Theft in Retail

Theft is the most prevalent form of shrinkage experienced by retailers on average globally. In Australia, theft costs retailers billions each year, and for most retailers that number is on the rise. Averaging between 1 and 3% of gross profit, theft can significantly impact the net profitability of retailers, particularly those working on slim margins.

Implement Procedures in the Case of Theft

If staff are to act appropriately when faced with a theft occurring, they must already know the doll-2590660_1920.jpg preferred action as set out in the store’s policies and procedures around theft. Supporting staff with adequate and accurate training on such situations allows them to take the required action with confidence rather than hesitating and doubting the appropriateness of their approach.

In the majority of cases internal theft is dealt with very differently to external theft. Often staff theft is only detected after extensive investigation into unknown causes of stock or cash loss, and is therefore dealt with by store management or specialist loss prevention staff. If a staff member suspects a colleague of theft in any form the best course of action is to guide them to report their suspicion to relevant management allowing them to take further action as prescribed by the relevant policies and procedures.

Confronting Shoplifters

No merchandise is worth risking the safety or security of staff or customers – don’t be a hero.

1. Before Confronting a Suspect:

  • To establish probable cause that a theft has taken place there are 5 things you must be certain of otherwise you may be falsely accusing someone of theft which can result in charges against you and your store.
      1. Did you see the shoplifter approach the merchandise – establishes you watched the entire act
      2. Did you see the shoplifter select the merchandise – clearly merchandise from your store
      3. Did you see the shoplifter conceal the merchandise – where are they concealing it
      4. Did you maintain continuous observation of the act – if not you may have missed something
      5. Can you prove the merchandise wasn’t paid for

2. Confronting a Suspect

  • Approaching a shoplifter is not a role for entry level staff, only store management and specialist loss prevention staff should do so
  • Your action depends upon whether your policy is to prosecute or not, if so contact police before you approach the offender and then:
  1. Wait until the suspect has left the store – it establishes they have left the store without paying
  2. Confront them with at least one colleague ensuring a witness is present
  3. Ask the suspect to return to the store- be polite and first ask if they forgot to pay for the concealed item and ask them to return to the store to do so
  4. Don’t accuse them
  5. Don’t make physical contact with them
  6. Don’t stay or even insinuate that you are trying to detain them

3. Know Your Rights

  • Be very familiar with the relevant state laws particularly whether you have a right to temporarily detain shoplifters when trying to recover stolen merchandise.

4. Gather Information

  • If the suspect agrees to return to the store ask them for identification and complete a written report to help determine whether or not the case should be prosecuted (be sure to check your rights to do so under local state law first)
  • If possible try to get the suspect’s statement in writing with their signature if possible
  • Then ask them to return the stolen merchandise
  • When police arrive, turn the matter over to them and all them to take over

5. Deciding Whether to Prosecute

  • Most Loss Prevention experts agree you should prosecute shoplifters. This makes it known that your store does not tolerate shoplifting, which is a great prevention tactic. It also sends a message to employees that shoplifting is treated as a crime, whether from external or internal sources.
  • The National Association for Shoplifting Prevention asserts the most important factor in determining if a person will shoplift again is the experience they had the time before. Not prosecuting can bring repeat offenders back to steal from you again.
  • When the suspect is a younger child, an elderly person or someone who is mentally challenged or disabled doubt can exist whether or not the suspect really knows what they were doing and many retailers would rather release the shoplifter to a family member.

blouse-2597205_1920.jpg Detect and Prevent Internal Theft

In recent figures internal theft is the cause of over 40% of shrinkage costs borne by Australian retailers.

Internal theft tends to be more sophisticated, has a greater financial impact per incident, and is more difficult to detect than external theft. Retailers with high turnover rates and a high percentage of casual staff tend to have the greatest rates of employee theft


The best way to prevent internal theft is to recruit and treat staff as well as possible.

Staff may steal for a variety of reasons the majority of which fall under the following three categories:

  1. Need: To support family or lifestyle
  2. Revenge: Bitterness about their situation or anger toward management, often emotionally driven.
  3. Thrills: The adrenaline rush brought on by the risk of getting caught (often there is no financial need to steal).

Recruitment is always a key element of ensuring a loyal and valuable workforce. If retailers recruit staff with a history of theft because they have not taken the time to interview comprehensively or do reference checks, they have no one to blame but themselves. Equally if they employ people that are not a strong cultural fit, loyalty is unlikely to impact a motivation to steal.

Treating staff well can help to mitigate some of the most common theft motivations. Treating staff with respect, consideration and trust can at a very human level reduce the likelihood of revenge as a motivation whilst increasing the likelihood of staff feeling guilty at the thought of taking advantage of an employer who trusts them.

