Retail loss prevention

From Wikipedia, the free encyclopedia
Jump to: navigation, search

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".[1] 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 purely poorly executed business processes, where employees fail to follow existing policies or procedures - or cases in which business polices 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[2] 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 they use 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.".[3]


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.[4] 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.[1]

Internal loss[edit]

Internal loss, as with other forms of shrinkage, can be classified as either "malicious" and "non-malicious".

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.[5] 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."[6]

Non-malicious shrinkage can result from a number of operational failures within the business structure. The processing of returned and/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.

Civil recovery[edit]

Main article: Civil recovery

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.[1] 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.[citation needed] 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. The accused as 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.[7]

See also[edit]


  1. ^ a b c Charles A. Sennewald; John H. Christman (2008). Retail Crime, Security, and Loss Prevention: An Encyclopedic Reference. Butterworth-Heinemann. ISBN 978-0-12-370529-7. 
  2. ^ Retail Security and Loss Prevention Solutions By Alan Greggo, Millie Kresevic, 2011, Taylor & Francis pp. 228
  3. ^ Charles A. Sennewald and John H. Christman (2008). Retail crime, security and loss prevention. Oxford: Butterworth / Heinemann. 302
  4. ^ Donald J. Horan. The Retailer's Guide to Loss Prevention and Security.
  5. ^ Centre for Retail Research, 2011. The Global Retail Theft Barometer 2011, Newark, Centre for Retail Research
  6. ^ Lawrence J. Fennelly (1999). Handbook of loss prevention and crime prevention. 3rd ed. Woburn: Butterworth / Heinemann. 55
  7. ^ Alan White (3 October 2012). "The £15m scandal our libel laws are silencing". New Statesman (London).

Further reading[edit]

External links[edit]