Caught Red-Handed

C-stores use a mix of old-fashioned techniques and new technology to limit internal theft.

Caught Red-Handed

May 2024   minute read

By: Shannon Carroll

While organized retail crime is getting plenty of buzz, convenience stores face an equally damaging threat to profits: internal theft.

Many of the suggested remedies boil down to good old-fashioned discipline and monitoring to recognize an issue before it spirals out of control.

Kelly Harrington, the director of asset protection at RaceTrac, said preventing internal theft starts early. “If you can create an impression of control out of the gate, people either go one of two paths,” he said. They take the risk of stealing despite knowing that they could be caught, or they decide to “take their business elsewhere and go down the road” and try to steal at some other business.

Harrington added that while people may like to point fingers at new employees, they’re not always the perpetrators. Sometimes, the thieves are long-tenured employees who have established trust and have figured out ways to keep their sticky fingers under the radar.

A big piece of curbing internal theft is publicizing it when it happens, Harrington said. It’s not about defaming someone; instead, share that someone was caught without explaining how. “That’s really good publicity for the store team,” he said, “because if there are other people stealing in your store, they’re going to stop.”

Important, too, is exception reporting.

At RaceTrac, Harrington is working to improve exception reports. Not too long ago, he was at a workshop where, in 30 minutes, attendees found several cases of internal theft just by looking at data and reporting.

If someone is stealing, chances are they’re not keeping an orderly till.”

Harrington said that clutter around the register and associates using their phones during work hours can be signs that the risk of internal theft is high.

“It doesn’t mean that every time you see chaos and disorder you have theft going on,” he said. “But if someone is stealing, chances are they’re not keeping an orderly till and things like that.”

“When our corporate asset protection team is monitoring exceptions, they can see, hey, something’s going on here and can work that down the chain,” he said. “That helps make everyone realize you’re on top of things every step of the way so that it’s harder for [employees] to get away with something.”

At a previous job, Harrington worked on a team that established and enhanced a tip line. “Some of the best internal cases I’ve worked came because someone came forward,” he said. “Associates make a choice: ‘I’m going to do it, too,’ or, ‘I’m going to tell someone about it.’ So tapping into that and offering a reward or incentive program is a good benefit.”

Innovative Strategies for Internal Theft Prevention

Babir Sultan, the president and CEO of Kansas City-based Fav Trip and a NACS board member, has seen a number of scams. Those include cashiers pretending to scan an item but not actually ringing it up; an accomplice buying $40 worth of merchandise, giving the cashier a $20 bill and getting $60 from the cashier in return; employees stocking cigarettes throw a few packs in a trash can, only to collect their ill-gotten goods on their way out; and an employee who claimed they were exchanging five $20 bills for a $100 bill but instead put five $1 bills in the register.

Sultan talked to an absentee c-store owner who was letting employees fill up the ATM and who brought Sultan in to help him figure out why he was losing money. Sultan said, “By the time we came on board and figured out what [employees were] doing, they got them for almost $20,000-plus.” An employee was saying they were filling up the ATM, but the owner never checked to see if there were appropriate, corresponding transactions.

“We noticed [the employees tested] out the waters,” he said. “They start off small and think, ‘Did anybody tell me anything the next day? No? OK, great.’ Then they start going for the big dollar amounts.”

To figure out how to decrease issues with safe drops, Sultan turned to an interesting source: the casino industry. “We suggest everybody look into other industries because all of us business owners have common problems,” he said.

Casinos make employees show their hands (even if the only observer is a camera) whenever they handle cash or chips. Similarly, to ensure there’s no theft happening at Fav Trip, the retailer put in its training manual that management must clearly show what they’re doing with their hands during safe drops—with no fidgeting whatsoever. That way, no one can sneak any money out.

Retailers Are Turning to Artificial Intelligence

To curtail crime, Fav Trip amped up its internal camera monitoring, and then realized that other retailers would pay for similar video monitoring, too. Now, Sultan has a team of about a dozen people who monitor c-store video almost 24/7 for about ten retail companies.

He’s a little wary of AI—“We had an AI system in place where every time an employee picked up their phone or put their phone in their pocket, it gave 400-plus notifications”—but he’s aware there is plenty of technology that could make AI a game-changer in curtailing internal theft.

