July 15 2021
The 2020 National Retail Security Survey shows that shrink costs the retail industry $61.7 billion in 2019, an extremely high amount. This is in contrast with stores and brands stating they focused more on fighting shrink that year. The majority of respondents indicated that different forms of theft and fraud are priorities.
A focus area for fashion and lifestyle retailers is internal theft (also known as employee theft), 20.3% of the respondents indicated that reducing employee theft is a very big priority. 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. For instance, an employee scans only three out of five items but removes the security tags from all five items. This way, the customer can walk out without activating any alarms.
But how big of a problem is sweethearting really?
Sweethearting Is Very Common
According to a study by Brady, Voorhees, & Brusco, 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, car washes as well as retail stores. As their motivation for giving away free or discounted products or services, employees often cite the hope of 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 to 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:
- Educate your entire organization. Most of the time, the frontline workers are not aware of the severity of the consequences for their employer. Every single employee must know that sweethearting is prohibited, and there are clear standard operating procedures in place for giving discounts or "freebies". Make sure your workers understand the consequences to your bottom line as well as to their career should they not act appropriately.
- Be aware during the interview and monthly or annual review meetings. There is a variety of social and environmental factors as well as personal traits that suppress or encourage sweethearting - be conscious of these. For example, you could include a thorough screening of your potential employees’ ethical standards, their need to be accepted socially, and their comfort with taking risks to detect possible culprits before you hire them.
- Use RFID technology. With RFID, every item has its own unique code embedded in the RFID tag. During checkout, the RFID tags of the items that are paid for are automatically deactivated – they will not generate alarms anymore. If an employee only scans one out of four items, the tag of this scanned item will read “sold”, while the rest of the items will be registered as “unsold”. These “unsold” items will generate alarms when the customer walks out and passes the RFID EAS systems.
Sweethearting Conclusion
Sweethearting is a problem that cannot be ignored by any retailer or a business owner. Modern loss prevention solutions, like RFID, allows you to focus on the events that matter most.
Starting with RFID in your Loss Prevention strategy is easier than you think. Within only three months, you will be able to identify, quantify, and ultimately prevent losses within your stores. Want to know how? Schedule a demo here.
Originally published on July 8th, 2015, updated on July 15th 2021.
Head of Product Management
Hilbert Dijkstra
