How consignment stores can prevent employee theft

April 7, 2016

Employee theft is real and growing

The statistics on employee theft are staggering.

  • Amount stolen annually from U.S. businesses by employees – $50 billion
  • Annual revenues lost to theft or fraud – 7%
  • Employees who have stolen at least once from their employer – 75%
  • Employees who have stolen at least twice from their employer – 37.5%
  • All business bankruptcies caused by employee theft – 33%
  • Theft by employees who had ideas stolen at work – 29%
  • Average time fraud occurs before detected – 2 years

Why Do Employees Steal?

A Pinkerton report states, “Over the years, we have seen the workplace mentality of some employees shift from one of responsibility to one of entitlement.” In many ways, we are a society with an entitlement mentality. Unhappy employees feel they are not being paid enough. They feel under appreciated or over worked. Therefore, they’re entitled to receive more. Not surprisingly, seasonal or part-time employees also feel a greater sense of entitlement due to their lower pay. Sometimes employee theft occurs merely for the excitement of “getting away with it.” Other times, an employee will justify their actions by saying, “Everybody else does it” or “Taking this little amount won’t hurt anyone.”

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Employees most likely to steal

Managers account for over 50% of employee theft. Trust gained means they’re often unsupervised. Similarly, when a business is small, individuals take over a greater amount of authority. Consequently, everyone has access to all areas of the business. Younger employees are usually more willing to steal. Men have a greater tendency to take a risk and steal over women. In addition, the majority of theft is not a one-time incident. It’s often an on-going scheme.

Ways employees steal from you

So, how do your employees steal from you? Checkout is their biggest opportunity. Up to 40% of small business theft is in cash. A sales rep can manipulate a sale through refunds, discounts or voided transactions after the customer has left the store. Consignment shops have an extra temptation. A retail shop receives boxes of inventory that are thoroughly numbered and entered into the system. However, a resale or consignment shop receives individual pieces that may not be entered correctly. Furthermore, items that never make it to the sales floor are reported as returned to the consignor or just never existing. In addition, employees steal information. One consignment shop owner reported an employee had stolen her consignor list, opened a shop down the street and was notifying everyone she was open for business.  Not surprisingly, she offered a bigger percentage.

No employee theftHow can you prevent employee theft

  • Everyone, no matter who, should go through a background check.
  • Always contact references.
  • If your state allows, run a credit check. Your state’s Department of Labor or Small Business Association can give you the rules for interviewing employees.
  • Create the right environment. Often, it can be something as simple as listening. Most of the time, employees just want to be heard and know someone cares.
  • Security cameras are a plus.
  • Review your store layout. Unobstructed exits, better lighting and even an area where employees check in and out can all deter theft.
  • Monitor your register closely.
  • Keep company checks behind locked doors and tracked.
  • Your intake area should be in the open near the front counter where items are reviewed, counted and entered immediately into the system.

Should You Report The Theft?

Why do over 80% of small businesses choose not to report the theft?

  1. The crime isn’t viewed as important enough
  2. Emotional ties to the employee
  3. Mistrust of the justice system
  4. Fear of losing the confidence of other employees
  5. In addition, the cost involved in prosecuting may be greater than the amount stolen

Ultimately, you have to decide on a case by case basis. By only firing the employee, you’re not changing a lifestyle pattern. Certainly, the time and financial investment involved in prosecuting could be greater in the long run. The best method of preventing employee theft is to build a quality team. Add checks and balances to all of your systems. Stress to everyone that employee theft is taken seriously. You will take action.

Deb McGonagle

I have been a writer for various forms of marketing for over 40 years. I've written my share of radio and TV scripts, magazine and newspaper ads as well as direct mail brochures and newsletters. Currently, as the Marketing Coordinator for Traxia, home of SimpleConsign software, I've moved into blog posts, eBooks and website text. It's been an ever changing and ever challenging journey but I've loved it all along the way.