Thievery in Workplaces– Trillion Dollar Industry: Honesty in Deep Decline– Business Theft Becoming Epidemic…

Theft in workplaces is epidemic and it’s devastating to business… According to Annual Retail Theft Survey: U.S. retailers stand to lose an average of 1.3% of sales through shrinkage, which translates to $54 billion per year (shrinkage is the loss of inventory attributed to factors, including; employee theft, shoplifting, administrative error, vendor fraud, damage goods, cashier errors…)

Employee theft is the largest area of retail loss accounting for 37% of total shrinkage…  Shrinkage rates varies by retail segment, from a high of 1.8% of sales for small-format specialty retailers, down to 0.9% for large-format specialty, hospitality, leisure retailers… Theft of inventory (37%) and theft of cash (20%) are the largest internal employees-related areas of retail loss. The second biggest factor of store loss is administrative or bookkeeping errors at 23%, and shoplifting came in at fourth place at 13%…

theft thFT7HAL7G

According to another study; U.S. retailers lose $45 billion annually to retail theft, and shoplifting alone accounts for $10 billion in losses… One-of-every 38 employees was apprehended for theft in 2014… Within just 25 large retailers; over 1.2 million shoplifters and dishonest employees were apprehended in 2014… Another survey estimated that the typical organization loses 5% of revenues each year to fraud, and if applied to the 2013 estimated Gross World Product, this translates to a potential projected global fraud loss of nearly $3.7 trillion…

According to U. S. Chamber of Commerce; 75% of employees steal from workplaces and most do it repeatedly… Security experts say that as many as 30% of the average company’s employees steal, and another 60% will steal if given a motive and opportunity… Some estimates indicate that more than $600 billion is stolen annually, or roughly $4,500/employee. According to Security Magazine; employees theft statistics are showing an upward trend… According to Federal Bureau of Investigations (FBI) report; employees theft is the fastest growing crime in U.S

According to Jason Rueger; U.S. businesses lost around $40 billion in 2013 to retail theft, which is more than 1.3% of overall retail sales, making retail theft one of the biggest problems facing business retailers today… there are 4 main reasons, namely:

  • Customers: Shoplifting accounts for around 34% of retail loss in the U. S. Items are taken for personal use or resale, e.g.; health and beauty items, apparel, electronics… are products most vulnerable to this kind of theft…
  • Employees: Employees theft is almost as damaging as shoplifting, accounting for around 32% of retail loss in the U. S. There are various reasons that employees steal, e.g.; some give friends a deal (i.e., sweet hearting), others are dissatisfied with their employers/bosses, some simply steal because they want extra cash…
  • Suppliers/Contractors: Store suppliers/contractors are another source of theft, accounting for around 8% of retail loss. Business with more informal/less-organized contracts are especially susceptible to this kind of theft. Suppliers might overcharge, or charge for services never actually provided…
  • Management: Management and admin errors account for around 26% of retail loss, e.g.; mismanagement of inventory (i.e., orders too much product, orders the wrong products…), pricing items incorrectly…

In the article U.S. Retail Workers are No. 1 in Employee Theft by Anne Fisher writes: Light-fingered employees cost U.S. retail stores (and consumers) more than shoplifters do… According to Ernie Deyle; the four months from October through January are when stores see not just their biggest sales volume of the year, but also the most returns and exchanges, and unfortunately the same four months account for about half of all annual shrinkage…

That shrinkage is made-up of missing goods from shoplifting, other causes… costs U.S. retailers about $42 billion a year, according to the latest ‘Global Retail Theft Barometer’: Shoppers pay the price for such theft and cost of mysteriously vanishing merchandise comes to $403 annually per U.S. household.

Of course, retailers everywhere deal with shrinkage but there is one big difference between U.S. and rest of the world: Globally dishonest employees are about 28% of inventory losses, while shoplifters account for a markedly higher 39%… But not so in U.S., where employees theft is much higher and accounts for 43% of lost revenue… Are U.S. workers bigger thieves?

theft thP5XEKJXM

Some stores get ripped-off more than others, e.g.; discounters– experience higher rates of employees theft than home improvement stores or supermarkets… Moreover, rather than simply walking-off with merchandize or pocket cash, most workers who steal do so in subtler ways, e.g.; usually it happens during checkout, when an associate manipulates a transaction to benefit themselves or someone else… or, employees might enter refunds, discounts, voided transactions into a cash register… or, they can cancel transactions, modify prices, or say someone used a coupon when they didn’t…

