Goodnight sweetheart

The term ‘sweet hearting' sounds quaint and romantic until you place it within the modern context of employee theft - a substantial growth area in retail crime that, according to the latest European Retail Theft Barometer, currently accounts for more than 50% of all shrinkage.

‘Sweet hearting', then, represents more than a stolen kiss. Rather, it refers to millions of pounds of missing stock processed through the tills via dishonest staff working in collusion with colleagues to receive stolen goods as a result of two or more items passing across the Electronic Point of Sale (EPoS) scanner, but with only one being paid for. It's a sort of unofficial ‘Buy One, Get One Free' policy, if you like.

It is high time retailers stood against these miscreants who betray their trust and abuse their position to line their own pockets. The monetary values involved range from between 10 and 20 times those of items stolen by customers. However, the good news is that because this crime occurs at the EPoS, modern technology is now more able to detect it - whether it is in the form of ‘sweet hearting', refund fraud or straightforward till dipping.

Let's step back for a moment, however. Although technology provides part of the solution to staff theft, it needs to work in collaboration with a wider business culture that is totally intolerant towards that theft. Technological solutions cannot work in a vacuum. Rather, they must operate alongside a culture of zero tolerance that is consistently applied and permeates the entire organisation such that employee dishonesty literally has no place to hide.

Technology should be seen as the catalyst for creating a company culture in your retail organisation that despises internal theft. Once this is stamped across every facet of the firm, it may then be accompanied by a host of tactics that enforce the culture at staff level.

For example, staff theft is most often noticed by the honest members of the workforce. Businesses can therefore set up a ‘whistle-blowing' Hotline so that those who abuse their position may be reported immediately and anonymously. This tactic can be incentivised to offer rewards. After all, staff theft ultimately affects the profitability and jobs of EVERY member of the team.

Encourage the whistle-blowers

Whistle-blowing policies should be aimed at all members of staff - from those part-time workers who steal the odd pound or two here and there through to lifetime offenders that may well have fleeced the company to the tune of thousands. The consequences will be the same. In turn, the message must be passed down to staff through both formal and informal channels of communication. It's rather like a form of induction indoctrination that includes the provision of a ‘Name and Shame' policy (as far as it is legal to do so).

Like the Honda diesel engine advertisement, sometimes you have to literally hate something to change that something and, after a conviction is secured, it is then open season as far as identifying the offenders is concerned.

At this juncture, it is highly important to stress the fact that the issue should not rest with the loss prevention specialist or retail security manager sacking the employee(s) concerned. The police may not wish to take the matter of staff theft any further, but retailers should also - and always - insist upon recovering the value of the theft (and the cost of any subsequent investigation) through the national Civil Recovery Programme. That is particularly true when thousands of pounds worth of goods or cash has been taken and significant resources deployed to investigate the crime. Again, this sends out a message that internal thieves have nowhere to hide.

Margin pressures are increasing from all directions, and in a downturn like that experienced last September most retailers have already driven costs right through the floor. Of itself, this can - and very often does - add to the shrinkage problem. Perhaps that's why they're now doing something about it.

How to tackle shrinkage

‘Black September 2005' witnessed the worst sales performances in recent retail history. Sluggish footfall was caused by a number of factors, but it would be crude - no pun intended! - to blame all of the High Street's problems on the global price of oil. Shrinkage - best defined as the loss of goods caused by theft, fraud and basic errors - has always been a major contributor to poor High Street results. Without doubt, tackling it must become the retailer's priority in the short and longer terms.

How to do so, then? The approach should not be of the knee-jerk variety, more a root-and-branch ‘assault' on making sure that shrinkage is taken seriously in the organisation from top to bottom. Investing in a range of recognised solutions - including data mining, management information systems, Electronic Article Surveillance (EAS) tagging and CCTV - can make a real difference.

Although technology provides part of the solution to staff theft, it needs to work in collaboration with a wider business culture that is totally intolerant towards that theft. Technological solutions cannot work in a vacuum

In general, retailers will always prefer a no-nonsense approach to shrinkage (particularly in those cases where they already have the solution to a problem that is costing them millions of pounds every year right under their own noses). Aside from highlighting a worrying increase in internal theft, the latest European Retail Theft Barometer suggests that one of the reasons for increased shrinkage is that companies are not sharing strategic shrinkage information with key stakeholders.

Packaging shrinkage data in the right way renders the reality visible right across the organisation, from loss prevention and store managers through to central finance, the Human Resources Department and main suppliers. This is nothing less than essential because shrinkage isn't the sole preserve of one department. It is everyone's problem, and it's only by working together that strategies may be put in place for its successful reduction.

In turn, those strategies will not bear fruit until you possess the ability to measure shrinkage in a way that is meaningful to the whole company. Management systems are now available that present a total picture of shrinkage on a region-by-region basis, store-by-store. They'll also factor-in key personnel and technology already in operation.

It's a bit like pressing the interactive red button on the TV when we're watching Sky's live coverage of West Ham United beating Fulham. Retail security managers may now access all sorts of information that enhances their understanding of individual and team performances as and when desired.

