Management – The Five Finger Discount


Management – The Five Finger Discount


The Five Finger Discount

Shoplifting can ruin your business.

Fred Tarasoff loves music. In fact, he used to own a record store, but had to go out of business in 1989 in large part because of inventory losses through shoplifting. Then he was assaulted by a shoplifter while he was running a health food store. Since that time, he has devoted himself to researching shoplifting and the retail industry in order to develop training programs to prevent and detect shoplifting. He currently works closely with law enforcement, industry associations and security firms to fight this crime. In the course of this work, Mr. Tarasoff has developed a simple way to calculate the losses suffered from shoplifting.

According to Mr. Tarasoff, even if your business has excellent controls, you can expect losses will approximate 1% of gross sales. Thus, if your retail store sells $600,000 a year, at least $6,000 will be missing from your sales figure. But, if your business does not have good controls, losses could be as high as 8% or $48,000 on $600,000 of gross sales. If your store works on a 20% gross margin your business is out $38,400 (i.e., 80% the sales loss of $48,000).


Deterring Theft Starts with Good Management Practices

  • Adequate staff is essential. One person in the store is simply not enough people to work the cash register and watch the customers.
  • If you can only afford one sales representative in the store, they should lock the door as a matter of policy when they have to take a break.
  • Greet each customer. This is not only good public relations, but it indicates to the potential shoplifter that you are aware they are in the store.
  • Provide a receipt to each purchaser. Post a policy statement that refunds will not be provided without proper receipts. This will prevent thieves from attempting to return stolen merchandise later for a cash refund.
  • Make sure your staff knows the prices of all items. This will help employees to determine whether lower-price tags have been switched to higher priced items.
  • If the package has been opened by the customer, be sure it is reopened by the cashier to prevent product substitution or the theft of other merchandise hidden in the package.
  • An open bag with your store name on it is the perfect shoplifting tool. Seal all bags with store seals to ensure that other items cannot be placed in the bag as the customer exits your store.
  • Do not stereotype customers by appearance. That gruff looking character may be honest while the nicely dressed family of three may be a team of professional shoplifters.
  • Do not age discriminate. Statistics indicate that 25% of thefts are committed by those in their teens or younger, but 75% is committed by adults.



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