While the lousy economy of the past two years certainly hit retailers hard in the form of slow business, many stores had another problem to contend with as well: Increased theft. 2009 created "the perfect storm in retail theft," according to Derek Rodner, vice president of product strategy at Agilence, a maker of retail loss prevention products.
"The economy wasn't doing well, and because business took a hit, retailers stopped spending on new projects and on any unnecessary expenditures—and a lot had to lay off non-essential employees."
Also see retail fraud -- investigative tactics and strategies for practical tests of retail employee honesty and service quality, plus a sample "shopping investigation form"
That meant putting enough eyes in the store to prevent shrink became more difficult. These factors, coupled with many out-of work and desperate people turning to theft for profit, caused worldwide shrink to rise to $114.8 billion dollars in 2009, a $10 billion dollar increase since 2008, according to the Global Retail Theft Barometer.
"Theft is always a problem, but became exacerbated in this climate," said Rodner.
But retail theft has changed in the last few years. Smash and grabs or hiding stolen items in a bag are no longer the most common ways con artists rip off retailers. Now a fair amount of shrink comes from internal fraud, as well as organized retail crime. Rodner laid out the most common ways tech-savvy criminals are getting away with goods today.
Web sites like Grocerygame.com are hugely popular with shoppers. Sites like this allow people to find coupons and big sales and then time their purchases so they make off with huge savings. But the popularity of online coupons has also spawned an explosion of counterfeit discounts, too, according to Rodner.
More on retail theft and loss prevention
- Organized crime and retail theft: Facts and myths
- Report: Global theft decreases in 2010
- Retail security: Critical issues
While you may be thinking a few cents here and there sounds like no big deal, fake coupons are a huge problem for grocery stores, where the profit margin is very small—usually only between one and two percent annually. Rodner referenced one client who lost over $150,000 in just a few days thanks to one counterfeit coupon.
"With that slim of a profit margin, anything that causes loss to the company has dramatic impact to the bottom line," said Rodner.
Self check-out lines have become common in grocery chains and even in some drug and department stores. While research finds a fear of making a mistake causes most people to try and be MORE honest using self checkout, their good intentions make it easy to steal for thieves.
"The self checkout has got this weird dynamic going for it," said Rodner. "Overall shrink is lower at those checkouts. But the employees that monitor the self-checkout lines are so used to the machine hanging up, it's become like a car alarm; no one thinks much of it."
As a result, managers monitoring two or three self-checkout lines sit at a podium and tend to allow an item to go through, even if the machine doesn't let it. This lack of concern works to a thief's advantage.
Read more about security at the point of sale on CSOonline.com
Self-checkout is relatively new; sweethearting is as old as retail itself, although the techniques have been updated for the barcode era. For example, a customer goes through the checkout line with an expensive bag of shrimp, and the person running the register (a friend of the con) runs through a bar code for a much less costly item.
"Or instead of ringing up all of the items, they pass them around the scanner and give them to you for free," explained Rodner. "Another way this is done is if the cashier tapes the barcode for pack of gum to their hand. They then appear to being scanning filet mignon, but their thumb is put over the bottom of the meat and the gum SKU scans instead. You've just purchased $15 in meat for 25 cents."
Building a bank (in the register)
Crooked cashiers often take advantage of items that are sold at even, or almost even, dollar amounts to pull off this technique. Rodner used a pack of cigarettes as an example. In New York, they currently cost almost ten dollars a pack&frequently $9.99.
"Usually the customer will lay out the ten dollars for the cigarettes and then they don't wait around for their penny in change. The cashier then takes the ten bucks, and voids the order when the customer walks out."
A common way for a cashier to make lots of money with this trick is to put money in the drawer, even if they void the transaction, and then keep track of what they are banking during a shift. At the end, they then pull out the stolen money when their shift is over.
Refund fraud occurs in department stores frequently and has been made more lucrative with the increased popularity and availability of gift cards.
"A sales associate gets a dress for $100 off the rack, processes the refund for $100 and then puts the money on a gift card."
Because the refund can be put on a gift card, it is basically untraceable. And while it is not cash, it becomes a form of money in the pocket nonetheless.