Loss Prevention Challenges in Retail

In retail today, every dollar counts, and loss prevention challenges are very real. Shrink has a significant effect on a retailer’s bottom line. In fact, a recent study by the National Retail Federation (NRF) found an average shrink rate of 1.44%. This costs “the overall U.S. retail economy $48.9 billion.”

This is why we put together a list of 4 loss prevention challenges retailers are facing, and how companies can address these challenges.

1. Staff Turnover

Turnover in retail is disruptive and expensive. According to a recent LinkedIn Study, turnover in retail is 16.2%. In restaurants this is even higher. Restaurants average 17.2%.

“When it comes to our business model there is a very high turnover rate, somewhere in the 120% range, which creates challenges to ensure staff are provided the knowledge on our LP practices.” – Sean Sportun, Manager, Security & Loss Prevention Circle K Stores and ISCPP Member

Sportun continues, “ When I first joined Circle K, one of my first tasks was to review, re-develop and then deploy a new LP Training Program – which has since been used by the Ontario Provincial Police as a model for all small business in the Province.”

One way to save time and money is to find ways to make the training process more efficient. Fon instance, think about what training materials can be converted into video. Converting content to video translates into more consistent and faster training and offers savings on labor and printing.

Below, a resource from the Ontario Provincial Police that was compiled based on Sean Sportun’s LP training program at Circle K stores.

Employees are your best defense

According to Retail Expert Francesca Nicasio, employees are the best line of defense against loss. To help new employees ramp up quickly consider using software to conduct loss prevention audits.

New employees can log in and view the full history of LP audits. New employees can see results, including photos for their store(s). Knowing the store history helps employees better understand and execute company loss prevention standards.

As new crime trends emerge content covered in the training program should be updated. Have law enforcement experts or a regulatory agency periodically review the content of LP training programs. This ensures the information is current and maintains a high level in training standards.

“A fully cooperative effort by all store level employees is essential to an effective Loss Prevention Training Program. An active and on-going program provides the knowledge employees require to remain safe while at work.” – Sean Sportun, Manager, Security & Loss Prevention Circle K Stores and ISCPP Member

As a best practice, the educational information within the LP training program should utilize a combination of proven safety techniques and “real life” tangible surveillance video/images of incidents as training tools to reinforce a safety culture amongst employees.

An effective employee safety & security training program should consist of two primary mechanisms:

  • First, require store-level employees to complete either a computer-based component or a review of the physical LP Manual on a quarterly basis. Include a short test in any LP review. Then, keep the test on file for compliance purposes. Compliance with the LP review process and the completion of review tests can be accomplished as a tracked task using retail audit software.
  • Second, the Loss Prevention department should facilitate a lecture-seminar style training program annually. Do so for all store-level employees utilizing surveillance video/images as relatable training tools.

2. Access to Data

Trying to search through old emails for key loss prevention data is frustrating and time-consuming. It is even worse to have the data of loss prevention audits sit unused on someone’s desk. This can happen when there is no time to translate it from paper or Excel into a central database.

The solution is not to expand the workforce. Instead, help existing employees work more effectively. More and more retailers are looking for technology that can be implemented quickly to improve operations, drive efficiency and give insights into the stores.

Find a solution that can collect, track trends and mine the data from loss prevention and operations audits. Be sure you can attach best practice photos and documents to the loss prevention audit form. This creates a streamlined repository for essential information.

A retail audit software and task management solution gives you real-time data and out-of-the-box trend tracking reports. It also gives you the ability to automatically filter who can see what data based on their role in the company. The data is secure but always readily accessible.

3. Returns Fraud

A survey by NRF discovered, “the average costs of return fraud was $1,766.27 in 2017, with a median of $171.”

“Return Fraud as a result of rising Organized Retail Crime trends appears to be an on-going problem. LP practitioners at every level are constantly attempting to balance the legitimate customer shopping and return experience with the retail criminal who is abusing the return policies to victimize the retailer for illicit gain.” – Robert Moraca, VP of Loss Prevention at National Retail Federation 

Here are 3 ways to combat return fraud.

Tags

Pay close attention to where you attach pricing and tags to an item to prevent non-legitimate returns. It is best to place tags on clothing in obvious areas. This way someone cannot wear the item unless they remove the tag. For example, do not put a tag at the end of a sleeve or the hem. It is easy for someone tuck these tags inside, wear, and then return the item.

Labels

If your use price labels, ensure they cannot be removed in one piece. Retailer HomeSense subverts this type of shrink by using tags with subtle cutouts throughout. It is nearly impossible to remove the tag in whole. Likewise, someone cannot reattach it for return or re-attach it to a less expensive item for return.

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Policy

Home Depot, for example, offers very simple returns without a receipt if you paid with your credit card. Home Depot simply swipes the customer’s card, looks up the purchase, and returns the money directly to the card. This allows the retailer to verify the legitimate purchase. Additionally, the retail can gather data on the frequency of returns from that customer. For instance, fast fashion retailer Forever 21 has a very clear return policy of no refunds, only exchanges and store credit.

Next, Moraca suggests investing in technology and tightening up the return policies as the best solutions. Last, it’s important that the return policy be simple but also clearly stated.

4. Lack of Resources

According to NRF’s 2017 National Retail Security Survey (NRSS), 7.9% of loss prevention departments saw a budget decrease of greater than 20% in 2017.

The NRF’s 2018 NRSS asks retail executives how many additional LP personnel they need to keep up with the emerging retail crime? The answer is eight individuals. This is up over 12% from last year.

In a conversation with Robert Moraca, VP of Loss Prevention at National Retail Federation he said, “One of the top challenges facing retail Loss Prevention these days is definitely doing more with fewer resources – we find that in times of a downward business trend, Loss Prevention seems to be one of the first areas that get cut, then upon the financial rebound, we are the last discipline to regain funding.”

“Budgets remain relatively flat so LP professionals really do need to find ways to work smarter, not harder” – Robert Moraca, VP of Loss Prevention at National Retail Federation

When it comes to budgets, organizations that deploy efficient processes are able to do more with less. Retail Audit software not only offers labor savings, (2.5 hour time saving per LP Audit versus Excel), it provides real-time data and notifications to address issues causing shrinkage immediately.

Trend reports help you identify repeat non-compliance at individual stores. Software allows companies to schedule action plan follow-ups with due dates and automated reminders to ensure issues are resolved.

Interested in loss prevention?

See our other posts dedicated to loss prevention: Loss Prevention Checklist and best practices for loss prevention audits.

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About the author

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Jacqueline Young-Sterling is the Director of Customer Experience at Compliant IA. She regularly contributes to and is quoted in publications such as the Shopify Blog, Business News Daily, Independent Retail, and the Vend Blog as a retail expert. Compliant IA is the leading retail audit platform. Field managers and stores use the app to complete smart checklists at store-level, take photos, and assign tasks with automated reminders.


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