What this term of endearment really means for loss prevention professionals and how to avoid it.

by John Lamont, JVC’s Director of Crime Prevention

A few years ago, Shannon Hill, National Client Services Manager at LP Innovations, wrote the following article, “Remember when the term “sweetheart” meant something endearing such as a true fondness for another person?  As with many words in the English language, “sweetheart” has multiple meanings, one of which retailers and loss prevention professionals do not find very endearing.

For loss prevention professionals, sweet-hearting is essentially giving (or aiding) a “customer” in the receipt of (additional) items without receiving full payment. Sweet-hearting can also cross over to refund fraud either in the form of a “customer” not bringing in merchandise, but receiving a refund from their friend or family member who is your associate or by a “customer” returning merchandise they received through a sweet-heart deal and receiving a full cash refund.”

This type of activity turns a term of endearment into an evil criminal act. It is not necessarily limited to one person in the store. It can become part of the store culture, costing a company thousands of dollars.

Several years ago, I was having a conversation with a loss prevention manager about an investigations he was conducting in a Canadian store during which he noticed that a large number of transactions that were made all totalled in only one cent. The transactions were all filed under repairs. After a lengthy enquiry, it was uncovered that the manager and all of the staff were giving themselves, as well as their family members, repairs for a charge of one penny. Meanwhile, the company was paying the goldsmith making the repairs full price. Each repair may have only cost the company $15 or $20 but when you add them all up, the total amounts to thousands of dollars. The manager of the store was not only sweet-hearting herself but also her staff and all of their relatives.

There was another instance in which a company instructed store staff to not discount particular solitaire diamonds. The staff had developed a philosophy of “Nobody Walks,” so in order to sell the diamond, they would offer the customer a matching band and discount it by 100 per cent.

In a research article entitled, “Service Sweethearting: Its Antecedents and Customer Consequences” in the March 2012 issue of the Journal of Marketing, authors Michael K. Brady, Clay M. Voorhees, and Michael J. Brusco say the following, “Sweethearting is an illicit behavior that costs firms billions of dollars annually in lost revenue. Sweethearting occurs when frontline workers give unauthorized free or discounted goods or services to customer conspirators.”

The authors gathered dyadic data from 171 service employees and 610 of their customers. They then compared questionnaire responses to relevant items that determined the relationship between the customers and the staff plus their attitude towards the store. The results from the employee data revealed that a variety of job, social, and remuneration factors motivated sweethearting behaviour and that several measurable employee traits suppress its frequency. The results from the customer data indicated that although sweethearting inflates a firm’s satisfaction, loyalty, and positive word-of-mouth scores by as much as 9 per cent, satisfaction with the confederate fully mediates these effects. Thus, any benefits for customer satisfaction or loyalty initiatives are tied to a frontline worker that the firm would rather not employ.

Basically, what I gathered from the study was that customers were drawn to the store when they received free or illegally discounted merchandise from dishonest employees, costing the company or store owners thousands of dollars. This is theft in the same way as stealing money from the cash register or product from the stock room. The above article went on to list ways to try and prevent sweethearting, which isn’t different from preventing other deviant employee behaviours. You can find an article that Phyllis Richard and I wrote on this subject called, “The Criminal Working Beside You” on the Jewellers Vigilance Crime web page at www.jewellerycrimecanada.ca. The article reveals that 10 per cent of employees will never, ever steal from their employers, 10 per cent will steal at any opportunity, and 80 per cent of employees are influenced by policies, procedures and supervision. These numbers have been used for a long time in the retail industry and are apocryphal – there is no hard data source to back them up. Most loss prevention workers use them to illustrate the fact that the vast majority of employees can be tempted to steal if a company does not have good policies, procedures or supervision. The doors of opportunity can be left wide open. Supervision is key. Companies as well as small stand-alone stores have to pay close attention to what transaction are going through their registers.

In over 20 years of investigating jewellery store theft, I have found that stores with superior policies, procedures and supervisors have very little employee theft and when it does occur, it’s very identifiable. CJ