Lately, we’ve been writing about some of the most common types of employee theft, as a part of our loss prevention education series, and our tips on how to identify and solve these issues. Sweethearting ranks on the top 5 list of common employee theft practices. Sweethearting is the term used when an employee gives away merchandise without charging another party. Usually involving merchandise that they’re not authorized to give away.
The term "sweetheart" characterizes the person that the employee is giving the free merchandise to; typically a friend, family member, or fellow employee. It’s like the employee and the customer are in a romantic relationship. The customer is the employee’s ‘sweetheart’ and thus gains preferential treatment through discounted or free items. Some of the means by which employees give the goods away involve:
- Faking a scan
- Overriding a price
- Ringing up merchandise at a very low value
- Refunding items
- Giving away gift cards
- Discounting items without proper authority
To look at how prevalent sweethearting and other forms of employee fraud are, we looked at a recent survey initiated by the National Retail Federation (NRF.) The National Retail Security Survey (NRSS) is a nationwide study of key benchmarks for retail loss prevention including inventory shrink, employee integrity, external retail crime and more. The 2015 NRSS reports that Inventory shrink amounted to $44 billion in losses for retailers in 2014. "Inventory shrink" classifies ‘sweethearting’ in the category of employee/internal theft:
- Shoplifting (38%)
- Employee/internal theft (34.5%)
- Administrative and paperwork errors (16.5%)
- Vendor fraud or error (6.8%)
- Unknown loss (6.1%)
The NRSS also reported that: when it comes to loss prevention budgets, nearly 2 in 5 of loss prevention executives surveyed say their budget for 2015 increased over last year.
Although many retailers offer friends and family discounts for the employee, many times, employees feel that they are entitled to more. Sometimes, this behavior is not necessarily indicative of intentional employee fraud but of employees trying to establish and grow customer relationships. Employees taking notice of your best customers may incentivize them to give discounts to frequent shoppers. Although fraudulent, their intentions were not intentionally harmful but still affects your bottom line.
As with any form of theft or fraud, you have to know it’s happening before you can fix it or set practices to avoid it. Most often, sweethearting is stopped by physical supervision of the cashier, the installation of software that detects the practice and education.
To get ahead of the problems, you need technology to support you. Surveillance cameras and security guards can check customer receipts against the goods purchased when the customer leaves the store but these can be costly installations with less than impressive results. Human errors occur, and technology can’t always decipher the difference between valid and fraudulently applied discounts.
So how can you truly stop your employees from giving away free items to friends and family? Education is the first step. Make sure all employees understand your policies and their boundaries. Beyond education, a tightly managed retail loss prevention system enables store management to track which cashiers may be behaving fraudulently. 20/20 has the powerful analytics tools to help you identify scan gaps in transactional records. Elongated scan gaps between scanned item time stamps, is a potential indicator that the cashier may be giving an item away without scanning it. Look for the anomalies when you’re physically in the store, and let the system bring to your attention the discrepancies that happen when you’re not looking, giving you full visibility over the entire organization at all times.
Technology has become an essential part of running a profitable business. As your business grows, so does the amount of data it generates. Agilence has the solutions to help you increase profits, drive efficiencies and improve margins. Through the 20/20 Data Analytics™ platform, you can monitor and receive alerts for bad behavior and also take advantage of upselling opportunities by salesperson or location.
Searching for even the positive patterns can be a tedious, time consuming job. 20/20 makes it easy, bringing information together with a purpose and makes every user a power user. It connects the dots in your data for a sharper, deeper insight into your people and processes so that you can ultimately increase sales and profits.
Give us a call and we’ll show you the way.
 National Retail Security Survey 2015 https://nrf.com/resources/retail-library/national-retail-security-survey-2015