In the retail industry, also commonly referred to as internal theft, occurs when individuals steal from the company where they are currently employed. While other types of retail theft often garner more attention, employee theft typically causes the most damage to retailers on an annual basis, carrying the greatest financial loss and a substantial impact on the business.
In most situations, retail customers only have access to merchandise on the selling floor—which is protected by the sales team, loss prevention personnel, and various anti-theft systems and controls. Employees, however, have greater access to more systems, more products and more areas of the store than customers. They have access to merchandise in the stockrooms, receiving, or shipping areas where CCTV surveillance, EAS tags and other anti-theft devices may be less effective.
According to data from the U.S. Chamber of Commerce, 75 percent of employees have admitted stealing from their employers at least once, and 38 percent admit to stealing from employers at least twice. The FBI refers to employee theft as the fastest growing crime in the U.S., costing businesses about seven percent of their expected margins. The problem becomes so dire for some businesses hit with employee theft that about 33 percent are pushed into bankruptcy due to losses from theft or fraud.
Reports collated by Statistic Brain indicate that more than 28 percent of business losses ranged from $100,000 to $499,000, and 25 percent of losses exceeded $1 million. These figures are disturbing because they demonstrate that business losses due to employee theft are not trivial. The median value of cash or goods stolen was placed at $75,000.
In 2014 alone, more than 1.2 million shoplifters and wayward employees were caught in the act, according to a study conducted by Jack L. Hayes, a loss prevention and inventory shrinkage control consulting firm. More significantly, these numbers were generated from 25 big retailers, suggesting that the problem is more widespread and the losses more substantial if small to medium retailers were included in the mix. According to several studies, losses from employee theft outpaced losses from shoplifting.
Employee Theft Methods
Employee theft may be difficult to detect because the perpetrator is an insider familiar with the system. Additionally, these employees have access to the keys of the kingdom because of their positions and their reputation as dependable team players. These are a few of the methods commonly used to steal from the company.
Most employees are honest and hard-working people with honorable intentions. However, when employee theft issues occur, it can lead to significant concerns that can impact the store in many ways, reaching far beyond the financial losses caused to the company. It impacts retail sales. It impacts retail shrink. It impacts the company brand and reputation. It also impacts all the hard-working associates who give their best each day.