Shoplifting poses a serious threat to Australian retailers. Recent research has highlighted a rising perception of crime across communities. Today, Australians increasingly see crime as a growing problem. Sixty-six per cent now agree it's growing in their areas, which is the highest level in a decade.

This perception has increased by 15% over the past four years, which aligns with the complex data showing a 12% national rise in theft incidents from 2021 to 2024. I have discussed this here before, highlighting how shoplifting has increased significantly since the COVID-19 pandemic.

Part of the reason is that attitudes have changed. Many no longer view theft as wrong. They often blame stores for weak security. If a shop seems vulnerable, they reason it's the business's fault. Additionally, it has been fueled by growing economic desperation since COVID, and Australian living standards have experienced a significant decline, with the sharpest fall in real household disposable incomes in decades, which is pushing some towards theft.

It is a reality today that I have spoken with retailers throughout Australia. They all share stories of thieves now being bolder.

The Real Impact on Your Retail Business

Say an SMB shop with $700,000 in annual sales and a 30% margin. Shrinkage from theft at 1.5% to 2% would cut profits by 4%. In low-margin sectors like newsagencies, this could destroy a business entirely. I've advised retailers who have been hit even harder by this. I have seen shops where we discovered inventory gaps of thousands over a few months.

Shrinkage affects more than finances. It leads to stockouts, as computerised controls no longer work, so we see frustrated customers who go elsewhere. That alone can destroy a shop's goodwill.

If not addressed early, thieves grow bolder. They learn your weaknesses and will return to exploit them.

Measure the problem with facts

Firstly, determine the size of the problem. Your accountant can assist you here, or if you prefer, you can do it yourself, as it's not particularly difficult.

Look at the year 2023/24 and write the stock on hand at the start of the 2024/25 year, say $X

Now, look at the stocktake of your shop that you conducted at the end of the 2024/25 year, say $Y.

Now, take from your financial report in 2024/25 the sales figure $S, and the purchase figures $P

Now, estimate your margin. You will need a gut feel for this.

Now your (Theoretical Stock on hand) = (Stock at the start of the financial year = $X) + (Purchases in the financial year = $P) - (Sales this financial year = $S) *(1-Margin%)

The (Missing stock) = (Theoretical Stock on hand) - (Stock value now from the stock take $Y)

If you want to compare your figure with others the formula = 1 - (Missing stock)/(Theoretical Stock on hand)

I have seen many at this stage go white.

Finally, follow these steps to calculate Theoretical Sales at Retail.

Formula: Theoretical Sales = ((Stock at the start of the financial year = $X) + (Purchases in the financial year = $P) - (Stock value now from the stock take= $Y)) / (1 - Margin%)

It provides the theoretical basis by treating all missing stock as if it had been sold.

Now, calculate the Difference (Actual Sales - Theoretical Sales), which gives us the revenue lost to shoplifting.

Working example with numbers

Assume

Stock at the start of the financial year = $100,000 Purchases in the financial year = $200,000 Sales in the financial year = $250,000 Stock take figure at the end of the year = $90,000 Margin% = 40%

Example with these hypothetical numbers

Theoretical Stock = $100,000 + $200,000 - $250,000 × (1 - 0.4) = $300,000 - $150,000 = $150,000

Missing Stock = $150,000 - $90,000 = $60,000 (at cost)

Theoretical Sales = ($100,000 + $200,000 - $90,000) / (1 - 0.4) = $210,000 / 0.6 ≈ $350,000

Difference = $250,000 - $350,000 = -$100,000

This analysis does not reveal how much stock was lost (generally external) or how much money was stolen from you (almost always internal). Although it is a reality, it tends to be a combination of both so we can say here that somewhere between $60,000 of stock is missing and $100,000 in money. Most analysist here would simply halve the difference and say you have lost $30,000 in stock and $50,000 in stolen money. 

Effective Prevention

Mapping theft hot spots

I would firstly suggest that you map out the blind spots and risky areas in your shop. I have discussed this with detailed instructions point by point here.

What it does is map theft hot spots to your shop layout. What you are looking for are the danger areas in your shop; this visual method is a quick method to improve your design. Knowing where the stuff disappears can give you a good idea of whether the problem is internal or external.

In practice, simple changes can also be effective, such as improving lighting or adjusting staff positions, which cost little and yield significant results.

