Retail shrinkage is an expensive and pervasive problem that costs businesses nearly $100 billion each year. Internal shrinkage—loss due to employee fraud or theft—makes up nearly a third of inventory shrinkage and is a growing challenge for loss prevention teams.

However, dealing with and proving internal fraud is challenging. If you suspect employee theft, it’s crucial to avoid making accusations or taking actions without evidence. An unsupported accusation or termination can cause irreparable damage to the employee in question, your relationship with them, and workplace morale—as well as open your business up to potential liability and legal action.

How can retailers combat employee theft while avoiding these risks? Over the past few years, significant advancements in video surveillance technology have made it accessible and efficient for retailers of all sizes—small businesses and massive chain stores alike—to combat internal theft.

This article explores how retailers can prevent theft with modern security cameras and the benefits and ROI of protecting your stores with smart technology.

The Rising Costs of Internal Theft and Fraud

Retailers face security challenges on many fronts, including shrinkage and fraud. For loss prevention teams, shrinkage due to employee theft is an expensive problem.

Employee theft is 3x more costly than shoplifting.

Each incident of employee theft is more expensive than other forms of shrinkage and fraud. According to the National Retail Federation, the average loss per incident of employee theft costs retailers three times more than the average shoplifting incident.

Retailers attribute 28.5% of inventory shrinkage to internal employee theft.

Employee theft makes up nearly a third of all inventory shrink. Outside of external theft and organized retail crime (ORC), internal theft is the biggest cause of retail shrinkage.

It’s also a growing problem—58% of loss prevention teams cite internal theft as a challenge that’s become more of a priority over the last five years.

Data from NRF Survey

Using Smart Security Cameras to Stop Retail Employee Theft

Employee theft is a significant issue for businesses and one of the main contributors to retail shrink. Fortunately, modern video surveillance has made it easier and more accessible for retailers to detect fraud, gather evidence, and prevent employee theft from reoccurring.

Smart security cameras leverage the latest technologies, including:

• Powerful video analytics — AI video analytics automatically process and analyze huge amounts of data. Because smart security cameras automatically recognize and index different types of activity, most of the work of reviewing and investigating footage is already done. You can see precisely when different types of activity took place and jump straight to the footage you're looking for.
• Intelligent search filters — Smart search filters, such as facial recognition, color search, and license plate recognition, give retailers a powerful way to pinpoint specific activity and complete investigations quickly.
• Remote access — Retailers can view footage and investigate incidents from anywhere, at any time. Thanks to remote access via cloud-based systems, there's no need to be onsite at a specific store to investigate potential theft or to have security guards actively monitoring video feeds.

Crystal clear video quality – Modern security cameras support a much high resolution than CCTV cameras of years past. They’re capable of showing you fine details within a scene so you can understand a fuller context of what’s occurring.

We’ll explore the benefits of smart technology and how you can use smart video surveillance technology to detect and reduce employee theft.

Benefit: Save Time and Improve ROI by Investigating Quickly

When retail shrinkage happens, one of the main challenges is figuring out what happened. Was it shoplifting? Organized retail crime (ORC)? Employee theft? Innocent mismanagement?

Security cameras capture massive amounts of footage—too much to monitor and review manually. Reviewing all that footage is a tedious and time-consuming task. Many retail stores either spend valuable time and resources investigating footage or don't have the staffing to efficiently investigate all but the most serious offenses.

Retailers can address the problem of time-consuming investigations by using smart security cameras with modern video management systems (VMS). Modern platforms are designed to be streamlined and easy to use. Within them, you can intuitively navigate footage and quickly find what you're looking for. This allows retailers to:

• Reduce the time required to review and investigate footage
• Require less labor to investigate potential theft
• Resolve incidents quickly to have a better chance of recovering assets and minimizing losses

Investigate Theft with Video Analytics

Video analytics are a game-changer for investigating potential incidents of retail theft. Gone are the days of scrubbing through footage, manually fast-forwarding and rewinding.

These are some of the AI-enhanced video analytics that aid and accelerate retail investigations:

• Automatic indexing – Cameras automatically categorize different types of activity, such as human movement. Quickly see when specific activities occurred and jump straight to relevant footage.
• Facial recognition – Quickly find footage of a specific employee, guest, or customer.
• License plate recognition – Filter for specific vehicles; monitor parking lots to determine when an employee arrived and left the store premises.
• Unusual behavior detection — Proactively detect suspicious behavior, such as someone unexpectedly onsite after hours.
• Region search — Automatically search for activity in a specific area, such as the cash register, safe, or other points of sale (POS).

