Retail loss prevention

Retail loss prevention (in some retailers known as asset protection) is a form of private investigation into larceny or theft. The focus of such investigations generally includes shoplifting, package pilferage, embezzlement, credit fraud, and check fraud. "Loss prevention" or "LP" is used to describe a number of methods used to reduce the amount of all losses and shrinkage often related to retail trade.

Store personnel that are hired for this task are known as: loss prevention agents, loss prevention officers, asset protection agents, store detectives, store security etc.

Sources of loss/shrink

The objective is to maximize profits through reducing inventory shrinkage, essentially the value of missing inventory. According to the 2006 National Retail Security Survey, retail operations suffered an average annual inventory shrinkage percentage of 1.57% in 2006. According to the survey, shrink is divided into 5 categories:

• 46.8% from employee theft,
• 31.6% from shoplifting
• 14.4% from administrative error
• 3.75% from vendor error
• 2.86% from unknown error

Although most retailers experience a shrink percentage of less than 2%, some smaller retailers often experience monthly and annual average shrinkage percentages as high as 20%.

Types of retail loss prevention investigations

Shoplifting

Main article: Shoplifting

Embezzlement

Cheque Fraud

Credit card theft

Stolen credit cards find their way into retail stores as much as or more than online retail websites. This is usually for several reasons. Retailers have generally relaxed their procedures for checking credit cards, to shorten customers' time spent at the cash register. Also, purchasing merchandise first-hand affords a credit card thief some anonymity, as opposed to providing a mailing address for an online sale.

Most retailers are not liable for the use of stolen cards, unless they have chosen to override the chip and PIN and accept a customer's signature when they could have accepted a PIN.

Main article: Credit card fraud

Check fraud

Check fraud is accomplished in several ways. One way is by writing a fraudulent check that is manufactured to look like a real document, which in fact has no real value or no real bank account to back it up. Due to the complexity of the process and the high-levels of knowledge and skill required to successfully do this, it is typically done only by people who are experienced in forgery and making counterfeit cash. Another method is check kiting, in which the suspect writes a check for a high dollar purchase, then withdraws the funds from the account before the check clears. Check kiting is usually done when suspects establish a fraudulent bank account under a false name. One other common check fraud tactic is to write a check on a closed account.

Margin loss and sweethearting

Retail loss prevention departments are becoming increasingly more involved in investigating losses which affect the margin of products and services. Typical areas of investigation include the overriding of PLU prices, price matching from competitors, and reduction of service fees such as delivery or protection agreements. While unintentional margin loss is reduced by educating employees and managers, the term for intentional margin loss is sweethearting. Sweethearting generally occurs when an employee promises a deal to a customer in order to close a sale, or otherwise reduces the price of merchandise for dishonest reasons. Sweethearting investigations involve research into employees' finding competitor price matches to give to customers; overriding prices for their customers, friends, and themselves; and markdown of fees such as delivery and protection agreements.

Equipment, tactics, and technology

Handcuffs / Expandable Baton / Wallet Badge

Exception-based reporting (EBR)

In the past 10 years, exception-based reporting (EBR) has become a widespread tool for loss prevention in retail organizations. EBR has allowed retailers to easily identify instances of potentially fraudulent activity by using data from the ERP, point-of-sale systems, and more. By utilizing this form of technology, retailers no longer have to search through cumbersome sales records to spot patterns of dishonesty.

These are an automated profit increase solutions, providing pin-pointed analysis and guidance for improved merchandise control, compliance assurance, loss prevention and fraud detection. These solutions are covering all operational areas of the retail enterprise – the POS, store operation, supply chain and purchasing.

Camera systems

The Post Exchange's loss prevention office, scanning the store September 16 from an electronic video surveillance room

CCTV CCTV is an abbreviation for Closed Circuit Television. CCTV camera systems are common to almost all loss prevention departments. The obvious benefits of CCTV camera is that the investigator can gain a better view of a suspect, record incidents, and not reveal themselves to shoplifting suspects. Some retailers use two-man teams in which one person uses the CCTV camera system to detect shoplifters and a floor man follows the suspect and apprehends them.

CCTV camera systems have been drastically modernized in the last decade. Most systems now record digitally as opposed to using videotapes. Many systems now include a computer server that stores recorded video for months at a time. Digital cameras overlooking registers have greatly increased the number of internal cash thefts being resolved, and in some major cities such as Houston, Texas, an ordinance now requires convenience stores, pawn shops and similar outlets to have at least one camera trained on the entrance door(s) and one on the register.

