When talking about Loss Prevention tools or solutions, Mystery Shopping is not typically “in the room”. Most executives view Mystery Shopping as a market research or customer service tool only. The fact that many Loss Prevention programs do not involve a mystery shopping component is interesting, as mystery shopping had its roots in loss prevention at the inception of the industry. According to information found on the website of the Mystery Shopping Providers Association (MSPA), “…mystery shopping was a technique used by private investigators to prevent employee theft – primarily at banks and retail stores”. The term mystery shopping was coined in the 1940s and started being used as a method for evaluating customer service at this time.
“Mystery Shopping is the practice of using trained shoppers to anonymously evaluate customer service, operations, employee integrity, merchandising and product quality”. – MSPA
It seems that mystery shopping has come full circle since the 1940s, as more and more retail and restaurant organizations see the deterrent value of the practice and are including mystery shop type programs as part of their overall loss prevention strategy. There are other names for these types of covert shops, including Bar Spotting and integrity shops. Several full-service mystery shopping companies got their start through Private Investigators conducting “Bar Spots” in restaurants and lounges. The goal of bar spotting is to identify employees at the bar over or under portioning liquor, underringing sales, comping drinks to friends and family, etc.
Integrity shopping is the retail variation of bar spotting. Retail and restaurant loss prevention departments have learned that it is more economical to send in a mystery shopper to test an employee, than to send in a field LP manager to conduct an investigation on the integrity of an employee. What do I mean by “Test” an employee? Here is an example: You suspect the GM in a store is dishonest and have heard complaints from customers or other employees that the GM was observed not ringing a transaction, or offered an item for less than the ticketed price, as long as the customer paid in cash. You have a couple options here. One inexpensive approach would be to send in a mystery shopper and offer the GM a reduced price, drop a $20 bill and leave. This is often referred to as a “Cash Drop” Shop. Following the drop, the District Manager or some other manager can verify whether the sale was recorded in the register system. In this situation, as well as others, you are simply providing the GM the opportunity to take the right action, and ring or report the transaction, and place the money in the register. Another action would be to hand the employee a $20 bill and explain that you just found it on the floor, and document what the employee did with the cash.
Several retailers conduct “Integrity Shops” in all of their stores on a recurring basis. Some only conduct these types of shops in their “High Shrink” locations. Either way, the goal should be to promote sales reporting integrity, as the true impact of such shops come from promoting the program at the start, and to regularly promote the results of such shops. If employees know that the LP department uses Integrity Shoppers, they will have to consider that every customer may be that shopper.
Although there are many benefits to using mystery shopping as a tool in your loss prevention program, there are also some challenges. There is a tendency to want to take immediate disciplinary action when the shopper claims the sale was not recorded. When this occurs, the more responsible course of action would be to go back into the same location and attempt to duplicate the dishonest action using a licensed private investigator in that state. Depending on the state you are shopping, there may be a requirement that such integrity related shops are to be conducted only by licensed private investigators. If adverse employment or legal actions are taken against an employee when a non-private investigator shopper claims dishonesty by the employee, the retailer could face legal or employment action by the employee. It is very important to make sure you know the state law on this issue prior to taking a negative employment action based on a mystery shop result. With that said, retailers realize the value of using a mystery shopper to conduct an integrity shop to document that dishonest behavior is occurring, then follow that up with a licensed PI to further document the action, and to support a prosecution or termination.
The savings realized through the use of a mystery shopper first, can be significant. Using a mystery shopper up front will cost you a per shop fee of $35-$60, where a PI charges typically by the hour at a rate of $55-$90 per hour. With a PI, there are usually minimum hours of 2-4 hours, and you are likely to be charged at least an hour for report writing, and travel time, which you do not have with a traditional mystery shopper. Additionally, over the past 5-7 years there appears to be a rise in the use of mystery shopping or subcontract audit companies to co-source other LP functions, including operational, loss prevention, and standards auditing. Again, there are several benefits to this, primarily financial. Another benefit is the issue of independence in the findings. However, in using outside resources to provide these solutions, or to support your existing staff, work quality must be managed closely to ensure that contract staff are well trained and are representing your department effectively.
While traditional LP tools such as Audits, CCTV, Burglar Alarms, Investigations, Hotlines, and Exception Based Reporting are all highly effective tools in preventing loss in retail, don’t leave Integrity Shopping out of your toolbox. It is an effective and economical strategy when used with the other components of your loss prevention program. $
