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.
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:
- 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 to these. For example, you could include thorough screening of your potential employees’ ethical standards, their need to be accepted socially and his or her comfort with taking risks to detect possible culprits before you hire them.
- Access control to sensitive areas. Another way to prevent employee theft is to remotely and accurately control your worker’s access to storage or warehouse facilities or other sensitive areas based on their role or the time of the day.
- IAS at employee exit. There are certain store layouts that have a specific employee exit and entrance. It acts both as a deterrent and loss prevention solution to place pedestals at these entry and exit points. A retailer will have the same advantages as from a pedestal at the customer entrance.
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.