The following recommendations can help retailers create a culture and climate that acts as a deterrent for internal theft:

  • Create a positive work environment:

Encourage employees to follow established policies and procedures and act in the best interests of the organisation. Fair employment practices, written job descriptions, clear organisational structure, comprehensive policies and procedures, open lines of communication between management and employees, and positive recognition.

  • Implement internal controls:

Ensure the effectiveness and efficiencies of operations, compliance with laws and regulations, safeguarding of assets, and accurate financial reporting i.e. no employee should be responsible for both recording and processing a transaction, access to financial assets and information should be restricted to authorised employees, transaction authorisation should be controlled.

  • Integrate Technology:

Good loss management systems reduce the opportunities for theft to occur and act to deter theft because employees are aware of them. Use of cameras and digital video at point of sale are effective as much for their existence as their ability to record data.

  • Hire Honest People:

This is the goal of every company and can be done through appropriate pre-employment background checks that look for criminal history involving violence, theft, and fraud; civil history involving collections, restraining orders, and fraud; education and employment verification of positions, length of employment, and reasons for leaving.

  • Educate Staff: Inform your employees about policies and procedures related to fraud, the internal controls in place to prevent fraud, the organisation’s code of conduct and ethics policies, and how violations of these policies will be disciplined.
  • Implement an Anonymous Reporting System: Provide a confidential reporting system for employees, vendors, and customers to anonymously report any violations of policies and procedures. Promote and encourage the use of the reporting system whenever possible.
  • Perform Irregular Audits: Random, unannounced financial audits and fraud assessments can help identify new vulnerabilities, and measure the effectiveness of existing controls. It also lets employees know that fraud prevention is a high priority for the organisation.
  • Observe: Focus on the key areas of desirability and opportunity i.e. cash, high value goods and transferable goods. Follow up with employees who report witnessing illegal or unethical behaviours by fellow employees. Use internal theft prevention technology can be very effective, especially if employees realise that it is constantly being monitored. Monitoring and auditing inventory levels frequently to keep track of inventory loss will ensure knowledge of the current situation.
  • Investigate Every Incident: A thorough and prompt investigation of policy and procedure violations, allegations of fraud, or warning signs of fraud will give you the facts you need to make informed decisions and reduce losses.
  • Lead by Example:

Senior management and business owners set the example for the organisations employees. A cavalier attitude toward rules and regulations by management will soon be reflected in the attitude of employees.

  • Improve Transparency: In order to establish an effective loss management system, managers need to better understand the problem of employee theft and its potential impact upon the business. The sooner the issues is out in the open the sooner it can be effectively addressed.

Prevention is the optimum method of addressing employee theft yet in many cases it still occurs. When theft does occur retailers need to know how to detect it.


As technology becomes more sophisticated so do that ways in which retail employees steal from their employers. Some people will never steal, others will take every opportunity but generally people will not steal unless the following elements are present:

  1. Attitude: a predisposition or ability to rationalise dishonest behaviour
  2. Pressure: internal or external forces working on the individual that might influence them
  3. Opportunity: attractive conditions that allow the theft to take place

Retailers can hope to recruit against the first two elements although it may be beyond their control. The biggest impact they can have is over opportunity and it is where most energy should be expended in attempts to detect theft.

Point of sale commonly provides the best opportunity for employee theft. Some of the most frequently occurring that retailers can learn to look out for includes:

  • Under ringing: The cashier rings an item at less than its listed price, collects the full amount and pockets the extra.
  • Sweet Hearting: Cashiers giving away free merchandise or discounts to family and friends without authorisation.
  • Refunds: Cashier rings up a false refund and pockets the cash causing the theft to appear as inventory loss (also commonly refunded to a gift card for later sale on eBay)
  • Voids: Cashiers rings up an item as a voided sale and pockets the cash (only possible where a cashier has kept a valid customer receipt)
  • Discounts: Cashiers ring up an item at staff discount for family and friends unauthorised

How can retail managers improve their ability to detect point of sale theft? Look for suspicious activity of individual staff and use the available technology to help.

Red Flags:

  • Frequent cash shortages or overages
    • Frequent recording of high number of voids, refunds or no sales
    • A spike in inventory losses
    • An unexplained drop in average sales
    • Customer complaints about not receiving receipts
    • Receipts found in bin

If doubt arises as to the honesty of staff and there is cause for concern reflected in the highlighting of red flags it is time to dig deeper. Generating exception reports for each employee, reviewing protocols for refund and void approval, tracking doubtful transactions through the use of available surveillance footage and video analytics systems can all help to isolate incidents of theft.

As always adhering to the requirements of state laws and internal policies and procedures as essential in the case of internal theft as external theft.

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