Retail loss prevention is a set of best practices created to reduce the risk of merchandise theft and minimize fraudulent returns. Shoplifting alone costs US retailers $61.7 billion each year. And, retail loss is on the rise. According to the National Retail Federation’s National Retail Security Survey, inventory shrink averaged 1.62% of sales during 2019, up from 1.38% in 2018, with a majority of losses occurring in-store.
So, store owners should consider retail loss prevention a top priority. Luckily, there are a number of policies and procedures business owners can put in place to limit preventable losses and protect profits.
What Is Retail Loss?
Retail loss—or shrink—covers a wide range of circumstances that cause businesses to lose profits each day. Retail loss includes shoplifting, return fraud, and employee theft. It can be especially damaging to retailers with narrow profit margins. Understanding these causes of retail loss is the first step to spotting shrinkage in your business.
Follow these retail loss prevention tips to protect your business:
1. Organize Your Store to Minimize Shoplifting
Poorly organized stores can make it easier for would-be thieves to take something without being seen by an employee or security camera. Reduce retail loss due to theft by organizing your store in a way that makes it easy for employees to see shoppers. Ensure maximum visibility by creating displays that aren’t too tall to see over. Likewise, avoid large clusters of products that will prevent employees from keeping an eye on shoppers.
You can also install mirrors in strategic locations throughout your store. Mirrors can reduce blind spots and make it easier for employees to monitor customers without hovering or being too aggressive.
Finally, if you stock higher value items, keep them close to the register—or wherever staff members spend time—and utilize locked displays.
2. Take Time to Greet and Assist Customers
A store’s floor plan is only as effective against theft as its employees. Make the most of your store’s strategic layout by training associates to be attentive while on the sales floor. This involves greeting each shopper as they arrive, making eye contact, and engaging shoppers in conversation. Many customers will appreciate the extra attention and would-be thieves will be less likely to steal if they know someone is actively keeping tabs on the sales floor.
For more details on how your merchandising strategy can impact loss prevention, download our free step-by-step guide to planning an effective store layout.
3. Train Employees to Spot Suspicious Behavior
Most retailers spend time training employees on products and sales tactics. However, it’s also important to teach sales associates how to spot suspicious behavior that may lead to theft. Keep an eye out for red flags such as:
- Repeatedly picking up items and replacing them
- Looking around to see whether they’re being watched
- Moving away from employees
- Swapping price tags
- Moving products to different packaging
Protect your business by establishing protocols for employees who spot concerning behavior or active shoplifting. Also provide regular training on the location of duress buttons, how to handle the security alarm, and whether there are any safety phrases for communicating between team members.
4. Install a Security System
If you already protect your store with a security service like ADT, find out what kind of interior monitoring hardware they offer. This may be more expensive than some options, but a security professional can help you choose the best places to install cameras and help you set up the monitoring equipment. Alternatively, try a provider like SimpliSafe that lets you set up a wireless security system for under $200, plus optional monitoring.
Learn more: See our top picks for the best business security systems
In addition to investing in storewide security measures, consider tagging products and installing an exit sensor system. These strategies can’t guard against fraudsters swapping price tags or packaging, but they will likely deter would-be thieves and thwart any actual shoplifting attempts.
5. Advertise Your Security Measures
Installing security cameras is a highly visible way to show your store takes theft seriously. Oftentimes, the mere presence of security equipment is enough to deter shoppers and employees from stealing or swapping price tags. If you can’t afford actual cameras, consider installing fake equipment that gives the illusion of a comprehensive security system.
Potential thieves may also be deterred by signage that warns them of security cameras and the consequences of stealing from your store. Keep in mind, however, that too much signage can be off-putting to paying customers. Keep it professional and decide what’s appropriate for your business and clientele.
6. Track Inventory Using Your POS
Inadequate inventory tracking can lead to retail loss and make it more difficult to spot theft, fraud, and human error when they occur. Use a POS system to keep an accurate count of your inventory as soon as it reaches your store. For example, a POS system like Lightspeed allows for mobile store counts, so your employees can count merchandise without bringing each item to the scanner. This makes tracking easier and reduces retail loss due to human error.
A POS system can also help employees spot fraudulent returns and ensure customers are otherwise complying with the store’s return policy. You’ll also be able to identify ongoing issues with shoplifting by regularly reconciling your POS system with what’s actually in stock.
Learn more: See our top-recommended POS systems for retailers
7. Minimize Cash Payments
Having a cash drawer at your place of business can make you an easy target for third-party thieves and employees. This is especially true if you aren’t open 24/7, which most businesses aren’t. Eliminate this type of retail loss entirely by reducing cash payments, and encourage shoppers to use credit cards, digital wallets, and other more secure forms of currency.
This change may inconvenience some customers at first, but it also streamlines the checkout process for associates and shoppers. Making change takes time and energy that could be directed toward improving the customer experience. Plus, customers won’t be able to make purchases with counterfeit money and return those items for cash.
8. Require Receipts for Returned Items
Retail loss doesn’t just occur when someone takes an item from your store without paying for it. While some people steal items and then return them for a refund, others buy merchandise, use it, and return it for a full refund. Retail losses may also be due to fraudsters who counterfeit receipts and return items for cash.
Consider taking these steps to prevent returns-related retail loss:
- Require a receipt for all returns
- Advertise and enforce a strict return window—30 days is common
- Confirm that the returned items exactly match those on the receipt
- Require customers to provide personal information when initiating refunds
- Customize your receipts in a way that makes counterfeits more easily recognizable
- Train employees to recognize the signs of returns fraud
- Issue refunds to the original payment method, not cash
9. Take Steps to Limit Employee-Related Loss
Unfortunately, retail loss can also occur as the result of employees, whether intentionally or not. Inexperienced and poorly trained employees may fail to adequately track inventory and forget to ring up items in a customer’s cart. And, even your best sales associates can fall prey to a fraudulent return.
Employees who aim to steal from your business may take items like a shoplifter, create fake returns and pocket the cash, or steal customer credit card information to make fraudulent purchases elsewhere. These losses may also be related to friends and family. Consider, for example, an employee who uses his discount to make purchases for a friend, or doesn’t ring up all of his friend’s items when checking out.
To limit your store’s susceptibility to employee-related losses, carefully consider all new hires and obtain professional references when possible. Once an associate joins your team, provide adequate training to avoid inadvertent losses from shoplifters and colleagues. An incentives program that rewards employees for preventing retail loss may also be effective.
Retail loss prevention is necessary to reduce the impacts of shrinkage on a business’ bottom line. Because shrink—or retail loss—is such a common issue, there are a number of ways to deter shoplifting, reduce human error, and incentivize employees against stealing. Once you familiarize yourself with the types of retail loss and how they’re impacting your business, start incorporating a few tips to safeguard profits.