Any loss prevention or store operations manager knows that loss prevention is the result, not the effort.
Ultimately, the only thing that counts at the end of the day is how much shrinkage you can prevent by employing the latest technology, devising the best training and hiring the most diligent employees.
However, even in the best scenarios there are factors that hinder your loss prevention efforts and encourage shrinkage. Below are the most common ones:
Lack Of A Comprehensive Loss Prevention Strategy
The first and probably the most important reason loss prevention efforts fail is a lack of a comprehensive loss prevention strategy that ties into the overarching business goals of the organization.
A study by Robert S. Kaplan and David P. Norton for the Harvard Business School entitled “The Strategy-Focused Organization” found that “a mere 7% of employees today fully understand their company’s business strategies and what’s expected of them in order to help achieve company goals.”
The overall goal of most retailers is to profitably sell products that were manufactured by a third party to maximize shareholder value — whereas the task of loss prevention managers is to help the organization sell more by losing less.
If a loss prevention strategy only focuses on preventing shoplifting, you are ignoring the other pieces of the puzzle such as securing the employee and back entrances, scanning incoming inventory to prevent vendor fraud, tracking each item individually to minimize administrative errors and making the store more secure for employees as well as visitors.
Shrinkage prevention is an organization-wide problem and has to be tackled on a corporate level. Every single employee must be informed, aware and educated on the causes and consequences of shrinkage — this will not only lower employee theft but also make the entire team more alert.
Loss Prevention In A Vaccum
Hand in hand with incorporating loss prevention into the overarching business strategy is the integration of loss prevention systems into existing business applications.
Traditional RF- or AM-based electronic article surveillance (EAS) systems are not integrated with other systems because they are electronic-based and not software-driven. This lack of integration not only isolates the company’s loss prevention efforts from other processes within the organization, but it inhibits the retailer to build a network of reinforcing systems that work together.
With mega-trends such as omni-channel, globalization, big data and the Internet of Things shaping the retail landscape, IT and other business departments need to work closer and align better with loss prevention.
However, the recently released study The Great Disconnect Between LP and IT finds that there are huge discrepancies between IT and loss prevention – however executives’ priorities do not align with these realities. For example, on average, the revenue lost per case of employee theft is up to six times larger than what shoplifters help themselves to (according to the 2015 Retail Theft Survey), but tackling internal theft is deprioritised compared to other priorities.
At the moment, only 8.3% of the IT budget (not including Payment Card Industry (PCI) Data Security Standards and data breach protection efforts) is dedicated to loss prevention efforts. One reason for this low number is simply that other business priorities are taking precedence. The other reason that loss prevention receives so little attention from IT is because electronic systems are not IT-enabled and cannot be integrated into other business applications. In fact, IT personnel, as well as LP professionals name system integration as one of the biggest hurdles in building a closer relationship.
With an increasing number of solutions including open API’s, internet connectivity and the ability to integrate with business applications, this will change over the next couple of years.
The third reason why loss prevention fails is demotivated employees. Retail thrives and fails with the quality and retention of its employees that it hires.
Theft from employees and their lack of motivation to follow up on alarm situations is very high. This is especially true in the United States, where the average retail employee earns on average $7.65 – $14.10 according to PayScale — compared to for example $17.42 in Germany. In addition, American stores have a high employee turnover rate of 67 percent. Both of these factors result in decreased motivation and loyalty towards the employer which is reflected in high shrinkage.
If a customer walks into your shop and they get approached almost immediately and helped, there is less opportunity to browse the merchandise, inspect security tags and slip items into aluminum foil-lined bags. In contrast, if your personnel is busy exchanging the latest gossip, filing nails or playing games on their phone, there is more opportunity for theft.
Lastly, if your front line workers don’t pursue a visitor that set off an alarm because they could not bother or are too embarrassed, your loss prevention efforts are futile.
No Clear Reasons For Alarms
The number of alarms your system sounds during the day can be a good indicator if something is amiss. For example, if you usually have 20-30 alarms during the day and this increases suddenly to 80-100 alarms daily, you know something is not right. But sometimes it is hard to determine the reason for the alarms.
If your system can decipher the alarm direction, you already have an indication for the cause of the problem.
Maybe a piece of merchandise fell behind a display case and into the field of the security pedestal, it would cause a non-directional alarm. However, you could see an increased number of incoming alarms if your neighboring store does not deactivate their tags properly, and customers continue their shopping in your store.
Not knowing the causes of the alarms prevents you from fixing the underlying problem and will result in too many alarms — which in turn will scare away shoppers.
No Status Updates On The Health Of Your Systems
For most retail employees, the day starts by testing the loss prevention systems. They have to go with a tagged merchandise item past a pedestal to manually test if it sounds an alarm.
However, if the system does not perform at peak performance, stops working during the day or the staff does not perform a daily check, the store will be unprotected for longer periods of times.
Often, the reason for the malfunction is simple and could be fixed if the system would be able to sound an alert — for example moving a display that has been blocking the EAS system.
Also, by having an Internet connection, you can allow remote device monitoring and maintenance as well as constant firmware updates to keep your solution improving over time.
Which factors do you see as the most hindering?
Which common pitfalls do you encounter every day that hinder you to do your job effectively? We would love to hear them – please use the comments below to continue the discussion.