Bookselling in Tough Times: Loss Control

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Booksellers who think loss control is not a store's top priority, especially when times are tough and profits are harder to come by, should talk to David Bolduc of Boulder Book Store in Colorado. If it weren't for the steps he started taking some 25 years ago to secure his bookstore, Bolduc's store could be losing around $80,000 per year in shrinkage.

Sorry. Bolduc doesn't call it shrinkage. "It's theft," he said flatly. "I give talks about loss control at regional meetings," he said, "and there's a certain kind of denial among bookstore owners -- it's that part of the business they don't want to acknowledge." Calling it "shrinkage" helps some booksellers to evade the real nature of the problem. As Bolduc pointed out, "Books don't shrink."

But profits certainly do when bookstore owners don't properly secure their store. At Boulder Book Store there is still theft -- hence the term "loss control" and not "loss prevention" -- but instead of losing $80,000 per year from theft, the store's security system keeps it to about $15,000. From this example, it's easy to see that good loss control could mean the difference between being in the red or in the black. Or out on the street.

Retail loss can take many forms: shoplifting, robbery, fraud, employee theft, debts, damages, and data loss. In 2006, retail operations suffered average annual inventory shrinkage (apologies to Bolduc) of 1.57 percent, which includes non-theft loss such as administrative or vendor error, according to the University of Florida's 2006 National Retail Security Survey. And now, with the economy struggling, employee theft and shoplifting is on the rise, according to USA Today.

Allison Hill has witnessed a dramatic increase in theft at Vroman's Bookshop in Pasadena, California, and she attributes this to the economy. "Historically, we've had problems with art books being stolen to resell to local used bookstores for quick cash," she told BTW, "but right now, as an example, we have Lily of the Valley body lotion being stolen once a month for three months. Clearly, the shoplifter isn't stealing one lotion a month to resell somewhere. My best guess is that a customer who usually buys the lotion can no longer afford it."

The issue of shrinkage "goes right to the bottom line," said Dale Szczeblowski of Porter Square Books in Cambridge, Massachusetts. "We track shrinkage monthly, and we know it's significant enough to invest in some technology to control the issue."

As noted in the ABA education program, "Loss Control: How to Stop Your Profits From Running Out the Front (and Back) Door," the first step in securing the store is to identify the store's vulnerabilities:

  • Hiring and training. Mistakes in the hiring process can create future vulnerabilities.
  • The sales floor. Inattentive staff and unguarded exits are vulnerabilities that shoplifters seek out in retail stores.
  • The cash/wrap. Lax refund and return policies are one of the most common ways for a shoplifter to convert stolen merchandise to cash.
  • The back room. Unlocked and unwatched doors in the back room could create the perfect opportunity for thieves to sneak into the store and walk away with a box or two of merchandise.
  • Accounting. The accounting department represents the most significant area of potential loss for most stores. There are some limits to how much merchandise an employee can remove from the store, but loss exposure from a dishonest bookkeeper is much greater.
  • At the top. Some estimates put the amount of employee theft attributable to managers and supervisors at over 50 percent.
Keep an Eye on the Problem -- or Two or Three or 40 ...

If a potential shoplifter knows the store owner or staff member sees them, and can recognize them if the need arises, they will be less likely to steal from the store. The key phrase there, of course, is "less likely." Let's face it, some thieves are either too bold or too good at their craft, or possibly too desperate, to care. To keep an eye on customers, many booksellers have turned to electronic article surveillance systems and security cameras.

Boulder Book Store has had a security system for the past 25 years. Boulder has three entrances and exits and each has a security gate. In addition, "we have 40 video cameras throughout the store," Bolduc reported. Then again, a week doesn't go by when someone doesn't run through an exit with a stolen book, setting off the alarm in the process. At that point, the store goes to the video tape to reconstruct "who did what."

Szczeblowski said Porter Square is experimenting with cameras to make up for poor sightlines. "We plan to cover certain areas with cameras," he said. "We noticed that particular areas of the store are being shoplifted due to sightlines. It's all about opportunities. You need to try to minimize opportunities."

One of the key benefits to having cameras, said Bolduc, is that they provide documentation of the event. After all, if someone bolts and runs, it's unlikely a bookseller is going to catch the shoplifter. "We will print out a picture [of the thief] and post it throughout the store," he explained. "If they come back, one of the managers will tell them to leave the store and the next time they come back they will be arrested."

Furthermore, the police appreciate meticulous documentation of any alleged crime. With video evidence and careful reporting, "police feel confident to follow up on our claim because they see that we've been careful," said Bolduc.

