Retail loss prevention
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A retail loss prevention worker in uniform, employed by Target Corporation, 2014
|Names||Loss Prevention Officer, Asset Protection Specialist|
Retail Loss Prevention is a set of practices employed by retail companies to preserve profit. Profit preservation is any business activity specifically designed to reduce preventable losses. A preventable loss is any business cost caused by deliberate or inadvertent human actions, colloquially known as "shrinkage". Deliberate human actions that cause loss to a retail company can be theft, fraud, vandalism, waste, abuse, or misconduct. Inadvertent human actions attributable to loss are poorly executed business processes, where employees fail to follow existing policies or procedures – or cases in which business policies and procedures are lacking. Loss prevention is mainly found within the retail sector but also can be found within other business environments.
Since retail loss prevention is geared towards the elimination of preventable loss and the bulk of preventable loss in retail is caused by deliberate human activity, traditional approaches to retail loss prevention have been through visible security measures matched with technology such as CCTV and electronic sensor barriers. Most companies take this traditional approach by either having their own in-house loss prevention team or using external security agencies. Charles A. Sennewald and John H. Christman state, "Four elements are necessary for a successful loss prevention plan: 1) Total support from top management, 2) A positive employee attitude, 3) Maximum use of all available resources, 4) A system which establishes both responsibility and accountability for loss prevention through evaluations that are consistent and progressive."
Periodically retail business inventories all of the merchandise in the store. Items that are unaccounted for compared to what the inventory system believes the store should have are losses or "shrink". Shrink is caused by operational errors, internal theft, and external theft. Retail loss prevention is responsible for identifying these causes and following up with training, preventing, investigating, responding to and resolving them. According to the 2018 National Retail Federal National Retail Security Survey, the average Shrink % for US Retailers is 1.33%.
Global Shrink Rates
Average global shrink rates as table by region, ranging from a high of 1.85% in the US to a low of 1.75% in Asia Pacific.
Region Shrinkage, 2018-2018
Latin America 1.81%
Asia Pacific 1.75%
Operational errors are inadvertent human errors. Operational errors occur when associates do not follow existing business best practices and policies or a company lacks the proper best practices and policies to ensure work is performed with minimal human error. Operational errors also occur due to a lack of proper training for associates.
External theft is when customers intentionally cause shrink by theft, fraud, or vandalism. 80% of customers who steal merchandise are opportunists and do not walk into the store with the intent to steal. They find that one thing they did not expect to find, cannot afford to pay for it, and will steal it if they have the opportunity. Others are desperate who will steal essentials for their family, but only if they have the opportunity. A few steal because they like the adrenaline rush and will steal, regardless of how much money they have if they have the opportunity. The remainder are "boosters" who are thieves for a living, walk in with the full intent to steal and sell their goods for a profit, on their own, or to a "fence" that sells stolen merchandise.
The vast majority of thieves have one thing in common, they will steal only if they have the opportunity. So theft prevention is fairly easy. Constant and great customer service will eliminate most opportunity to steal. However, there are those who are not as easily deterred. Prevention techniques commonly used are customer service, Electronic Article Surveillance (EAS) with inventory control devices, uniformed or plain-clothed security or loss prevention personnel, surveillance systems, dummy cameras, locked display cases, etc.
Retail loss prevention uses several prevention techniques because, like most things, there is no one answer for everything. Once all prevention measures are in place, resolving external theft in many companies includes apprehending shoplifters. State laws vary and allow business owners or representatives of the company to detain shoplifters with "reasonable force" for a "reasonable amount of time" until law enforcement arrives. Several companies have designated trained individuals who are allowed to detain shoplifters according to company policy. Modern retail loss prevention teams use surveillance techniques with camera systems or on the sales floor or a combination. Working in teams has its advantages since one person can man the cameras while the rest of the team observes on the sales floor as individual shoppers in disguise or male and female loss prevention agents posing as a couple.
Policy from company to company varies, but are basically the same. There are very specific elements that Loss Prevention must observe before detaining a shoplifter.
Some of the typical elements are:
- Observe the subject enter the store or department
- Observe the subject select merchandise
- Observe the subject conceal merchandise
- Know what the subject selected and where it was concealed
- Maintain unbroken observation of the subject
In some companies, entering a restroom or fitting room is broken surveillance and elements must start over. Observe the subject pass all points of sale. In some states, the point of sale may be the line of cash registers or the front door. One must observe the subject exit the store.
If any of the elements used by the company are not observed, Loss Prevention may not detain the subject according to company policy. The use of force or detain the shoplifter varies from company to company and take local and state laws into consideration.
