Ask SCORE: Putting a stop to local business theft

COURTESY TO THE BELLINGHAM HERALDDecember 16, 2012 

Question: OK, the last two Ask SCORE columns have helped open my eyes to my store's problem with inventory shrinkage. What more can I do?

Answer: There are numerous things you can do to combat shoplifting and internal theft. Realize that for a typical retailer with a 10 percent net profit margin, the loss of a $100 item wipes out your next $1,000 in sales. Let's talk about this.

First, the physical environment of your store is very important. Some effective techniques:

- Conspicuous surveillance devices like cameras, convex mirrors and one-way glass.

- Store layout, with the checkout counter near the exit.

- Open sightlines and low visual barriers.

- Good lighting; no blind corners.

- Prominent "We Prosecute Shoplifters" posters.

- High-value items are protected, and away from doors.

- Seasonal rent-a-cops.

- "Floorwalkers" who blend in with your customers.

A recent development: public-view monitors. A ceiling-mounted flatscreen just inside your door displays customers as they enter. A prospective shoplifter may turn around and walk out.

Be sure to consider theft-resistant packaging when you order merchandise. There's a reason that 16-gig camera card, which is about the size of a postage stamp, comes in 5-inch-by-9-inch plastic housing that requires a machete to open.

If you sell many small, high-value items, you should look into radio-frequency identification (RFID) technology. There's a good discussion at explainthatstuff.com.

Besides the physical factors, your store's personnel have an enormous impact on your loss rate. Loss-prevention professionals agree: The single best technique is for staff to greet each guest as they enter the store.

That works hand-in-hand with an "annunciator" device, which sounds a soft tone when someone enters. Those start at around $40. The more a shoplifter feels visible, the less likely they'll steal. Related: Google "Walmart 10-foot rule."

Internal or "backdoor" theft is thought by many to exceed the total amount of shoplifting. Here's the bottom line: If you don't have good controls and tracking of your inventory, you're a sitting duck, and your employees know it.

There's no way for you to monitor inventory loss if you don't have a control system. For a very small store, this could be as simple as a manual tally each day of sales of all items over, say, $50. Above that, most accounting software packages have some inventory tracking capability. The gold standard is a point-of-sale (POS) system that follows the entire sales process, from write-up to inventory adjustment.

Let's look at some examples of internal theft of goods:

- A sales employee colludes with a "customer" shoplifter, and looks the other way for a moment. They split the goods or proceeds.

- An employee puts a valuable item out in the trash; an accomplice retrieves it from the trash bin.

- A salesperson writes up phony merchandise returns.

- A restaurant server gives extra food or drinks to friends.

- A receiving clerk signs for more goods than were actually received, for a cash bribe.

Your ability to control internal theft starts with your employee-screening process. Be sure to verify the applicant's previous employment. Confirm dates of employment.

Be very careful what you ask. This question is safe: "Would you hire him/her back if you had the opportunity?" For more on this and a concise list, go to sba.gov and enter "background check" in the search box.

Note: It's not just the December holidays when there's a rash of theft. January brings "return fraud," which is rampant. Some thieves steal year-round, then bring the items in during the liberal refund times typical in January.

You need to have a clear policy on how refunds are issued. Example: An under-$10-item gets a cash refund; over $10 gets a gift card; over $100 requires photo ID. You're probably aware there is a secondary market for gift cards, typically at half the card's value.

The next high-shrink period is around spring break. Then follows summer, when school kids are out and about. Typically there's another bump during back-to-school sales.

Bellingham Police Department is stretched pretty thin, but may be able to do an on-site evaluation of your vulnerabilities. Local businesses can call 360-778-8800 to inquire.

Your particular line of retailing probably has several trade associations. You might contact them and see if they have loss-prevention ideas specific to your field. Also, Google "shoplift prevention videos" to see what suits your situation.

The U.S. Chamber of Commerce says shoplifting and internal theft, along with embezzlement, are "significant factors" in about one-third of business failures. Don't let that include you.

ASK SCORE COLUMN TO PUBLISH MONTHLY

After two years of writing his weekly Ask SCORE column, Bob Dahms will take a break, returning in early 2013 with a once-a-month column. If you would like to submit a question for the column, send an email to Business Editor Dave Gallagher at dave.gallagher@bellinghamherald.com. To see Dahms' previous columns online, click here.

ABOUT SCORE

To learn more about managing cash flow, and other small business matters, contact SCORE, "Counselors to America's Small Business." SCORE is a nonprofit nationwide organization with more than 13,000 volunteer business counselors who provide free, confidential business counseling and low-cost training workshops to small business owners. Call the local SCORE chapter at 360-685-4259 to schedule an appointment. For details about the organization,visit SCORE.org.

Ask SCORE is prepared for The Bellingham Herald by Bob Dahms, a business counselor with the Bellingham chapter of SCORE. Submit questions for this column to newsroom@bellinghamherald.com.

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