Of course, for a store that does not have cameras, there is the old-fashioned way of keeping an eye out for potential thieves, Szczeblowski noted. "Greet customers. An important asset for shoplifters is their anonymity. The more you can make eye contact, it increases the chance of their not stealing anything."

Train Yourself and Your Staff

As noted previously, an inattentive and untrained staff is a boon for thieves. As such, it is imperative that staff be trained to be alert to security risks and to follow procedures, and that there be a clear and consistent security policy and procedure in place. In addition, store owners should understand their states' laws on how to deal with theft.

"We put in our security system 25 years ago, but we saw no decrease in theft," Bolduc reported. The reason was that the staff wasn't trained in security procedures. "So the local hardware store let me bring in their main security guy to do staff training. Most people in retail have misconceptions about what you are allowed and not allowed to do. But the store is just like your home." He added: "You need to become well versed in the law -- it is the most important single thing you can do to benefit your store."

As Bolduc noted, one of the best sources for training is the local police department. It's worth either asking if one of their officers will come and speak about loss control at the store, or, as Bolduc did initially, bring in a security person from another local store.

An officer can provide staff with key tips for identifying shoplifters, such as looking for people wearing bulky clothing or carrying a large open bag. In addition, shoplifters will undoubtedly display suspicious behavior while in the store -- they will be nervous, seek privacy, conceal or misplace merchandise, will enter in groups that create diversionary tactics, or enter unauthorized areas of the store.

Bolduc also uses videotapes of real-life incidents at Boulder Book Store to train staff about the right and wrong ways to handle security situations. Moreover, he stressed it's important that staff know "when the alarm goes off you need to approach people, though you don't want to endanger yourself." He said that some people simply did not want to be put in that kind of situation, and one or two staff members had left because they didn't want to confront people.

"We're in an urban strip mall, so our mall had someone come in and speak to store managers of the various establishments about loss control," said Szczeblowski.

And Hill said that Vroman's is currently retraining staff regarding cash handling in general in an effort to thwart quick-change artists and other retail scammers.

Maximize Sight Lines in Store Design

Store design and layout are key in stopping thieves and reducing the opportunities for theft, both from internal and external sources.

"Store design plays a significant role and is extremely problematic in a traditional bookstore layout," said Hill. "We try to compensate with security cameras (real and fake), lighting, mirrors, and staff awareness on the sales floor."

Both Szczeblowski and Bolduc told BTW that they have to deal with store layouts that are, well, conducive to theft.

"Our store is three stories in a 100-year-old building and it rambles all over the place," Bolduc said. "That's why the cameras are there, because there are so many nooks and crannies. Due to the nature of the bookstore design, theft is very difficult to prevent."

At Porter Square Books, display space has hampered sight lines, and the store's cash/wrap is away from the door, which is why the store has security gates at the exits and entrances.

Other solutions include using mirrors to make problem areas more visible, increasing lighting in dark areas, and keeping expensive or high-theft merchandise in clear view of staff. The cash/wrap should be positioned so that it's easily visible to other staff members and so that the back of the counter is not easily accessible by customers. Registers should also have automatic lock systems.

Cooperate With Your Fellow Retailers

Vroman's has historically had a problem with art books being stolen and then resold to other local bookstores for quick cash. "We address the issue by forming relationships with the used bookstores and putting an end to the demand for the art books," said Hill.

When Bolduc was plotting to tighten security in his store, he sought the advice of a fellow retailer who had experience with security. In the case of Boulder Book Store, it was a large hardware store in town.

Don't Neglect Internal Security

It is most likely the natural instinct of a store owner to trust their staff as honest folk who never steal. And, as Bolduc stated, 95 percent of the time, they are right. "It just takes these few people and you're losing money."

At Boulder Book Store, the key is to not give staff the opportunity to steal. One of the best deterrents to internal theft, Bolduc explained, is being serious and consistent with how you deal with external theft. "Unless the staff sees you serious about external theft, they are not going to take you seriously about internal theft. Consistency in policies and procedures in is the key."

In addition, just like customers, staff must pass through security at the entrances and exits to the store. They must sign out any book they borrow, and they are not allowed to keep books in their lockers. The more hoops you present them, the less likely they'll steal, Bolduc said.

Of course, it helps to hire people who are honest. Bolduc said that he researches a potential employee via the Internet to see if anything comes up. The store has been doing more serious background checks than in the past. It's also important to check references and to stress the importance of honesty and security in the store. When in doubt, don't hire.

To prevent accounting fraud, it is best to require a counter signature on all checks, to review the bank statements, and to institute strict cash handling procedures. --David Grogan