The recession has dealt retailers a double whammy: Sales are down for many chains, as consumers are reluctant to part with their cash, but merchandise is still going out of too many store doors without passing through the point of sale.

In a 2008 NRF survey, 74 percent of 116 participating retailers saw an increase in shoplifting for the year. According to the most recent National Retail Security Survey (NRSS), U.S. retailers attributed 34 percent of their companies' inventory shrinkage to shoplifting, at a cost of $11.8 billion.

"Not only have we seen a dramatic increase in shoplifting, we're also seeing people becoming more brazen in their attempts," says Tim Ruggiero, territory loss prevention manager for Barnes & Noble College Booksellers.

"It's becoming more challenging for me to come up with methods to give to my managers to deter and prevent [shrink] … In a word, they are frustrated." His division is seeing more forms of theft and fraud, like hot checks, fraudulent credit cards and gift card scams, Ruggiero says.

After seeing inventory shortages grow in 2006 and 2007, "I am very proud of our decrease in 2008," says Diane Holtz, president and COO of Pet Supermarket. "I do not believe that the economy helped us; I believe fighting back did."

Sunrise, Fla.-based Pet Supermarket has a three-step program to combat shoplifting and other theft: hotline reporting, exception reporting of the POS and customer service. "Over the last two years, we have developed a loss prevention department that involves everyone on the payroll," Holtz says. "We reward up to $500 for reporting a theft, which can be done anonymously."

The pet care chain advertises the hotline number for reporting any issue of harassment, theft or impropriety by stapling a business card containing the information to each employee's pay envelope.

Security consultant Chris McGoey also believes that employees can make a difference in reducing shoplifting. "Good customer service is still the No. 1 method for preventing shoplifting losses," he says. "Retailers that run skeleton crews looking to save payroll dollars now often end up paying for the decision later on the inventory shrinkage expense line."

Los Angeles-based McGoey operates www.crimedoctor.com, a multi-purpose security site. He says almost all retailers have seen an increase in shoplifting, a development he attributes, in part, to cutbacks in floor personnel after Christmas. He acknowledges that hard times have caused more shoppers to steal, but he also points to recession-related layoffs and store closures as employee morale-dashers, reducing the incentive to prevent shoplifting.

Technology, particularly video surveillance, can be an important LP tool for many retail chains during tough economic times. "Retailers are struggling to keep sales up, while at the same time theft is up," says Jumbi Edulbehram, director of the strategic channel for Axis Communications, a Swedish-based company offering products and solutions focused on surveillance and remote monitoring via network video.

The upside to the recession, he says, is that many LP departments are developing new and creative ways "to effectively leverage their existing resources."