Electronic article surveillance

A tag used for EAS

Main article: Electronic article surveillance

Electronic article surveillance (EAS) is a deterrence system used by retailers to deter shoplifting. EAS involves the use of electronic security towers and electronic security tags. Hard tags or Sticker tags are placed on items throughout the store manually or are applied when merchandise is made and are disabled at check-out by either removing the hard tag using a detacher or by scanning label tags over a magnetic label deactivator. If the tag is not disabled it will activate the alarm pedestals, which are generally located at the exit of a retail store. EAS tags & labels are extremely effective in deterring amateur shoplifting, but most professionals require a combination of hard tags, labels, and ink tags to keep them in check. Even with the most elaborate anti-shoplifting systems some goods will be lost; this is possible with booster bags or simply a "grab and run".

Dual Resonator EAS stickers are usually placed on small items such as shaving razors and cold medicines. These items are popular items to sell at flea markets and swap meets.^{[citation needed]} Dual Resonator EAS stickers are printed on thin paper and are difficult to remove. The high speed packaging application of these stickers was perfected by Craig Patterson (Knoxville, TN) and is a process called Source Tagging. Usually the sticker includes a retailer's company logo and serves as an indication to would-be buyers that the merchandise has been stolen.

Two-way radio sets

Almost all loss prevention departments have some form of two-way radio communication. This technology is used by LP investigators to help teams follow shoplifting suspect(s) in conjunction with the CCTV camera system operators, summon assistance when apprehending a shoplifter(s), contact mall security when available and request police assistance. Most LP associates, agents, officers, etc., when actively "working the floor" conceal their radios and keep the volume at a low setting as not to "blow their cover".

Point of sale

Main article: Point of sale

Point of sale is a form of electronic journal that allows the loss prevention investigator to see a transaction as it is occurring live. This system is either displayed on a computer screen or on a monitor linked to the CCTV camera system. This system has assisted investigators in closing employee embezzlement cases pertaining to merchandise passing, merchandise voiding, and discount fraud.

Audits and reporting

Exception reports

Exception reports are compiled on an annual basis into a report. Usually the reports are received monthly or bi-weekly. They include information on cash audit overs and shorts, no-sales, flagged returns, employees ringing themselves up, fake employee numbers used to avoid commission docking, excessive markdowns and/or discounts, and merchandise voids. Exception reports have dramatically reduced the amount of time an investigator needs to detect a possible sign of employee embezzlement.

Electronic journals

Almost every large retail institution has some form of electronic journal which records all its transactions. Information such as credit card numbers, gift card numbers, refunds, and merchandise voids are gathered at the point-of-sale. These journals can then be used to view and print facsimiles of receipts or checks.

Cash office audits

A cash office audit usually counts up the cash from transactions at the retailer's registers. A shortage occurs when the amount contained in the register does not match what the cash audit says it should have. Shortages are used to begin and close cash embezzlement cases that are investigated by loss prevention departments. Cash office audits all employees who used a particular register during the day. This information is used by loss prevention investigators to narrow the field of suspected employees.

Ink tags

Ink tags have been around for several decades and are most commonly used by clothing retailers. Special equipment is required to remove the tags from the clothing. When the tags are forcibly removed, one or two glass vials containing permanent ink will break, causing it to spill over the clothing, effectively destroying it. Ink tags fall into the loss prevention category called benefit denial. As the name suggests, an ink tag denies the shoplifter any benefit for his or her efforts. Despite this, shoplifters have found ways around them. Ink tags are most effective if used together with another anti-shoplifting system so that the shoplifter can not use the product or remove the ink tag.

Ceiling mirrors

Ceiling mirrors were once a staple of the loss prevention industry. Now, for the most part, they have been relegated to convenience stores. Mirrors allow loss prevention investigators to watch activity in a high-theft area without being seen. Some loss prevention departments have been known to use mirrors to increase the range of their camera systems.

Retailers also mirror the stores structure columns. This not only benefits the customer by allowing them to view themselves it also assists LP camera operators who use the mirrors to reflect their cameras view in another direction.

