While cybersecurity threats tend to grab the headlines, good, old-fashioned loss prevention still plays a critical role in retail. That’s because lost inventory (also called shrink or shrinkage) can take a big bite out of a retailer’s bottom line: about $100 billion per year on a global scale.
Some of the loss is due to theft, some to fraud, and some to sloppy store processes. And technology is introducing even more ways for retailers to leak money.
That’s why today’s loss prevention professionals have a much bigger role than standing inside a store giving suspicious-looking shoppers the stink eye. In fact, it’s quite the opposite — they’re working top-down to identify their organization’s biggest holes and to plug them before they sink the ship. And they do it while knowing that whatever tactics they come up with, they’ll only work if they’re properly executed in the stores, where most losses happen.
Theft has been around forever, but the methods change as thieves keep up with the times. Here’s what that looks like in 2019:
Good, old-fashioned shoplifting is still alive and kicking. Customers hide merchandise in their handbags, coat pockets, even their babies’ strollers. Sometimes they’ll take a product out of the box, avoiding security tags and making it easier to hide the item. Some even work with accomplices who will try to distract store personnel, making it easier for them to steal.
Organized retail crime is a fairly new threat with a big impact. In organized retail crime, or ORC, teams of thieves steal large quantities of items with the intent to resell them. Some networks are structured much like drug rings, with multiple layers of hierarchy, specific roles, and even recruiters.
While some target high-end products like jewelry and electronics, anything the thieves think they can easily resell is at risk: razor blades, diapers, baby formula, even expensive cuts of meat. The items then show up for sale at garage sales, flea markets, or online marketplaces. And the loss to retailers is huge: According to the National Retail Federation’s (NRF) 2018 Organized Retail Crime Survey, organized retail crime gangs cost retailers $777,877 per $1 billion in sales in 2018 — an all-time high.
Whether it’s a scan-as-you-shop app or a fixed self-checkout stand, some customers will take advantage of an innovation that was supposed to improve the customer experience by making shopping more convenient. The method is pretty simple: Shoplifters put items in their chart or in bags without scanning them. They usually scan most items to avoid attracting attention, saving their pretend scans for high-ticket items.
Some “shoplifting” really is unintentional. The cashier doesn’t notice the rolls of paper towel or bag of dog food on the cart’s bottom rack, and the customer doesn’t notice that the cashier didn’t ring it up. It can be a perfectly innocent mistake on both sides, but it’s still shrink.
Wardrobing is when people buy an item — often high-end fashion — to wear to an event and then return it afterward. (Some social influencers do it just to post a selfie on Instagram). It’s common with technology, too, like when travelers buy a pair of noise-canceling headphones to get through an especially long flight. The practice may seem harmless — the retailer can just put the item back on the shelf, right?
But it’s usually not that simple. Sometimes the items show signs of wear (makeup on the collar, a lingering odor of cigarette smoke, etc.), and can’t be resold. Sometimes the “buyer” has kept the item so long that it’s no longer on the sales floor, so the retailer has to mark it down and put it on clearance. And tech items are often returned with parts of the packaging damaged or missing, so that the item has to be shipped back for repackaging before it can be put back on the sales floor. All of those scenarios incur a cost.
There are any number of ways thieves use stores’ return policies against them. In fact, return fraud is so prevalent that it costs retailers between $9 and $16 billion per year.
Return fraud wears several disguises:
There are even websites where you can create a print a fake receipt that looks just like an original!
Many big retailers now let employees check customers out right on the sales floor via handheld devices. It’s great for customer service and providing a frictionless shopping experience, but mobile POS doesn’t come without challenges.
One risk, of course, is the security of the data transmitted via those devices. But that’s one thing that’s truly out of the hands of store teams. The risk at the store level comes from something much simpler: Employees setting the devices down and walking away. The internet makes it easy for thieves to find a buyer and sell the device at a profit.
Unfortunately, you can’t talk about loss prevention without mentioning employee theft. Anti-theft devices won’t stop a cashier who has the device needed to take them off (although monitored security cameras might). Nor will they stop the theft of merchandise that never makes it to the sales floor, as when an employee takes something straight from the loading dock to their car. Dishonest employees can also help out their friends by processing fraudulent returns, scanning only a portion of a friend’s “purchases,” or granting unauthorized markdowns.
The role of the loss prevent professional is evolving to meet new threats. A lot of the work takes place back at the corporate office — keeping up with the latest threats and developing ways to fight back, advocating to buy new technology, etc. There’s also an increased focus on analytics, trying to spot patterns of questionable transactions that take place whenever a particular employee is signed into the register, for example. Some go as far as monitoring social media, trying to catch hints of a planned ORC attack in a certain geographic area.
Still, many of the best ways to stop shrink take place within the walls of brick-and-mortar stores. And that means they’re dependent on proper execution by flesh-and-blood employees.
The gold-standard method of preventing shoplifting is offering a great customer experience. Greeting customers as soon as they walk in and checking in frequently to make recommendations or offer advice is not only great for sales; it also tells customers that their presence has been noticed.
Other ways loss prevention depends on store employees to stop shrink include:
Turning policies developed at corporate into tasks that are properly executed in the stores takes a robust store communication and task management solution — starting with skilled writers who can help break academic-sounding policies into understandable, actionable chunks.
But the communication platform itself is just as important for making sure LP policies and tasks are properly carried out. Features to look for include:
When your loss prevention plan depends on the store teams knowing what to do and doing it correctly and on time, a communication and task management platform like Retail Zipline can be your best friend. Reach out today to schedule a demo.
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