Loss Prevention & Retail Theft
Retail Loss Prevention
What Is Loss Prevention?
Loss Prevention (Or Asset Protection) is exactly that. A department within a company, dedicated to protect the assets of the company, from internal theft (Employee theft), External theft (AKA Shoplifting) and reducing what is known throughout the retail industry as Shrink.
What is Shrink?
Shrink can easily be broken down into a couple different sections or "Shrink Causes". These causes are typically, Employee Theft (Internal), Shoplifting (External), Administration Error, Vendor Error / Fraud, and Human Error.
Typically, these shrink causes can be broken down into percentages and are quite common across the board at all different types of retailers.
Employee Theft - 47%
Shoplifting - 31%
Administration Error - 12%
Vendor Error / Fraud - 8%
Human Error - 2%
Believe it or not, but it is a fact, Employee Theft contributes to approximately 48% of all retail shrink dollars. Why? You ask, Employees are the driving force of any retail company, no matter how big, or how small, and the bigger the company, the more employees there are, which in turn means more chances for employees to commit fraudulent transactions, steal merchandise, free bag merchandise, til tap, etc. There are many, many different ways employees can steal from their employers, however 99.9% of the time, the employees are caught, charges are pressed and civil restitution is demanded on behalf of the company in question.
"No receipt Returns" Return of no receipt merchandise for themselves without actually bringing merchandise to the registers, and creating a gift card to keep or use at a later time with the value of the falsified returns merchandise amount on the gift card.
"Damaging" Damaging out perfectly good merchandise then taking it home or using it for personal use.
"Free Bagging" or "Sweet hearting" Is the act of passing along merchandise to friends, family, or coworkers that come through a cashiers' line. The cashier only pretends to scan merchandise at their register. Then charges the customer for 1-2 items, when in actual fact the customers in question should be charged for 5-6 items.
Stealing merchandiseThere are a lot of creative ways to steal merchandise from employers, the most common merchandise thefts occur through back room / receiving associates. Due to the high level of access to stock and receiving bay doors that the associates have. Associates have been known to conceal merchandise on their person in places such as backpacks, purses, waistbands. Associates have also been known to do a form of "Free bagging" as explained above, called "Roll outs" where an associate who runs or works in a pick up area, will just literally roll out merchandise for friends or family members. Associates have also been known to use store merchandise and not mark or document these uses, which in turn will cause shrink to rise, due to no accountability or documentation for the used merchandise. Associates also, love, and I mean love, to steal candy, food or drinks if the store in question sells it.
"Til tapping" is not as common anymore due to the technological advancements companies are setting in place to help track the cash flow through their registers. Cash does, however, make any company run. Til tapping happens most commonly during the very first time the register is opened for the day, so the associate who had tapped the money, can short change various customers throughout the day, and a loss will never actually flag on any cash count systems. AND VISE VERSA. Associates will also wait til the closing of registers, after short changing honest customers throughout the day, creating a "Ghost" or "Unknown" overage in the register. Only the associate will know how much the register is over at the end of the day, and if they can keep count of how much extra is in the register at the end of the night, there won't be a shortage after the associate has 'tapped the til' for the extra cash in the register.
Shoplifting contributes to approximately 32% of shrink throughout retail stores country wide.Shoplifting, believe it or not, has a direct impact on the prices that companies charge for their merchandise. Why? When companies are at a loss, they tend to boost prices to compensate for the loss they had endured due to shoplifting.
Shoplifters tend to use a huge variety of methods to steal merchandise and cheat the system, and this is why companies employee Loss Prevention Agents, to combat the loss that shoplifters and return fraud artists inflict to the company.
Loss Prevention Agents are plain clothed security associates, either employed directly by the store, or through a third-party security firm. The sole purpose of a Loss Prevention Agent is to reduce shrink, caused either by associates, customers, or paperwork errors.
The life of a Loss Prevention Agent; On a daily basis, Loss Prevention Agents walk or scan sales floors via CCTV surveillance footage. Agents are programmed to look for "Alert signals" which are signals that can provide probably cause or a reason to follow a particular customer or potential thief.