They start off small and think, ‘Did anybody tell me anything the next day?’”

Standard AI, a San Francisco-based company at the forefront of the industry, uses AI in certain zones in stores—including the backbar. As a result, if there’s a sale that doesn’t line up with, say, a tobacco-related item, a store manager or front-office employee can check to make sure a transaction lines up with video.

Alex Plant, the company’s vice president of marketing said, “I think a lot of these problems seem kind of simple … but I think that’s how this whole AI thing is going to be. It can’t be so complicated or inaccessible or expensive or complex—you have to meet the market where the market is, and the market needs help to address shrink.”

Read Hayes, the director of the Loss Prevention Research Council (LPRC) and the co-director of the Loss Prevention Research Team at the University of Florida, said, “What AI is doing is finding things that we might not. It can help us because [on the video], there’s a lot of noise and a lot of boredom.”

Before, employees might have had to watch store tape for hours. Plant said Standard AI can tell an employee exactly when shrink might have occurred. “With AI and computer vision, we can add the actions and transactions concept. I think you can get a lot closer to the prevention of loss.”

Friendly Express implements Standard AI’s technology in one of its stores and is monitoring the experience. Amy Wood, director of enterprise IT at the Georgia-based retailer, said the company installed cameras on its backbar. If an item is removed from that area, Friendly Express should see a corresponding transaction.

“If we don’t see that transaction occur, then it’s going to create an alert to send to the manager that there was an issue,” Wood said. “But the really cool part is [the technology has] captured images from that time frame for you to be able to determine what happens. Now, instead of looking at 24 hours of data, we can look at 15 minutes. … It’s a huge time-saving technology.”

If there’s an issue, then Friendly Express can match up the data with video before going to an employee. The retailer already has cameras in its stores and currently encourages managers to watch surveillance videos. So Wood doesn’t think the backbar cameras will be too much of a change for the company’s employees. Plus, Friendly Express tries to educate its employees that, with the more general rise in crime, “This is for your safety, as well,” she said.

“It’s not to be Big Brother and catch every little thing [employees] do,” Wood said, “but it is to ensure that, when there is an issue, we have something to back it up. We have visual proof, and it’s not just an assumption. Right now, we may not have a good view of the area. [Previously] it could have been that you were working with another person on a shift and [the theft] might have been a little bit of a gray area. So we feel like this is just one more tool that we will have to help confirm what issue we have so we can determine, ‘Who actually did this?’ so that there’s absolutely no confusion.”

She said retailers often don’t know an issue has happened until weeks later, and thieves will continue stealing because they realize no one at the company has picked up on what they’re doing.

“Then it’s a big issue all of a sudden,” she said. “We’re hoping to be more active instead of reactive. I feel like [AI is] going to help us address an issue or determine when there’s an issue so it’s not just, ‘We had this huge loss and there’s nothing we can do about it.’ If we had realized this issue was going on three weeks ago, we could have stopped it before it became a true big issue.”

Additional Ways to Deter Internal Theft

Regardless of exactly how big of an issue internal theft is, there are a plethora of innovative ideas for limiting it.

The LPRC’s Hayes recommended working to help employees understand that “corporations and companies aren’t just faceless entities—they’re all people.” And they’re operating at very slim margins to serve and provide for the communities where these employees live.

To make sure Fav Trip is hiring trustworthy employees, Sultan makes sure the retailer is thoroughly checking references. The managerial team will call references to verify that a potential employee worked there—and that people who worked with that person have good things to say.

“It might be a little bit of a slower hiring process,” he said, “but it’s worthwhile.”

Now, we just say, ‘I want to learn how they went about it.’”

Still, he goes back to—and emphasizes—what Harrington originally said: Make it clear you’re aware of potential internal theft and can nip it in the bud.

“[For us, internal theft] always starts with the newcomers who think they can outsmart us, but it’s also a good thing for us,” Sultan said. “I look at it as a learning curve. Before, it used to be, ‘Oh, my God, how could you do this?’ … Now, we just say, ‘I want to learn how they went about it. How long did it take us to realize what was happening and fire them quickly?’ instead of dwelling on the why, which can help our monitoring staff get trained better.”

Essentially, Sultan wants to create an environment where potential thieves think: “I shouldn’t try my luck here.”

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