Leveraging Technology to Prevent Internal Shrink

By Steve Morefield

Retailers lose billions of dollars every year—$44 billion in 2014, in fact—to various forms of inventory shrink. Employee/internal theft accounted for 34.5 percent of the loss, according to the 2015 National Retail Security Survey, just a bit behind shoplifting, which logged in at 38 percent.

Internal theft is probably the most difficult loss to comprehend, however, because it involves employees, not just strangers who are acting on greed or opportunity.

Fortunately, savvy retailers and their integrator partners are now using technology to combat the various forms of internal shrink, giving workers notice that businesses can neither tolerate nor afford theft from within.

Cameras, of course, serve as both deterrent and identifier of shrink situations. Just having visible cameras off the store floor may be enough to make an employee think twice about taking an item knowing that they may be under surveillance.

There are several key areas that should be covered by video surveillance, starting with the back door.

The rolling doors on receiving docks and the back doors where merchandise comes in are prime spots for keeping an eye out for questionable activities via cameras. We’ve all heard of situations where merchandise has “fallen off the truck” and never makes it into the store. Likewise, someone on the inside can easily pass off product to an accomplice who happens to be hanging around the alley or parks near the loading dock.

In tandem with this would be an access control system that monitors door activity. The access system can send alerts to security personnel or store management when a door is propped open or is used at suspicious times, such as before or after regular store hours.

Cameras in the break room or stockroom will also deter shrink. In the break room, employees are likely to take merchandise off the store floor and stash it with their personal gear such as a purse or backpack.

Another form of internal shrink occurs at the register, when an employee provides an accomplice with an unwarranted discount or a refund for merchandise that was never purchased. By linking surveillance video with the point-of-sale system, stores can look closely at red-flagged transactions to see what actually occurred and then act accordingly. The same is true with monitoring “no sale” transactions, which allow the worker to open the cash drawer even without a sale being made.

Retailers will also want to add extra layers of protection for high-value merchandise such as electronics and jewelry. Cabinets with electronic locks that are also watched by surveillance cameras can signal when a cabinet is accessed and by whom. Then stores will have a record of what occurred and when and can use the video to see if what was removed jives with sales records.

It’s not realistic to think that all employee actions can be monitored throughout their working day, but having the right surveillance and access control tools in place will make identifying problems—and problem people—much easier down the line.