Detaining an individual who did not take merchandise is referred to as a "bad stop", and depending on the severity of the situation and if force was used against the innocent business patron will depend on the severity of the consequences for the loss prevention agent. Consequences for a bad stop may include a civil lawsuit, corrective action from the company up to and including termination, criminal prosecution for kidnapping is possible if an innocent customer is moved and detained against their will, etc. So mistakes are not an option and the fear of making mistakes can be very stressful.
In cases of internal theft, company employees intentionally cause shrink by theft, fraud, vandalism, waste, abuse, or misconduct. Because associates have access to the entire building and during non-business hours, they are capable of costing the company substantial losses over a longer period of time. Internal theft is typically identified by reporting systems, first-hand visual/CCTV surveillance or tips from coworkers.
Employee theft frequently occurs via dishonest operation of the Point Of Sale (POS) system. The primary way of identifying POS theft is by the use of data analytics software that identifies high risk POS activity and flags the transactions and employees for investigation by the retailer. These data analytics products are typically referred to as EBR (Exception Based Reporting) systems. Item markdowns, overrides, line item voids, suspended transactions, hand-keyed merchandise, refunds outside of normal transaction perimeters, cash over/shorts, and other reports are monitored for signs of dishonest behavior via automated EBR analysis. Although some companies hire a third-party to perform EBR analysis to identify specific patterns, most large retailers ($100M+ sales/year) either invest in a purpose built loss prevention EBR solution or build one in house with Business Intelligence software. When potential fraudulent POS activity is identified, the loss prevention will investigate to determine if the behavior is intentional theft, policy violation or an inadvertent error that can be solved with additional training.
Discount and Under Ringing fraud is becoming more prevalent as retailers become more promotion centric. The addition of various discounts types (coupons, promotions, loyalty rewards, etc.) offers a dishonest cashier a multitude of ways to discount an item, resulting in a friend/accomplice receiving unwarranted and excessive discounts. This type of fraud is commonly referred to “hooking up” or, by industry veterans, as “sweethearting” – i.e. “my friend works at the mall and hooked me up with this laptop for $50 bucks!”.
Associate merchandise theft that does not involve a computer or cash register is more difficult to identify because the offender must be witnessed directly. Whether prompted by suspicious behavior or expression, an anonymous tip, or intuition, internal theft cases are usually investigated with the use of video surveillance systems or a plainclothes loss prevention worker that the associate has not been introduced to. Because offending employees tend to adhere to a single method of theft, the installation of hidden surveillance cameras in a work area (provided company policy and local/state laws allow it) generally gives loss prevention an advantage in resolving the situation.
Once the internal theft has been proven, all required evidence has been collected, and approval is given by appropriate loss prevention or human resource management, loss prevention will bring the associate to the office for interview or interrogation. There are a few scenarios where a certified loss prevention agent will pull an associate based on a tip, rumor, or intuition and conduct a "cold interview" to attempt to acquire a verbal admission, but most companies do not allow cold interviews, as the implementations of the interview may be perceived by the associate to be an accusation of theft and have issues with civil liabilities that may result. It is often wiser to wait and complete a thorough investigation before conducting an interview unless you have a Certified Forensic Interrogator (CFI) attached to the name.
Once the interview is complete, Loss Prevention may proceed in several ways depending on the information gathered during the investigation and during the interview. Again, the investigation should identify if the associate's behavior was intentional theft, a policy violation or an inadvertent error that can be solved with additional training. If intentional theft is discovered, the police may be called and criminal charges filed. The severity of the criminal punishment will depend on the amount of property/cash/merchandise the company has lost due to the associate's dishonest/illegal behavior. To file criminal charges, the exact dollar amount stolen/lost must be proven beyond a reasonable doubt to hold up in a criminal trial. Termination of employment due to theft will most likely be an outcome of the investigation.
In addition to criminal prosecution, companies have the option to seek civil restitution. In a lot of theft cases, the company loses property that cannot be returned or recovered. Since the dishonest associate represented the company, the reputation of the company may have been tarnished, relationships with business partners may suffer or terminate, and the possibility of lost business opportunities with new clients. The company also uses a lot of resources, technology, and payroll to investigate internal theft, and any other possible losses or "damages" incurred by the company due to the associate's dishonest behavior allow the company to partner with a legal firm or their own legal department to demand civil restitution from the former associate in the amount determined by a case-by-case basis. Failure of the former associate to pay the civil restitution may result in the company filing a civil lawsuit.
