BOOSTING IN-STORE LOSS

MINA WILLIAMS

There is no substitute for proper training and team effort to cut down on the most pervasive area of in-store loss: employee pilferage and mistakes.

Retailers interviewed by SN said success in combating employee shrink hinges largely on taking proactive steps that involve several distinct areas within the business, such as enhanced training, use of loss-prevention software or systems, and involvement of human resource departments.

By leveraging all three of these tactics, retailers can better monitor -- and change -- employee behavior, and thus bolster accountability, honesty and accuracy. Training, along with the use of such proven technologies as cashier monitoring and CCTV systems, can go a long way in cutting losses.

According to Mark Gephart, chief operating officer, Fresh Encounter, Findlay, Ohio, training and accountability have been the linchpins to success in reducing employee shrink.

"We have recently introduced training initiatives to make our associates more aware of loss prevention," said Gephart. The retailer is paying particular attention to the front-end and customer service areas where credit card activity and utility payment transactions involving large amounts of cash open the door for costly mistakes as well as outright theft.

As a result of the new process Fresh Encounter has implemented, the retailer has also been able to reduce some operational expenses attributed to shrink, as well as cut shrink overall.

"There were some routine activities involving common errors as well as 'sweethearting.' There were also some big things related to credit card transactions, and voids and error corrections," said Gephart.

Specifically, there are cashier "tricks" that facilitate theft. A cashier can ring up a sale, take the payment and then void it in order to pocket the money. In error correction theft, a cashier can ring up an item such as a $25 ham and then go back into the front-end system and put in a false correction for a carton of eggs. In credit card theft, a number of methods are used to gain money, Gephart explained.

Fresh Encounter uses transactional analysis software, along with enhanced training methods, to ensure better cashier accountability and accuracy.

"[Cashiers now] have a better understanding of what our performance expectation standards are -- and that we are looking at performance using key indicators. When deviations occur, we are able to bring examples to the table so that performance can be improved," Gephart said.

At Fresh Encounter, loss prevention and human resources are grouped together. This combination enhances the training process and ensures well-trained associates, who are more comfortable and confident with the jobs, said Gephart.

"Our program is in its infancy, but we see a lot of opportunity."

Gephart declined to give specific program results since it was first initiated six months ago.

Training also is being employed as a key strategy to overcome in-store shrink at Town & Country Markets, Seattle.

"We give our associates the tools they need to do their jobs," explained Michael Latham, director of security for the independent. "We go beyond a job description. We are clear that there is accountability. We are also clear that we know people simply make mistakes. No one is ever perfect."

The operator has established an orientation process and precise procedures for employees to follow. In these procedures the auditing process is described and explained. The retailer conducts periodic follow-ups and audits, said Latham.

As a result, associates have become more a part of the store, forming a community, Latham noted. "The entire store works together."

Town & Country trains a cashier for 60 days. "It takes that long for cashiers to learn and understand bag packing, handling merchandise and handling money," said Latham. "We put baskets together to do trial runs. People want to feel they are competent and comfortable at doing their job. That is a key to success. People, by nature, want to do a good job. When there are not enough tools, performance fails."

Latham said he believes employees who are made part of a team effort to reduce shrink and losses typically have a feeling of belonging and show more loyalty to the company. They are also more likely to report dishonesty among other employees.

Losses due to shrink cost supermarkets about 2.3% of retail sales. Employee-caused shrink leads losses at 54%, while shoplifting trails at 23%, according to the latest Supermarket Shrink Survey, produced by the National Supermarket Research Group, Scottsdale, Ariz.

"Shrink is no longer considered just a cost of doing business," said Larry Miller, director of research, who estimates that operators taking a proactive approach to shrink can shave 1% off the cost. Miller is also president of Trax Software and Consulting, also based in Scottsdale.

"The culture of controls starts with the store managers," he said. "But to live up to expectations of the corporate culture, management must invest and train people."

According to Miller, "The synergy of joining loss prevention, human resources and store management into one engaged engine is powerful and offers a winning store culture." While loss-prevention and shrink control training and awareness programs are typically rated by loss-prevention professionals as among the best tools for reducing shrinkage, they also acknowledge the need to enlist all employees in their efforts to reduce losses. "Loss prevention has moved toward a team-effort approach with all employees," said Mark R. Doyle, vice president, Jack L. Hayes International, Fruitland Park, Fla.

"Prevention, not detection and apprehension, is the goal. Making all employees 'part of the team effort' to reduce shrink is usually a win-win situation," said Doyle.

Employee Theft: A Widespread Problem

Supermarkets are not alone in this preventative loss. Employee theft has reached record levels of $32.3 billion, up from $29 billion a year ago, according to the 2001 National Retail Security Survey, released by the University of Florida, Gainesville. The survey of various retail outlets said that in 2000, retailers lost 1.75% of their total annual sales to shrink, up from 1.69% in the previous year.

Employee theft is attributed to 46% of shrink, costing operators $14.9 billion. By comparison, shoplifting -- ranked second in the survey -- amounted to 30.6% of revenues or $10 billion.

"It's a wake-up call," said Richard C. Hollinger, survey director and associate professor. "Shrink is a multibillion-dollar source of revenue loss. This means the single largest category of larceny in the United States is the crime that occurs in retail stores. This figure is larger than motor vehicle theft, bank robbery [and] household burglary combined."