Minding The Store
How to Overcome Fraud in Your Store
I cannot tell you the number of Independent Specialty Store Retailers who have told me, "I don't really have a problem with shoplifting in my store(s)". In almost every one of those situations, that retailer would tell me that they do not conduct annual physical inventories of their merchandise, either. So, how would one know if they have a shoplifting, shrinkage, or fraud problem? Studies have shown that in the United States, as many as one in twelve customers is a shoplifter, and that shoplifters commit an average of fifty thefts before being caught. That's if they are caught at all; its estimated that only 10-15% are apprehended! The following information in this column is a collection of battle tested, inexpensive ways you can overcome this huge problem in your operation, and possibly save your bottom line profitability.
FIX YOUR FIXTURES
- In most cases shoplifters require privacy in order to conceal merchandise. This is especially true with small specialty shops that the arrangement of the fixtures creates many areas where the shoplifter may be hidden from sight.
- Determine where your staff spends the majority of their time. For many small stores, this is near the cash register, the telephone or the office. Arrange your fixtures with the goal of minimizing the "blind spots" on the sales floor. From their usual vantage point, your staff should be able to look down almost every aisle.
- Once you have maximized visibility by arranging fixtures, consider installing a large convex mirror to view any unavoidable hiding places. If nothing else it puts concern in a potential shoplifters mind that they may be seen. When in doubt they will move on to a store where there are less hindrances.
- The next time that you are in a store from a large chain of convenience stores, take note of the layout. Most allow direct visibility of the sales floor to a lone sales associate, and mirrors expose the remaining areas.
- The greatest hindrance of all is an aggressive sales person moving around the floor...they never know if they will be seen by a proactive salesperson.
REQUIRE A RECEIPT FOR ALL RETURNS
- Many shoplifters steal with the express intent of returning the merchandise to the store for a cash refund. If you have more than one location this is even more of an attractive option to them. This can be easily addressed by requiring a purchase receipt for all returns. This creates some conflict, however, with the interest in delivering quality customer service, in the mind of some retailers. A compromise policy is to require a receipt for cash refunds and general store credits that can be used on that store's merchandise only. This way a legitimate customer with no receipt can still exchange their merchandise for something that they need or want without giving out unwarranted amounts of cash to the shoplifter.
Shoplifting is not the only type of "fraud" that can cost the Independent Retailer on the bottom line. "NSF", "Account Closed", "Counterfeit"--each time retailers see these words on returned checks, they know they have lost money. According to the National Check Fraud Center, check fraud and counterfeiting are among the fastest growing problems affecting the United States financial system.
Estimated annual losses from these two problems exceed $10 Billion and increase every year. There were over three billion represented check entries processed through the automated check clearinghouse network in the fourth quarter of 2000, according to the National Automated Check Clearing House Association. You can imagine the growth since then!
Checks account for about one-third of retail spending and they are one of the most popular forms of spending payment--second only to cash. Because of the popularity of this method, retailers cannot afford to lose business by refusing to accept them. However, there are some precautions that Independent Retailers should take to combat this terrible form of fraud:
- ESTABLISH A CHECK ACCEPTANCE POLICY
- Detail acceptable forms of ID, required information and dollar limits, and make no exceptions to the policy. Fraud artists are skilled at creating hassles or confusion that can leave businesses stuck with a bad check.
- BE SURE NAME, ADDRESS, AND PHONE INFO ARE PRINTED ON THE CHECKS
- Also be certain that the written and the numeral amounts on the check correspond. This is an old trick to confuse you and the bank.
- PAY ATTENTION TO THE FEEL OF THE CHECK
- Most check paper has the same weight and texture. If the feel of the paper is strange, call the bank to see if they have had complaints on this account.
- WATCH THE CHECK WRITER
- Watch as they sign the check and have the customer print the name below, if the signature is illegible. If they have to look up to spell the name or if they misspell it, call the bank.
- COMPARE THE SIGNATURES
- In addition, photo and physical descriptions of the customer both must match the Identification they carry.
- CHECK THE DRIVERS LISCENSE
- It should be smooth all over with no ridges that indicate an alteration or modification. Also verify that the ID is still valid.
- REVIEW THE CHECK NUMBER
- Ninety percent of returned checks have low check numbers. (100-500) While low check numbers indicate a recently opened account and a potentially more risky check, particularly for a business or "dba" (doing business as) checks, that is not always the case. Just be sure to check out Identification, phone numbers, etc. a little more carefully. More useful information on the check is the account's opening date (month and year), usually indicated by four numbers to the side of the account holder's name and address.
- DONT ACCEPT SECOND OR THIRD PARTY CHECKS...PERIOD!
- WHENEVER POSSIBLE USE A CHECK GUARANTEE OR VERIFICATION SERVICE, SUCH AS TELECHECK.
If you follow these shoplifting, shrinkage and fraud tips, you will not function totally problem free. However, consistent use of these tips will hold your shrinkage and bad debt charges down and your bottom line will rise!
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