Retailing

Stopping Theft in its Tracks: 14+ Strategies for Independent Retailers

Lauren Mathews
Cover Image for Stopping Theft in its Tracks: 14+ Strategies for Independent Retailers

Losing merchandise or money can feel like a punch to the gut. Unfortunately, it’s an all-too-common experience. The National Retail Federation found that retail shrink generated $94.4 billion in losses in 2021—up from $90.8 billion in 2020. 

For independent retailers, protecting your business is critical. In this article, we’ll explore why loss prevention is worth the investment and provide best practices for reducing and preventing theft.

Why loss prevention matters

Loss prevention refers to the strategies retailers use to prevent theft, fraud, and other financial losses. A shopper, employee, or vendor can cause these losses.

Effective loss prevention not only protects earnings—it also ensures a safe environment for employees and customers. Here are some reasons to invest in loss prevention.

  • Protect your bottom line
  • Identify and address potential loss sources before they occur
  • Minimize the impact of losses if they do occur
  • Insurance policies may require loss prevention measures to qualify for coverage.
  • Implementing loss prevention techniques can make employees feel safer and boost morale.

Safeguarding your business: Strategies to prevent theft and fraud

Unfortunately, theft and fraud affect businesses of all sizes. In this section, we’ll discuss strategies for avoiding being taken advantage of by customers, employees, and vendors.

6 ways to protect your business from shoplifters 

According to the National Retail Federation (NRF), external theft is the biggest source of retail shrink. Here are six ways to reduce and prevent shoplifting.

1. Keep stores organized

It’s easy for stores to get jumbled throughout the day—especially as customers browse through sizes and colors. But a disorganized store is attractive to shoplifters. Businesses may not realize items are missing until too late.

2. Optimize your store layout

Your store layout and merchandising techniques can serve as a prevention tool. Here are some ideas for you to consider:

  • Place the cash wrap near the entrance. This allows employees to monitor customers as they enter and exit the store.
  • Place products away from entryways and exits.
  • Implement a one-way traffic flow to reduce contact between customers.
  • Reduce blind spots. Use mirrors if there is a low-visibility area.
  • Place at-risk items near cash wraps or in locked cabinets.
  • Place cameras around the store.

3. Implement a fitting room policy

Fitting rooms are a common target for shoplifters. Having a clear fitting room policy can help reduce thefts in the area. 

  • Lock the fitting rooms. Customers should ask an employee for access to the fitting room.
  • Limit how many items customers can bring into the fitting room.
  • Limit small accessories (e.g., jewelry or wallets) in the fitting room. Create a dedicated space for shoppers to place those items while they try on clothes.
  • Designate a fitting room attendant. This will improve customer service and ensure that staff is visible to customers.

4. Implement inventory tracking

Inventory tracking systems—such as RFID or EAS—use physical tags to prevent shoplifting. These systems require employees to remove sensors during checkout. While these systems can be expensive and require additional resources, they can prevent loss or alert owners in real time. 

5. Use customer service as a prevention tactic

Implementing best practices for customer service not only increases sales—but also prevents shoplifting. “If the customer thinks you are watching, they will not steal,” said Elliot Djmal—Co-CEO and COO of Material Retail—on a recent episode of the Material Retail Dumps podcast.

Here are some ideas to get started:

  • Greet customers when they enter the store.
  • Maintain adequate staffing levels. Additional employees will increase visibility throughout the store.
  • Check in with customers to see if they need assistance.

6. Set clear return and refund policies

Unfortunately, shoplifting isn’t the only scam customers commit. Research shows that 10.3% of returns are fraudulent.

To reduce fraudulent returns, set a clear return policy. The policy should include a clear return window and require a receipt. Post the policy in your store and on your website. You can also include it with online orders or use social media to remind customers.

In the podcast episode referenced above, Djmal recommends making a list of customers who return items frequently or ask for refunds. “Mistakes happen. Packages get lost. But it’s very rare that these things happen to the same customers more than once,” he says.

5 ways to prevent employee theft 

Employee theft includes stealing merchandise, supplies, money, or data. Data from the NRF also shows that internal theft accounts for 28.5% of retail losses. 

Here are five things you can do to prevent or minimize employee theft.

1. Set clear policies and procedures 

Clear procedures can reduce financial mistakes or opportunities for employee theft. “Your employees need to know exactly what you are and are not willing to do. And it needs to be written down, and everyone needs to know it,” says Djmal in episode 27—titled Don’t Get Taken Advantage of By Employees.  

Refrain from leaving discounts, refunds, or returns up to employees. Instead, define clear policies so employees know what to do at every stage. 

2. Create an anti-theft policy

Develop an anti-theft policy and have employees sign it as part of the onboarding process. The policy should also include how employees should report suspected theft incidents.

An anti-theft policy lets employees know you have loss prevention strategies in place. Setting expectations upfront can prevent theft and help employees feel safer.

3. Invest in the right point-of-sale (POS) system

Choose a POS system that allows you to set permissions and security levels for your employees (e.g., only managers can process returns). Your POS should also allow you to set individual logins for each employee.

An effective POS system should also handle inventory management. This will allow you to detect anything out of the ordinary quickly—such as an increase in damaged goods or a sudden drop in sales.

4. Maintain adequate staffing levels

Adequate staffing also deters employee theft. With more staff members on duty, it’s less likely that stealing will go unnoticed.

5. Conduct regular audits 

Regular audits can also help you catch discrepancies early—such as differences in recorded and actual inventory levels. Business owners should also count cash drawers at the start and end of each day.

3 ways to reduce loss from vendors 

Vendor management is an inevitable aspect of running a retail business. Unfortunately, poor vendor management can also lead to financial losses. “Vendors are businesses trying to make money on your business,” says Djmal in episode 28—Don’t Get Taken Advantage of by Vendors. “You need to be careful.”

Here are three strategies to prevent being taken advantage of by vendors. 

  1. Centralize vendor information: Choose an inventory management system that tracks vendor information and purchase orders. This will allow you to monitor vendor performance in a standardized format.
  1.  Streamline invoicing: When working with vendors, establish a preferred invoicing method. Identify what information you need from vendors and make sure vendors mark payment terms on invoices. 

Business owners should also establish a consistent accounts payable procedure to avoid late payments.

  1. Use digital payments: With encryption and security features, digital payments protect you from fraud. They also allow you to audit your payments for mistakes. 

Complete a regular review of your credit card statements for discrepancies, including:

  • Unauthorized charges
  • Getting charged twice
  • Increases to utility bills, credit card processing fees, or subscriptions
  • Identify the services you don’t use

The value of loss prevention 

Loss prevention is an essential part of running a small business. Unfortunately, there will always be bad actors. But with the right strategies in place, business owners can reduce financial losses and create a safer environment for customers and staff. 

What other steps do you take to reduce or prevent theft? Let us know at editor@materialretail.com!

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