Inventory shrinkage is a problem for any retail operation, be it an upstart or a Wal-mart.  Lazy bookkeeping can be to blame, but more often it’s because some people in your store—customers or employees—have been invoking the well-known “five-finger discount.”  The following are some simple steps to make sure your shelves match your receipts.

Make Shoplifters Think Twice

Short of barring certain movie stars from your store, there are numerous steps a retailer can take to create an environment that´s unattractive to shoplifters—without alienating the honest customers who pay your bills.

• Have someone on the sales floor at least 80 percent of the day.   
• Train employees to greet every customer who enters their department. 
• Make frequent eye contact with customers who choose to browse on their own.
• Create zones for staff coverage and make sure someone is always in vulnerable areas.
• Train employees on the floor to look for open showcases, loose price tickets and/or price guns, merchandise concealed for later pickup, unpaid-for merchandise under wrap desks, employees bags or backpacks under counters or empty packages on the floor.
• Lower the height of cash register displays and maintain clear sightlines from the cashier to the sales floor.  Use mirrors and bright lighting to keep back corners in view.

Keep Employees Honest

Even the best employees can be tempted to help themselves to a freebie now and then.  It is management’s challenge to remove that temptation without creating a “lock-down” environment that’s destructive to employee relations.

• Authorize refunds only when the customer is present. 
• Be behind the counter to authorize a void or overring, making sure to watch for potential trouble, such as bagged merchandise that could be handed off to someone, money not in the correct slot in the till or too much in the cash drawer.
• Inspect the outside dumpster randomly, at least once a week.
• Don’t allow employees to ring-up or wrap their own purchases; have management authorize all employee purchases.
• Never allow employees to leave the cash drawer open between sales.
• Provide employees with shelves or lockers to stow personal belongings.  Don’t allow bags or backpacks on the sales floor.
• Require that the receipt always be given to the customer; have employees tear up all receipts left behind.
• Change the door-locks when employees with key access resign or are terminated.
• Coach employees on how to say “No” when friends or relatives ask for free merchandise or discounts.
• Explain why employee theft hurts everyone by creating an atmosphere of distrust, necessitating more intrusive security measures and by affecting the company’s profitability, and thereby, their paychecks.
• Train employees to know what they should report and how to report it.  Reassure them they are doing the right thing.

Make it a Team Effort

Your employees’ attitude about their workplace will depend largely upon whether they feel they are being treated fairly by management. 

• Treat your employees as well as your customers.  The person with the wallet may always be right, but that doesn’t make employees wrong by default.
• Keep employees involved in the success of their department and store.  Profit sharing, bonuses (no matter how small) or gift certificates can go a long way toward giving employees a sense of ownership and pride in the business.
• Reduce Stress.  Threats, criticism or unreasonable workloads will not help your business.  Disgruntled employees look for ways to strike back.
• Work with employees on how to respond to a shoplifting situation in a manner that won’t make them feel at risk.
• Acknowledge employees for doing things right, rather than just catching them doing something wrong.

The information for this article was provided by The Peter Berlin Report on Shrinkage Control—Store Manager’s Edition.  The Peter Berlin Retail Consulting Group Inc., 380 N. Broadway, Jericho, NY 11753.  Telephone: 516-932-0450

For an update on how toy-store owners prevent theft, read Retailing Tips: Minimizing Theft.

Writer's Bio: Tim Connolly has a degree in film production from the University of Texas at Austin and writes screenplays when he isn’t test-driving remote control speedboats in his bathtub. Read more articles by this author