One client, after doing this, found that their end-of-aisle displays were targets. They moved the camera there, which helped to cut their losses almost immediately.

Employee Theft: A Hidden Threat

Internal theft hurts deeply. It's often subtle, accumulating over time. Many staff today see it as a perk. Our POS tracks user actions and audit trails. It identifies anomalies. A client uncovered years of losses this way. Address it early. Combine with staff training for accountability. Protect your business while supporting your team.

One idea is to have a camera pointing at the tills, allowing for visual monitoring of what goes in and out. Review this footage and compare your sales audit figures to ensure they match one another. You may be surprised by what you find. I had one client who did this and discovered that one employee was taking money, putting it in the till without ringing it up, and later taking it out. I like what he told the police after he was reported: "I took the money but did not steal it."

Conclusion

Shoplifting is estimated to cost $9 billion a year; it's the largest crime by value in Australia. Shoplifting incidents have nearly doubled from 2022 to 2024, as accurately measured through stock analysis and theoretical sales calculations. Quantify the losses and understand your current position.

Written by:

Bernard Zimmermann is the founding director of POS Solutions, a leading point-of-sale system company with 45 years of industry experience, now retired and seeking new opportunities. He consults with various organisations, from small businesses to large retailers and government institutions. Bernard is passionate about helping companies optimise their operations through innovative POS technology and enabling seamless customer experiences through effective software solutions.

MOTO payments are EFTPOS transactions where the payment card used is not present. It is often used for payments made over the phone.

For many of my clients, this is a major source of income.

Besides having higher fees than regular credit card transactions, they can also be trouble as yesterday one of my clients found out. As the card was not there when the transaction occurred when the customer complained, it was my client's responsibility to prove that the actual cardholder authorised this transaction, This was impossible to do. A chargeback was done. The transaction cancelled. The goods sent are lost.

The problem is that for many of my clients there is no alternation but to accept MOTO payments

If so here are some tips that the bank sent, that might help by giving you some warning signs, so I thought I would share them here:

1. If the delivery address does not look right
2. Overseas orders
3. Orders from people claiming that they cannot be contacted
4. If a transaction is big or has orders for large quantities of the same item that do not seem to fit.
5. If the same person starts giving you in a short time many orders
6. If the orders are required urgently

What can I say but be careful? Accepting MOTO payments is a business decision.

Unlike many other point of sale software, our system talks directly to the cameras which mean we get involved in security cameras, which I do not mind as I find these fascinating.

The first point is cameras seem to be the best form of evidence in a theft that judges accept today in retail. So it is important to get it right.

Some of our clients have installed these type of cameras to protect the outside of their shop. Say you put them in a spot guarding the rear of the shop.

If you are thinking of getting some of these cameras, here are some points to note.

) As they are outside, they need to be waterproof. Avoid plastic ones as they need to be sturdy so metal is better. Plus if they are metal, you can nail them in.

) Its best to get ones that have a lot of flexibility in their stands as you will need to aim them.

) Test the motion detection. When we tested some and found that the motion detector did not work well at all.

) The installation seems to be quite easy. I would say that someone that is reasonably handy with their hands and tools should be able to install them. Since they are outside, they can be an eyesore so they do not need to be professionally installed as would be the case in the shop. In fact, it is better its an eyesore as it will be noticed by thieves.

) You do need to find a good spot to put them. Make sure this spot has some wind and rain protection. Strong winds are often a real pain as they set up false signals. The spot will need a powerpoint and a decent WiFi signal. In shopping centres we have seen problems are there seems to be a lot of interference on the WiFi if so you may need to move it closer to the shop although another possibility is to install a WiFi extender.

) Once installed you need to check the picture quality both in the daytime and at night.

) Check the frame rate, most defaults are one picture in ten seconds. In ten seconds a thief can be long gone from the camera's view. I would recommend one picture in three seconds.

) One of my clients reported that they found if they walk on a certain path it did not set off the motion detector in the camera. This problem is common so you may want to consider more cameras.

) As with most videos systems today you need a decent size hard drive to keep the images.

) Lastly, you will generally only get a few years out of these cameras before they need to be replaced. They need to be tested every few months.

Overall they do appear to be very good at deterring thieves. One client had a shed in the back, which was burgled a few times, they put in these cameras and no-one has come back.

I hope this all helps.

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