KOLKATA: They may be bitter rivals in the battle for customers’ wallets, but the country’s top retail groups have decided to join hands to battle a common problem – the rising scourge of employee theft. Top organized retailers such as the Future Group, Spencer’s Retail, Reliance Retail and Aditya Birla Retail have come together to create a blacklist of employees found guilty of theft as the industry looks to jointly combat this rising menace that costs it an estimated $1.25 billion a year.
The proposed blacklist will include names and details of people identified for unethical conduct, bad behavior to customers and quitting without notice. The $300 billion retail sector has been characterized by rampant employee churn in the last 2-3 years with the entry of large corporate groups.
“Typically in a year, we are able to catch 6-7 cases of employee theft. It has been recently decided that all major retailers will share a list of delinquent employees with each other”, said Sanjay Jog, HR head of the country’s largest retail chain Future Group, which runs Big Bazaar, Food Bazaar and Pantaloons stores. Having a shared list of bad apples in a country where employee reference checks are relatively uncommon and difficult will help retailers tackle the largest contributor to inventory losses. A shared pool of blacklisted employees will help ensure that such people sacked by one company do not easily find employment with another.
According to industry estimates, around 45-50 % of retailer’s total stocks shrinkage (stock loss from crime or waste expressed as a percentage of sales) is due to employee theft. Shoplifting by customers, account for 30-35 %, with the balance attributed to administrative errors and fraud by vendors. The organized retail sector in India lost $2.54 billion, or 3.1% of total sales, last year due to shrinkage, according to The Global Retail Theft Barometer 2008 that is widely consulted by retail companies.
The study, carried out by The Centre for Retail Research in Nottingham in the UK, notes that India has the highest rates of so-called stocks “shrinkage” as a percentage of sales at more than double the global average of 1.34% of total sales. The shrinkage figures for the Unites States and the UK are 1.48% and 1.3% respectively. “Controlling shrinkage is especially more vital now, since nearly all retailers are trying their best to reduce cost and losses”, said Vineet Kapila, president of Spencer’s Retail.
The organized retail sector has been particularly hit by the economic slowdown triggered by global credit crunch and trade slump. Many retailers were forced to scale down expansion plans, with some of them even shutting shops.
In creating a blacklist, the retail sector seems to have been borrowed from the IT industry’s bid to create a blacklist of IT/ITeS employees involved in data theft and other unscrupulous practices. The software industry body, Nasscom, has also created the “National Skills Registry” to verify the background and antecedents of IT professionals.
While big retailers have taken this initiative on their own, industry body Retailers Association of India (RAI) is also planning to set up a similar list of delinquent employees and initiate a verification process of potential employees.
“Even if some retail chains start an informal process of sharing their respective lists of delinquent employees, there is still a burning demand to have an organized method. The vital factor here is to have a strong process to verify employee background and antecedents” said Kumar Rajagopalan, CEO of the association.
RAI has also initiated talks with global service providers who specialize in employee verification, he added. While most stores have close-circuit cameras to keep an eye on customers and employees, it’s next to impossible to go through all the video footage. Retailers routinely frisk employees whenever they leave the store.
But all these measures are not sufficient to stop crimes like employee shoplifting and “sweet heartening” where an employee at the counter sells high value items to his “sweet heart” partner posing as a customer, but bills for cheaper items. Cases of stealing cash and cutting manual bills are also rampant.
Other types of internal frauds reported by retailers include discount abuse, refund abuse and even customers’ credit card abuse.
The standard practice of dealing with those caught stealing is to dismiss the person. Most retailers avoid the hassles of lodging a police complaint or filing a case unless it’s a major theft.
With economic activity reviving and consumers back in stores during the festival season after a hard year that saw retailers being forced to scale down expansion plans and even shut shops, many retailers are reviving their expansion and hiring plans. A blacklist will help them avoid hiring dangerous candidates.
However, experts say creating such a list is not without legal implications. “It is a different matter if someone is caught internally for fraud or pilferage and creating a list like this. Retailers may then have to prove in the court of law about the employee’s crime”, said retail analyst and Technopak Advisors chairman Arvind Singhal.
This scenario will come up if any such employee moves the court. The move also has the potential to ruin careers of many retail employees and some see it as a bit too harsh on people reported for misconduct or bad behavior.
“There should be a mechanism by which a professional can delist himself if he improves his behavior or promises to do so in the future”, says E Balaji, CEO of HR firm Ma Foi Management Consultancy.
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My opinion … although I am unsure of the legality and whether it could be challenged. Coming soon will be finger print identification for most laptops, etc. and could be incorporated into the retail culture. This would allow a far bigger data base than exists presently. I was shocked at the small numbers of finger prints in retail data bases.
I totally agree with Mr. Marie-Louise Jacobsen, need training for staff about shrinkage, Loss to the Company,
And it is continuous process, implement performance linked reward, should help to reduce internal shrinkage, awareness program also should conduct periodically,
Ramarao vedula (SCM) HYD, INDIA
Black listing a dishonest employee is not legal in many societies around the world, and as you have stated in your article, it is not without some legal consequences. Retail Employers have a big responsibility in discouraging their staff from stealing, and that starts at the very beginning of the hiring stage where staff should go through rigorous training not only in how to operated the POS Systems, selling skills, customer service, company policies, but also as part of the training; Internal Loss Prevention mentoring.
I have recently published a book called the Art of Retail Buying-An Insider’s Guide to the Best Practices from the industry. Besides being an in-depth book about retail buying I have dedicated a full chapter on Loss Prevention called-Retail Shrink: The Bare Truth (Chapter 16). There the readers can find 40 over ways of how to prevent both internal & external theft, methodologies and strategies on Loss Prevention. In addition, at the beginning of the book (Chapter 2) under the title of Qualification, Qualities and Abilities required for a buyer’s job, I have stated 12 requirements one of them being about Honesty & Integrity. As a buyer, there is a high potential for “Kick-backs”, and I explain to the reader how to identify and avoid such entrapments, as well as the career consequences such acts can have.
Internal Loss Prevention is about education, it’s about treating your staff with dignity and by instilling loyalty, devotion and motivation in the staff right from day-one. If the staffs are positively emotionally attached to the company, chances are they won’t steal; this coupled with good Loss Prevention Systems such as CCTV, EAS Detectors and tight security checks at the staff entrances.
Marie-Louise Jacobsen-Managing Director of Retail Management Solutions -Singapore