- Baggy or out of season clothing.
- Shopping bags from other retailers. (Especially if the bag is from a retailer that is not in the surrounding shopping center or mall.)
- Females with large, empty or free spaced purses (Or males with purses, dead give away, and yes, this has happened on several occasions throughout my career.)
- Teenagers or preteens with backpacks during school hours. (Obviously they've ditched school, 9/10 times they will steal, from candy and Pokémon cards to high-priced electronics.)
- Acting nervous when associates are around.
- Looking up or around for cameras.
- Wearing sunglasses inside the store (to conceal their eye movements when looking up for cameras).
- Removing hangars, tags, opening boxes, and removing merchandise from their respective enclosures.
- Quick selections without regards to price of merchandise or the merchandise in general.
- Moving from one department to another, with no correlation to each other. (IE: The tool department to the baby department in the back of the store.)
- Taking merchandise down dark or secluded aisles of the store.
The thing with external theft, to someone in the field, everyone is a potential thief. Age, Race, Size, Weight, Height, Clothing, Homeless, Rich, Poor. It does not matter, at all. In the mind of a Loss Prevention or Asset Protection Agent, EVERYONE steals. I've had to make close to literally 1,000 arrests since being in the field, and I can quite confidently say, that thieves come in every single shape and size. Stereo types are thrown out the door completely.
As stated above, administration error contributes to approximately 12% of shrink. These errors are usually caused by process errors from receiving or register ringing errors from newer associates. During annual inventory, counts can be off, a 0 can be missed when entering values, and that will spike inventory completely. These errors can easily go unnoticed, however a tight wrap from the Loss Prevention Department or the Asset Protection Department, these errors can be fixed easily if they are caught in time.
Price changes & Signage contribute to a chunk of administrative error. On paper, merchandise is supposed to be sold at a certain price, if changes aren't made correctly through systems, and they are changed under the running price. The merchandise will be sold for less than what the system expects it to be sold at. There by causing a specific dollar amount in shrink per item sold, until the problem is noticed, and changed. Signage can cause the same problems price changes can, wrong signs in front of merchandise can cause items coded as one set price, to be sold at a lower price, there for causing shrink due to price over-rides. If the cost of the hypothetical merchandise stated above is lets say, $5.00, and the mark up is only 20%, so the retail value is sold at $6.00, but the signs are wrong, or price was input into the system as only $4.50. The company is losing a shrink value of $0.50 per item sold. Therefor the company is making 0 profit on its merchandise, and is also losing in shrink. Pretty easy to understand right? These errors can be easy to fix, but sometimes hard to spot at a retail standpoint, if you don't know the actual cost of the merchandise being sold, this contributes to millions per year, though only 12% in shrink.
Vendor Error & Vendor Fraud
Vendors pose a huge risk to shrink, but most companies have checks and balances in place to eliminate vendor fraud.
When vendors come into a retail establishment and charge companies for merchandise, honestly, most of the associates who sign off on paperwork either don't care, or trust the vendor in question. Now, if a vendor comes in with 5 items, lets call these items x. So the vendor brings in 5X, but charges the company for 6X. The extra X can either be, stolen by the vendor in question, OR returned to the company. On paper, the company signed off on receiving 6X, but in actual fact, they only had received 5. The vendor (judging on the price of the merchandise) just made off like a bandit! What if "X" was $5000.00?
Vendor fraud has the potential to cost retailers millions, upon millions of dollars a year, hence why companies set practices and checks & balances in place to eliminate such a shrink rate. However, it still manages to slip through some retail fingers and cost some companies more money than others.
The Human Error
The human error is pretty much an excuse for things that really have no explanation. The cogs in the retail industry aren't perfect, and quite literally move 24-7 (Think about the saying Christmas in July.) Companies are so far ahead of themselves to make profit and sales, that things will "Fall through the cracks". Shit happens, and things get lost! Thankfully this is only a small percentage across the board for all retailers. (Even though 2% can literal be a couple millions of dollars, but to retailers, this really isn't much.)
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