The interesting question, of course, is not so much, ‘how’ but ‘why’ do employees steal… Some reasons, include; hiring wrong employees, or lack of employee supervision, or easy sale of stolen items…  Others see it as cultural differences, e.g.; internationally there is more of an unwritten code that says; it’s not honorable to do something dishonest to an employer, whereas in U.S. there is a different mindset…

The Global Retail Theft Barometer (GRTB) Study: An annual survey that interviews 222 retailers in 24 countries representing $744 billion in sales in order to research the amount of shrinkage, theft in retail business… Report Summary: In 2013–2014, U.S. shrinkage rate decreased by 2 basis points to 1.48% of the region’s sales: Total shrinkage stood at $42 billion. North America recorded the highest shrinkage rate in the world, although it has highest concentration of retail stores, however, this region also spends much less on ‘loss prevention’ than other regions… Other Report findings:

  • Shrinkage Across Store Types: U.S. discounters (2.78%), pharmacies/drugstores (2.16%), and supermarkets/grocery retailers (1.38%) witnessed the highest shrink rates owing to shoplifting, dishonest employee theft, organized retail crime… and together with a low-level of ‘loss prevention’ spend. Almost all types of retail stores in U.S. are affected by dishonest employees theft and shoplifting… The lowest shrink rates are in department stores (1.11%), home improvement and gardening stores (1.10%), and apparel specialist retailers (0.84%)…
  • Shrinkage Sources: In 2013–2014, dishonest employees theft was the major reason for shrinkage in U.S. The proportion of shrinkage attributed to dishonest employees theft increased to 42.9%. Dishonest and fraudulent employees were responsible for $18.01 billion (by value) of shrinkage. Shoplifting is the second-largest source of retail shrinkage in U.S. In 2013–2014, it accounted for 37.4% ($15.70 billion, up from 34% in the previous year… Finally, administrative and non-crime losses, including; accounting mistakes, poor budgeting practices, pricing errors, and process failures specific to inbound and outbound inventory control accounted for 10.8% ($4.53 billion), down from 26%, in 2012…
  • Most-Stolen Items: Shoplifters and dishonest employees primarily targeted items that were easy to conceal and resell in the market, resulting in increased pilferage of accessories. In 2013, shoplifters preferred to steal fashion and mobile accessories over fashion clothing and mobile handsets, respectively. Other frequently pilfered products included; power tools, wines, cosmetic products…

theft6 untitled

Is stealing becoming more acceptable in the workplace? Generally, when people think of theft or stealing they are referring to the act of physically taking property from someone else… In reality there are many ways that employees can steal from an organization; the basic definition of theft is the wrongful taking and carrying away of personal goods, property of another… However, the most common way for employees to steal is theft of ‘time’, and this includes; taking extra ‘time’ on breaks and lunches, using work ‘time’ for personal matters, simply wasting ‘time’ while at work, fraudulently changing ‘time’ sheets and expense reports…

According to Michelle Boykins; most often you think of workplace theft as someone snatching money from a person’s wallet or purse… It can just as easily be an employee stealing office supplies or committing identity theft. However to chagrin of many employers, the workers guilty of the most grandiose theft frequently turn out to be those deemed to be highly trustworthy… They are employees that are given access to most sensitive systems, information that allow them to commit major fraud…

Employees who are caught stealing or who confess to it– give some interesting reasons, e.g.; in many cases it wasn’t because of a real financial motivation but the company made it to easy to do so… Some employees says they saw management helping themselves to whatever they wanted, so they assumed it was an ‘ok’ for them… There are many ways that workers can steal from employers. Some common ways are, e.g.; taking cash from cash registers, or stealing customer information, or helping themselves to products, or copying digital assets belonging to the company, or cheating when filling in time sheet…

theft images0DXY533V

But does all this thievery represent a basic decline of honesty/morality in society? The almost-daily incidents of– business, government, law enforcement, celebrities, sports figures, church leaders… involved in questionable activities make it easier for ‘borderline’ employees to steal and to rationalize their actions… Also with significant growth of the part-time workforce it’s not uncommon to find that many workers have less loyalty to employers, hence they are more apt to take advantage of opportunities to steal…

But, no plan will eliminate business theft 100%: As the saying goes; ‘where there is a will, there is a way’. Business must send a strong signal to potential thieves that they are serious about security and loss prevention… business must show a deep commitment to prevent loss at every level with policies to prosecute theft where ever it occurs, and at all levels of management…

Controlling theft is important to profitability and business cannot afford to ignore it… Hence, review your ‘loss prevention’ procedures, policies, systems… you can save your business a lot of money and grief… Remember; ounce of prevention is much better than a pound of cure: Be prepared!