Electronic article surveillance
The development of electronic article surveillance (a magnetic device attached to the merchandise that would trigger an alarm if removed from the store, also called EAS) led to an increase in arrests; however, many cases have been dismissed due to lack of observation of the crime. A later effort, called "benefit denial" by Read Hayes, was intended to reduce the incentives for people to take the items by destroying the usefulness of items that were improperly removed from stores through the use of measures such as exploding dye packs (ink tags).
Internal loss, as with other forms of shrinkage, can be classified as either "malicious" or "non-malicious".
The malicious internal loss is shrinkage caused by individuals from within the business such as staff members and cleaning staff and anyone else involved internally in the company. Internal shrink accounted for 35 percent of shrink to businesses in 2011. Internal shrink is caused by methods such as staff members stealing products, cashiers not ringing sales through the tills and keeping the payment for themselves, package pilferage, staff selling products to friends and family at discounted prices, "sweethearting" by giving products for free to friends and family by staff, colluding with maintenance staff or external contractors to steal products, and under-ringing merchandise on the tills for friends or family so they end up paying less for the items.
Internal theft traditionally causes more loss to a business than external theft due to the increased opportunity available to internal staff members. "A well-informed security superintendent of a nationwide chain of retail stores has estimated that it takes between forty and fifty shoplifting incidents to equal the annual loss caused by one dishonest individual inside an organization."
Non-malicious shrinkage can result from a number of operational failures within the business structure. The processing of returned or damaged stock, for example, can cause articles to be removed from inventory and discarded (which contributes directly to shrinkage) rather than sold at a discount, donated, returned to vendors for credit, or otherwise removed from inventory in a manner that minimizes financial loss.
The image of retail loss prevention has become linked with the controversial practice of civil recovery.
In the United States, laws were enacted in the 1970s allowing merchants to be awarded damages from those who removed merchandise without paying. Some say[who?] this law then began the development of departments that focused on retail loss prevention. In more modern times, merchants expanded "recovery" to include larger monetary damage awards. The controversy surrounds large retailers suing thieves in civil court for up to ten times the replacement cost of the merchandise stolen. These recovery amounts, argued by merchants, are for the costs associated with the detection, prevention, and prosecution of theft. In most cases, these recovery claims are secured voluntarily, in conjunction with criminal charges. Judges like to see a penitent thief repaying merchants for their crimes. It is more likely that people caught for stealing would voluntarily pay these claims rather than endure them appearing on their credit report as judgments.
- McAfee Institute
- Package pilferage
- Shopkeeper's privilege
- Store detective
- Tamper resistance
- Charles A. Sennewald; John H. Christman (2008). Retail Crime, Security, and Loss Prevention: An Encyclopedic Reference. Butterworth-Heinemann. ISBN 978-0-12-370529-7.
- Alan Greggo and Millie Kresevic, Retail Security and Loss Prevention Solutions (2011), Taylor & Francis, pp. 228
- Charles A. Sennewald and John H. Christman (2008). Retail crime, security and loss prevention. Oxford: Butterworth / Heinemann. 302
- National Retail Federation, 2018 National Retail Security Survey, https://nrf.com/system/tdf/Documents/retail%20library/NRF-NRSS-Industry-Research-Survey-2018.pdf?file=1&title=National%20retail%20security%20survey%202018
- Sensormatic (February 2018). "Global Shrink Index".
- Donald J. Horan. The Retailer's Guide to Loss Prevention and Security.
- Centre for Retail Research, 2011. "The Global Retail Theft Barometer 2011", Newark, Centre for Retail Research
- Lawrence J. Fennelly (1999). Handbook of loss prevention and crime prevention. 3rd ed. Woburn: Butterworth / Heinemann. 55
- Alan White (3 October 2012). "The £15m scandal our libel laws are silencing". London: New Statesman. Archived from the original on 2013-12-03.
- Rudolph C. Kimiecik; Chris Thomas (2005). Loss Prevention in the Retail Business. Wiley. ISBN 978-0-471-72321-9.
- Read Hayes (2007). Retail Security and Loss Prevention (2nd ed.). Palgrave Macmillan. ISBN 978-0-230-00681-2.
- Philip Purpura (2007). Security and Loss Prevention: An Introduction (5th ed.). Butterworth-Heinemann. ISBN 978-0-12-372525-7.
- Alan Greggo; Millie Kresevich (2009). Retail Loss Prevention: Problems and Solutions. CRC Press. ISBN 978-1-4200-9006-2.