Boots: setting the trends

As one of the biggest High Street brands, Boots is continuing to set the trends and innovate, having recently invested in a new web-based management tool that provides shrink management information across its entire estate of 1,400 stores via the Intranet.

The Shrink Information Database has been custom-designed to provide crucial data on key areas of the business, including loss prevention, logistics, personnel information and store operations.

Importantly, all of that data is located in one place, assisting access to - and navigation around - the system by means of easy-to-use, interactive software tools.

In essence, the system has replaced the manual records once held by the health and beauty retailer to try and keep track of loss through shop theft, administrative glitches and ‘sweet hearting'. It delivers reports to Boots' head of loss prevention Robert Jennings and his team both on-screen and in hard copy, employing tables, graphs and charts in tracking shrinkage nationally, regionally and by individual store.

The system also factors-in individual and influential details about a given store's performance, including the names of the store management team and the types and quantity of security equipment at each location (thus offering a true picture of performance ‘in the round'). By making this information available, it shows the entire business the extent of the problem and the contributing factors to its existence. Users access the data remotely via Boots' own Intranet, and can then share it with individual suppliers and store managers.

"Historically, our fight against shrink was always restricted by limited central access to key performance data," asserts Jennings. "We recognised that we needed to establish what we were up against. We liked the fact that the system chosen immediately made our lives easier by informing central departments of the pressure points, and that we can now benchmark store performance. The Shrink Information Database is intuitive, and requires little end user training. It was designed by retailers, which means that it produces data in a format that's easily understood by the team."

Boots initially took the core modules of the Shrink Information Database's shrink results, asset management and employee tracking, subsequently integrating this system with its own SAP Human Resources function to measure manager tracking directly against shrinkage. Final presentation of results has since been configured with the help of Robert Jennings' main IT suppliers - Xansa and IBM.

Of late, new modules have been added which share information on stock write-offs, cash shortages, ‘shrink school' results and incident reporting. There is now also a module delivering case management for fraud, although access to this area is necessarily restricted to members of Jennings' loss prevention team.

The police may not wish to take the matter of staff theft any further, but retailers should also – and always – insist upon recovering the value of the theft (and the cost of any subsequent investigation) through the national Civil Recovery Programme

"The system has saved us a great deal of time right across the business," adds Jennings, "because managers no longer have to manually harvest shrinkage information. It's there at the click of a button. Those time savings are so important, transforming the way in which store managers can react to, and therefore reduce shrinkage in their own environment."

Is shrink the new growth?

Currently the third largest female fashion retailer in the UK and now looking to expand into the menswear market, New Look is fast become one of the ‘retailers of choice' for quality clothing and accessories, primarily targeting teens through to the thirty and forty-something's markets.

Just now, the company is taking a fresh look at itself as part of an overall strategic review aimed at re-positioning the brand as the leading player in the high fashion, high value end of the retail market. That ‘fresh eyes' approach involves a root-and-branch review building upon the ‘New' image that has been harnessed by way of the powerful, external ‘The New Now' marketing message running through its 535 UK stores.

While New Look is aiming to grow its business by winning fashionable hearts and minds with strap lines like ‘Noir is the new Black', it is also bringing a new meaning to the internal battle to protect profits through controlling theft, waste and damage with its internal strap line ‘Shrink is the new growth'. This is an important message, not just for the internal loss prevention team but for the business as a whole if the brand shift strategy has any hope of being sustained. The idea is that the company's 12,000 members of staff will act as the ‘agents of change'.

The task is being driven from the very top of the business by chief executive Phil Wrigley, who recently appointed Stuart Green as New Look's head of audit and loss prevention. Since then, Green and his team of eight regional profit protection managers have set about the task of understanding and measuring shrink and its causes, with the overriding aim of driving it out of the business altogether.

Green's remit is to control both customer theft and internal fraud, an issue that he describes as one requiring constant scrutiny. "During periods of sustained growth, retailers' shrinkage is susceptible to dropping out of focus," he suggests. "My job is really to keep it ‘front of mind' right across the business. It's a bit of a Catch 22 situation, really. As our products have become more desirable for customers, so they have also been rendered more attractive to thieves both from outside the business and within."

Case management: cost-effective

To this end, Green has deployed a sophisticated, web-enabled case management tool which will help him and his team track instances of internal fraud from the point of reporting, through the investigation procedure and on to case closure in terms of a prosecution and/or a successful civil recovery.

The system is designed to provide timely mapping and closure of fraud investigations. It also measures return on investment for investigators and fraud detection systems, capturing and recording the weaker business processes such that Green can act and avoid any repetition of this in the future.

"Loss prevention managers who employ systems of this nature must ensure that they are fully-compliant with the Regulation of Investigatory Powers Act (RIPA) 2000, which ensures that security teams are not invading civil liberties by using ultra-vires procedures to build their cases," insists Green.

For New Look at least, case management is proving to be a cost-efficient and effective solution for managing the investigation team. It helps Green make the rest of the business more aware of the issues at stake. Staff now realise that fraud has become a top priority for the business. In other words, case management is of itself a preventative measure leading to shrink reduction.