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How Are Stores Improving Loss Prevention?

Posted by Joe Clarkin on 9/8/15 3:37 AM
Topics: retail management, loss prevention

In 2014, retail stores saw a significant decrease in potential losses. In this article from the National Retail Federation, they explained what happened and why stores across the country made the decisions they did to help cut down on things like internal theft, shoplifting and resumé dishonesty. Check out an excerpt from their findings below, and be sure to give the article a full read here.

Man hiding something under his sweater

By the numbers

A total of 100 retailers participated in the survey, representing more than 20 retail market categories. The largest sample (24 percent) came from retailers seeing $1 billion to $2.49 billion in sales.

The study represents a significant investigation into where shrinkage takes place.

“For some time we’ve been looking to compare where the shrinkage is coming from, and for the most part the highest percentage has been internal theft,” Hollinger says. “For the first time, it’s actually seeing shoplifting … exceed the internal numbers.”

Shoplifting and organized retail crime accounted for 38 percent of inventory shrinkage; employee theft accounted for 35 percent and administrative error 17 percent.

The efforts to combat shrinkage are significant. Retailers use loss prevention systems “almost universally,” but loss prevention budgets represented less than 1 percent of overall 2014 sales. Specialty apparel retailers spent an average of 0.63 percent of sales on loss prevention measures; grocery stores used 0.36 percent.

Almost all respondents are pursuing efforts to cut down on high-risk employees, which Hollinger calls a key point. “The focus in the report should be whether or not the loss prevention attention is being placed on pre-employment activities,” he says.

Some 89 percent said they’re conducting criminal conviction checks, while 86 percent conduct multiple interviews and 73 percent verify employment history. Men’s and women’s specialty apparel stores and supermarkets are pre-employment screening leaders, with 92 percent checking criminal convictions and 83 percent verifying past employment. Grocery stores and supermarkets reported 100 percent criminal background checks; 83 percent test for drugs.

Training plays an important role, as do hotlines and incentives.

“Everybody seems to be doing something in that regard,” Hollinger says. “One can argue that retailers are making greater use of the Internet and various digital training systems … . There’s a number of different training mechanisms in place.”

Of those surveyed, 95 percent have an anonymous hotline and 88 percent use awareness posters; more than half offer a variety of training programs and notification systems. The leading program continues to be videos (72 percent), but more than 55 percent use Internet-based systems and 54 percent offer “honesty incentives” such as cash and gifts.

Employee incentives offer great value to loss prevention strategies, but retailers still have to prove theft.

“I think there’s greater use of cameras, particularly digital cameras linked to computer software that is interpreting what the camera’s seeing,” Hollinger says.

All respondents use burglar alarms and 93 percent use digital video recorders; 66 percent use live hidden closed-circuit television. More than 69 percent use point-of-sale data mining to help losses at the till. In-store deterrence — plain-clothes detectives (41 percent), receipt checkers (38 percent) and signage (36 percent) — are also gaining traction.

A third of department stores use acousto-magnetic electronic security tags, but all men’s and women’s specialty apparel stores and sporting goods retailers use them.

Hollinger says the best programs are a combination of human resources and technology.

“We’ve been seeing this for years: Hire the best people, train them as well as you possibly can by making them aware of the impact of shrinkage, control your merchandise to make sure you know where it is and where it’s going and then finally develop a range of technologies to apprehend those who are stealing from you,” he says.

“There still has been a tremendous change in the order of which those items appear from the last study … . It does show that the takeaway is greater reliance on technology, as opposed to personnel catching other personnel.”

In human resources, loss prevention staff can make a budget work and are leaders in diversity. About one in four loss prevention managers are women, slightly higher than the national trend that sees 22 percent of senior leadership roles filled by women. Almost 10 percent of loss prevention managers are Hispanic.

About Joe Clarkin

Joe Clarkin is a former copywriter at MBS. When he’s not working or studying, you’re most likely to find him reading a book or watching a game.

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