Effective loss prevention is critical to a business’s profitability. It deters theft, fraud, and operational losses.
While most people think of a security guard by the door or EAS gates when they think of retail loss prevention, there are many other ways to cut shrinkage and safeguard profits. Here are a few tips and tricks to help you do just that.
1. Invest in a Surveillance System
Businesses lose billions in inventory each year due to theft, fraud, and preventable administrative errors. Effective loss prevention can help companies reduce losses and increase profit margins. A key first step is to invest in a security system.
A well-implemented CCTV (closed-circuit television) system can protect a store from external and internal theft, providing important evidence in the event of a theft or other crime. Cameras can be strategically placed to cover areas of the store that are most at risk of theft, such as point-of-sale areas or the location of sensitive merchandise. Camera resolutions vary; a jewelry store, for example, may require dense camera coverage to ensure that every suspect can be identified in the event of a shoplifting incident.
Retailers can also protect their stores and their profits with a variety of other technology tools, including video analytics that identify suspicious patterns of behavior, license-plate recognition systems in parking lots, and conspicuous surveillance devices such as the ones Target uses at self-checkout stations. Simple improvements to the store environment can also help: clean, well-organized shelves and clear sightlines along aisles, for instance, make it easier for employees to monitor shopper behavior and quickly spot suspicious activity.
Finally, a full system review from an experienced integrator can help retailers eliminate in-store blind spots and support critical communication programs. This can improve the efficiency of loss prevention associates, enabling them to focus more on detecting and preventing theft and other crimes instead of searching for proof after the fact.
Many retailers, especially those with slim profit margins, employ dedicated loss prevention teams. These teams can range in size from a few employees at smaller companies to hundreds or even thousands of workers at larger chains with multiple stores and warehouses. These teams are responsible for implementing policies, selecting anti-theft technologies, and monitoring day-to-day store security, as well as investigating problems. They may also be responsible for vetting new hires, educating employees on the importance of loss prevention, and educating them about how to spot shoplifters or other types of theft.
2. Ask Customers for Identification
Retail shrinkage — also known as inventory loss — is a significant problem that hurts business profits and frustrates customers. These losses can occur due to theft, employee error, operational issues, and inventory damage. Prioritizing effective loss prevention is a way to ensure that these losses are minimized.
Asking for identification is a simple yet effective technique to help protect against retail loss. By requesting ID, businesses can verify that customers are who they say they are and spot fraudulent returns or suspicious return behavior. By implementing this strategy, businesses can reduce the amount of money lost to retail shrinkage and improve their bottom line.
Other physical deterrents to shoplifting include tamper-proof packaging that prevents products from being resold on the black market or a heightened security system with cameras and sensor-equipped tags that detect unauthorized movements on a storefront’s sales floor. Store layout is also an important factor that can deter theft, as clean shelves with clear sightlines are more easily monitored by employees and make it harder for thieves to conceal items in shopping bags or other bags.
In addition to these physical tools, a solid loss prevention program includes automation of data analysis procedures that catch patterns of profit-draining behaviors early on. This allows for rapid response and a shorter time to solve when an issue is identified.
Strategic scheduling of employees, especially those performing money-handling tasks such as cash register operations, is another key to effective loss prevention. This helps ensure adequate staffing levels and enhances surveillance capabilities during high-risk times. This can also help avoid the risk of an inattentive or dishonest employee making a mistake that results in profit loss.
3. Don’t Let Employees Work Alone
Each year, businesses lose billions in inventory shrinkage due to theft and fraud from outsiders and internal employees. The best way to combat these losses is by implementing effective loss-prevention strategies, tools, and technology.
For retail stores, effective loss prevention focuses on several areas:
Employees are the most common source of shrinkage, especially external theft, so reducing the possibility of employee misconduct is a top priority. Careful hiring practices, including criminal background checks and reference checks, help to reduce the risk of employing someone with a history of stealing or fraud. Training employees to identify and respond to suspicious behavior appropriately is another important aspect of this process.
Keeping an eye on inventory is also essential, especially in large warehouses or stores with high-value merchandise. Physical security measures, such as a secure warehouse entry system or cages for storage of high-value products, can help deter theft and other potential hazards. In addition, ensuring that the warehouse is properly lit can make it harder for employees to steal or damage products by accident.
Another way to cut the risk of theft is to train employees to actively engage with customers while they are on the sales floor. Greeting each shopper with a friendly “How can I help you?” is music to the ears of most shoppers and can serve as a deterrent for those who might be planning on committing a crime in your store.
Finally, it’s important that lone workers receive regular feedback and updates from their managers. Whether it is through a formal review process or simply by being copied on emails and included in meetings, this can prevent them from feeling isolated or left out of the loop and could be a key element to their well-being and motivation.
4. Conduct Surprise Audits
Every year, retail businesses experience significant financial losses due to theft and fraud, operational errors, inventory shrinkage, and other issues. This is why effective loss prevention strategies are essential. These measures can protect companies from financial ruin, build customer trust, enhance brand reputation, and improve employee morale.
Many of the biggest retail losses are caused by shoplifting and return fraud, both of which can be reduced by implementing simple security tools like cameras, mirrors, and sensors. These security measures can also deter would-be thieves by making them feel as if the company is watching their every move.
Another way to prevent theft is by hiring the right employees in the first place. Before allowing new hires to work on-site, conduct criminal record checks and ask for references. In some cases, it may be appropriate to run credit checks as well. If any red flags pop up, consider taking that applicant out of the running.
It is also important to make sure that all employees understand the importance of keeping the workplace free from unnecessary losses. Make sure that loss prevention is included in the new employee orientation and that employees are encouraged to alert managers if they notice accounting errors.
In warehouses, it is important to provide proper lighting so that employees can see what they are doing and avoid causing damage to merchandise. This is not just for theft prevention but can also help with reducing inventory shrinkage and ensuring that all items are properly accounted for.
Finally, retail stores should consider establishing a tip line for employees to report suspicious activities. This can be done in a variety of ways, including through the use of a dedicated phone number, email, or website form. This can help to encourage employee participation and reduce the risk of retaliation.
5. Create a Workplace Culture
In addition to investing in technology and creating a dedicated team, businesses can also work toward a culture of integrity by incorporating policies that support loss prevention. This will help with deterring employee theft and fraud, as well as preventing inventory shrinkage that can’t be accounted for.
This might include requiring background checks for all warehouse staff or adding credit checks to the hiring process for accounting positions. Companies can also use strategic scheduling to prevent understaffing during high-risk periods and implement overlapping shifts when necessary.
During new hire orientation, companies can talk about how they want employees to behave and the consequences of unethical behavior. They can also provide ongoing training to employees on the signs of shoplifting and how to handle suspicious product returns.
Another way to foster a culture of integrity is to encourage a low turnover rate. When employees stick around longer, they are more invested in the business and are less likely to steal from it.
Companies can make a difference by providing employees with adequate compensation, ensuring they have access to all the tools they need to do their jobs, and offering training opportunities. Lastly, they can establish a culture of trust by leading by example and encouraging ethical behavior.
Effective loss prevention not only protects a company’s financial interests, but it can also improve customer service, build a positive reputation, ensure compliance, and boost morale. The best approach is a comprehensive strategy that incorporates multiple tactics to create an effective system. Incorporate these five tips and tricks into your business’s operations to reduce losses and enhance security. With proper planning, your business can keep more of its profits and focus on growth.