Using Region Search, an AI-based video analytics feature, with a fisheye security camera to pinpoint activity.

Benefit: Recover Assets and Prevent Future Theft

Smart security cameras help retailers confidently and quickly find out where their losses are. Employee theft is expensive and typically recurring but often goes undetected. The faster a store discovers internal fraud, the better it can recover missing assets, stop sources of shrinkage, prevent future losses, and improve the bottom line.

• Recover missing cash and assets — Smart security cameras make it easier to track missing inventory and quickly resolve incidents. This makes it more likely that retailers can recover missing money and assets and minimize losses.
• Prevent recurring fraud and shrinkage — When an employee commits theft, it's likely to be a recurring issue. Staff members have special access to inventory, back rooms, and payment info. They're a consistent part of a business and are positioned to target a store or business consistently. Identifying the culprit of internal theft is especially important for saving money and preventing losses.

Case Study: Catching Employee Theft to Save Hundreds of Thousands of Dollars

Blake’s Lotaburger, a QSR chain store, began noticing order discrepancies and cash transactions that shouldn’t have occurred. Their IT Operations Manager investigated using the store’s smart security cameras and VMS and discovered that twelve store managers had been stealing money from the business.

Their stores had incurred $23,000 in losses in just one week. Without the cameras and the ability to effectively investigate at scale, the business would not have been aware of any fraud. By uncovering the theft, they were able to prevent hundreds of thousands of dollars in potential losses.

Benefit: Protect Your Business from Liability

When you suspect employee theft, it’s critical to avoid making false accusations, as these hurt employees and open the company up to potential liability and damages. Without solid evidence, accusing an employee of theft will damage your relationship with them, hurt workplace morale, and risk legal action if the accused employee sues you for slander.

It’s therefore crucial to obtain solid evidence before acting on suspicions of employee theft. That’s where smart security cameras come in. By making it easy to gather evidence, retailers can know the details of the crime with certainty.

Retailers and managers can use smart surveillance systems to:

• Obtain objective video evidence of wrongdoing.
• Ensure solid legal footing if you terminate the perpetrator or press charges.
• Securely save and share timestamped video evidence; you can share password-protecting footage with law enforcement or other relevant parties.
• Enjoy the peace of mind that you know the truth and are acting with evidence and certainty, not potentially making a wrongful accusation based on suspicions alone.

Share Video Evidence of Theft

After you collect video evidence of theft, you may need to share it with law enforcement or other third parties. Modern VMS platforms allow you to share footage remotely. Unlike old NVR/DVR systems, you don't need to physically visit a store to retrieve footage.

• Retailers can digitally share video evidence with third parties, including law enforcement or legal teams, via email, SMS, and URL. Automatically timestamp footage to make the context and timeline of events clear.
• Businesses can password-protect shared video clips to retain complete control over who can access video footage and for how long.

Case Study: Exposing Employee Credit Card Fraud

A QSR store used its smart security cameras to catch two incidents of employees—now ex-employees—committing credit card fraud. Store security cameras recorded them taking photos of customer cards, and the IT Operations Manager used the business’ modern VMS system to uncover the incident. By submitting timestamped security footage from their cameras, Lotaburger was able to provide law enforcement with the necessary evidence to hold the perpetrators responsible.

Prevent Retail Theft with Rhombus Smart Technology

Employee theft in retail stores is a pervasive problem that costs businesses significant time and money, both in lost inventory and in time spent investigating shrinkage. New technology has made it more affordable and convenient to stop retail shrinkage.

At Rhombus, we believe that physical security doesn't have to be stressful. Our cloud-based solution makes enterprise video surveillance powerful and user-friendly, so you can streamline operations and improve safety at scale. Rhombus' unified, cloud-based platform includes smart security cameras, connected IoT sensors, and integrations with best-in-class third-party solutions. You get all the benefits of an enterprise cloud solution with consumer-level ease of use.

With the Rhombus platform, you can:

• Gain all the benefits of a modern cloud-based system (cloud cameras, cloud VMS, cloud storage, cloud computing, cloud-based integrations, and more)
• Use native remote access to manage all locations from anywhere
• Accelerate investigations with fast, powerful, AI-enhanced investigative tools
• Receive actionable insights with real-time, automatic alerts
• Integrate with third-party solutions to build exactly the solution your organization needs

To learn how Rhombus can help you combat retail theft and streamline security management, request a free trial or reach out to a team member at sales@rhombus.com.