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.

Support trained staff with physical theft deterrents.

Physical Deterrents the Next Line of Defence

  • Staff training to reduce potential shoplifting must be supported with physical theft deterrents.
  • Ensure every part of the store can be seen by sales staff at all times. Blind spots, dressing rooms and tall shelving units make theft easy.
  • Users of dressing rooms expect privacy, but there can be no such expectation on the store floor. Security cameras should be placed strategically to monitor the floor area. A large monitor at check out will provide live video from every camera to enable cashiers to view suspicious actions.
  • Placing mirrors to view blind spots is an alternative to cameras although not as effective since staff cannot always be watching.
  • Expensive merchandise should be looped through an alarm box or fitted with Radio Frequency Identification (RFID) devices that sound an alarm as soon as the product is removed from its packaging or its shelf space.

Please Leave the Store

You have the right to ask someone to leave your store. Most merchants are hesitant to do this because they do not wish to create conflict or negative publicity. Nevertheless, you are well within your rights to ask someone to leave and inform them that if they return, they will be trespassing. Do not provide a specific reason. Above all, never suggest they are stealing and do not physically touch them. Such actions will not only escalate the situation but could result in legal actions against you. If an individual refuses to leave, contact the police and have the individual removed. Most provinces will have a trespass act that provides you with grounds to inform the unwanted customer either in writing or orally that they are not welcome on your premises. The wording will read something like the Ontario Trespass to Property Act (1990):
2. (1) Every person who is not acting under a right or authority conferred by law and who,

  • (a) without the express permission of the occupier, the proof of which rests on the defendant,
    (i) enters on premises when entry is prohibited under this Act, or
    (ii) engages in an activity on premises when the activity is prohibited under this Act; or
  • (b) does not leave the premises immediately after he or she is directed to do so by the occupier of the premises or a person authorized by the occupier, is guilty of an offence and on conviction is liable to a fine of not more than $10,000.

Detaining the individual on suspicion of theft without immediately calling the police is unwise since it risks a charge of “forcible confinement” under the Criminal Code. Consult with your lawyer to establish how and on what grounds your staff can approach and temporarily hold any suspected shoplifter.

Train Staff

Store staff are the frontline in shoplifting prevention. Educating staff in anti-shoplifting procedures combined with a one-time installation cost of physical deterrents should return your inventory costs and profit to their normal levels.

Contact Argento CPA today!


Disclaimer: BUSINESS MATTERS deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.
Although every reasonable effort has been made to ensure the accuracy of the information contained in this letter, no individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.
BUSINESS MATTERS is prepared bimonthly by the Chartered Professional Accountants of Canada for the clients of its members.
Richard Fulcher, CPA, CA – Author; Patricia Adamson, M.A., M.I.St. – CPA Canada Editor.
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