Bottom of basket

Bottom of basket loss (BOB) occurs when an item is placed on the lower tray of a shopping cart. The cashier may forget to check the lower tray for items, resulting in the item not being paid for. What makes this form of shrink unique is that it may happen intentionally or unintentionally. Estimates for the dollar amount lost in this manner are over US$2 billion per year in North America alone, or $7 per checkout lane per day. There are a few products on the market to help prevent this loss. The most common are mirrors mounted across the checkout lane. Some stores have camera systems pointed at the lower tray with monitors for each cashier. Neither of these systems are completely effective as the problem is not visibility alone but also the inattentive cashier and/or forgetful customer.

A newer type of system actively monitors the checkout lane and alerts the cashier when an item is detected on the lower tray of the shopping cart. The alarm will trigger when any object is detected on the lower tray but the systems' technology is able to distinguish between a shopping cart and a person or bag passing through the lane. Unfortunately, none of these types of "alarm" systems have made any significant impact on BOB loss rates, as the cashier tends to ignore them within 3 months of installation. There is no way to ascertain whether the cashier simply ignored the alarm.

Consent searches

Consent searches are widely used in law enforcement as well as loss prevention. When a customer consents to a search of their belongings, it is very difficult to later challenge the legality of the search in court, should an offence be detected in this manner. Consent searches in some instances can be used to build on previously existing evidence to establish the probable cause necessary to detain a shoplifter. The extreme end of establishing probable cause through a consent search has been eliminated except with a few smaller companies who still utilize it.

In modern retail loss prevention, consent searches are most often utilized by warehouse retailers such as Costco and Sam's Club. The warehouse retailers have made consent searches of their customers' purchases a part of the membership agreement. Although a customer may refuse to consent to a search from a legal standpoint, the warehouse retailer does retain the right as a private business entity to strip the customer of their membership or issue a verbal trespass. Warehouse retailers have been able to utilize consent searches to lower their prices on goods and reduce external shrinkage at the same time.^{[citation needed]}

Certain states such as New Jersey allow loss prevention personnel to apprehend a shoplifter as soon as they conceal merchandise, rather than being required to wait until the customer attempts to leave the store. LP staff do not often make use of this permission, however, as a better court case is constructed when the shoplifter with the concealed merchandise attempts to walk out the door.

Viewing towers

Although the necessity of viewing towers or "perches" has been largely eliminated by CCTV camera systems, they still exist today. A tower providing a wide view of the selling area is usually situated along the wall areas of a store, accessed by stock room ladders . Some perches were also walls that were floor level and centrally located. Two way glass is used to hide the LP associate from the customer. Some appear to be mere display walls or customer mirrors. Others are equipped with phones that will blink a light so not to alarm a shoplifter by ringing. An investigator can spend time in the tower while searching for shoplifters or investigating employees, much in the same manner as with CCTV. Most towers are now obsolete and being eliminated from many retail establishments. Some do remain even in major retail stores but their obsolescence due to CCTV systems has resulted in many being turned into small stock rooms.

Integrity shops

The information gained from an integrity shop can be used to initiate investigations or conduct interviews that could possibly reveal dishonest and/or criminal employee behavior. Integrity shoppers are at times LP associates from other stores or an outside company. The integrity shopper purchases items at a register and the LP associate monitors the sales person.

Integrity surveillance also is used to monitor cleaning crews, contractors working in the store and on some occasions by management or corporate officials to monitor LP associates themselves. LP monitoring of cleaning crews and contractors is often conducted outside of trading hours when the store is closed. It is common for LP crews to remain in the store after closing and monitor via CCTV.

Facial recognition

Facial recognition systems mounted at the point of entry to a store are capable of comparing the faces of people entering the store against a blacklist of known shoplifters. This allows a suitable system to notify store security when a person of interest enters the store, thereby allowing the person to either be ejected from the store (removing the opportunity for the loss to occur in the first place), or alternative allow more detailed surveillance in order to detect a theft occurrence with one of the above systems.

See also

• Authentication
• Security Smoke
• Tamper-evident
• Tamper resistance

Further reading

• Hayes, R., "Retail Security and Loss Prevention", 1991, ISBN 0570690380
• Horan, D.J., "The Retailer's Guide to Loss Prevention and Security", 1996, ISBN 084938110X
• Kimieckik, R., C., "Loss Prevention Guide for Retail Businesses", 1995, ISBN 0471076368
• Thomas, C., "Loss Prevention in the Retail Business", 2005, ISBN 0471723215

External links

• HowStuffWorks: How anti-shoplifting devices work
• LP Eye United Kingdom loss prevention information