Employee Theft Poses A Unique Loss Prevention Challenge

Sweethearting: A Sour Pill To Swallow For Retailers

By Hilbert Dijkstra

July 8 2015

The National Retail Foundation recently released its 2014 National Retail Security Survey, which estimates that retailers lost about $44 billion in potential revenue due to shrinkage last year. While shoplifting and organized crime contributed the bulk of the losses, it is closely followed by employee theft at 34.5%.

The most common type of employee theft is a practice commonly known as "sweethearting" - which refers to an employee giving a customer unauthorized discounts or free merchandise or services.

But how big of a problem is it really?

Sweethearting Is Very Common

According to a study by Brady, Voorhees, & Brusco, which was published in the March 2012 issue of the Journal of Marketing, 67% of respondents admitted that they had participated in sweethearting in the past two months.

67% of respondents admitted that they had participated in sweethearting in the past two months

Brady, Voorhees, & Brusco

This practice is common in all kinds of service industries, such as restaurants, hotels, and car washes as well as retail stores. As their motivation for giving away free or discounted products or services, employees often cite the hope for receiving better tips or gaining some other benefits from their customers.

Employee Theft Poses A Unique Loss Prevention Challenge

Sweethearting poses numerous, difficult challenges to any retailer.

On one hand, it is a loss prevention problem. The customers and employees are aware of that fact and will keep quiet about it. That makes it very complicated for loss prevention professionals to find the cause of the shrinkage and eliminate it.

On the other hand, it has consequences on customer satisfaction, loyalty, and positive word-of-mouth as it inflates these scores by as much as 9%.  The client satisfaction and loyalty with this store are now tied to an employee the retailer would rather not employ.

What Can You Do To Discourage Sweethearting

Surveillance cameras and security guards checking receipts are no longer sufficient to prevent employee theft effectively. Since this problem creates a ripple effect through all areas of your organization, you can best tackle it on different fronts:

Sweethearting Conclusion

Sweethearting is a problem that cannot be ignored by any retailer or business owner. While modern loss prevention solutions can help alleviate the problem, pre-employment screenings, and thorough, ongoing audits are needed to reduce employee theft in the long-term.

Need an assessment of your theft level? Schedule a free, no-strings-attached security assessment with one of our loss prevention experts and learn how you can alleviate this and other security-related challenges.

Hilbert Dijkstra - Head of Product Management
Head of Product Management
Hilbert Dijkstra