Retail Loss Prevention: Using Threat Intelligence Technology to Safeguard Stores

For many people, the word “shoplifting” might conjure an image of a teenager slipping a pair of sunglasses or tube of lipstick into their bag. But petty theft is far from the only threat modern loss prevention teams need to worry about.

While the field of retail loss prevention is rooted in anti-shoplifting tactics, such as electronic article surveillance (EAS) tags, it has grown to encompass much more than that. Today, retail security and loss prevention teams are involved in a diverse set of issues, from crime prevention and employee safety to physical security and even supply chain integrity. The duties of loss prevention teams also continue to evolve in response to ever-changing retail security needs. In the wake of COVID-19 mask mandates, for example, many retail loss prevention teams had to train employees in de-escalation techniques to maintain employee safety during tense or volatile situations.

Loss prevention for retailers with multiple stores is complex. For large retailers with many store locations or a lot of physical assets, monitoring all the potential threats that could impact their employees, stores, and products—at any time, anywhere in the world—is impossible without a high level of situational awareness.

But none of us can be everywhere and see everything. Fortunately, technology can help.

This blog post explores how retailers can strengthen their loss prevention policies and procedures with a comprehensive threat intelligence and emergency communication program. You’ll learn how retail security and loss prevention teams can gain complete visibility into critical events happening at and near all of their stores, at all times—even when they can’t be physically present.

You’ll learn how retail security and loss prevention teams can gain complete visibility into critical events happening at and near all of their stores, at all times—even when they can’t be physically present.

The Importance of Loss Prevention

Retail loss is a huge and costly issue facing the industry. According to the National Retail Federation, U.S. retail store losses due to theft, fraud, and other causes total over $60 billion annually. Effective loss prevention tactics are vital to protecting the bottom line, keeping employees safe, and delivering a positive customer experience.

Loss prevention is no longer just people chasing after shoplifters. From sophisticated organized crime to employee theft to human errors, retail losses have a number of causes. And before you can enact effective loss prevention tactics, you need to understand the root causes of retail shrink—and how they’re impacting your business.

4 Top Sources of Retail Shrinkage

Retail shrinkage—also known as inventory shrinkage or shrink—is the portion of inventory that gets lost or stolen. And for retailers, it’s a growing problem. The 2020 National Retail Security Survey found shrink at an all-time high, accounting for 1.62 percent of a retailer’s bottom line.

From intentional theft to accidental oversights, there are four primary causes of shrinkage that retail loss prevention teams should consider in their planning and response efforts.

External theft

As businesses open to the general public, retailers are naturally more vulnerable to criminal acts such as shoplifting and burglaries. That’s why one of the largest causes of retail loss—accounting for over 35 percent of inventory shrinkage—is external theft.

External theft is when customers intentionally cause shrink by theft, fraud, or vandalism—and it costs retailers billions of dollars each year. From opportunistic shoplifting to highly sophisticated criminal operations, external retail theft takes many forms.

Shoplifting is also up markedly since the COVID-19 pandemic began. With the introduction of identity-concealing face masks, fewer staff members on the sales floor, and many Americans facing economic desperation, shoplifters are more brazen than ever. At the same time, retailers have to face a host of new challenges and fraud risks brought on by the increase in online shopping and multichannel sales.

The most prevalent types of external theft for retailers include:

• Shoplifting
• Organized retail crime (ORC)
• Return fraud

Internal theft

While external theft is often the focus of loss prevention strategies, employee theft—when employees steal from or defraud the company—is also a major problem for retailers. And although the vast majority of employees are honest and ethical, those who aren’t have a major impact on retailers’ margins. One study of retail theft found that employees who steal from retailers average $1,381 in theft, while the average shoplifter will only take about $289.

Supplier fraud

Supplier fraud—also known as vendor fraud or procurement fraud—accounts for the least amount of shrinkage for retailers, but it’s both costly and preventable.

Most vendor fraud occurs when outside vendors come into a store to stock or monitor inventory. For example, a sales representative or delivery person may fail to provide as many units as invoiced, steal other products while they’re in your store, or inflate your purchase price with the intent to pocket the difference.

There are numerous procurement fraud schemes, but some of the common types of vendor fraud that retailers are susceptible to include:

• Billing schemes
• Bribes, kickbacks, or extortion
• Illegitimate vendors
• Understocked orders
• Price inflation from supplier’s employees
• Accidental errors

Administrative and operational errors

Mistakes happen in even the best-run stores. When it comes to loss prevention, retailers need to account for the inevitable human errors and operational blunders. Administrative errors—also known as paper shrink—contribute to more than 20 percent of a retailer’s annual shrinkage. Errors in pricing, cash counting mistakes, shipping errors, and misplaced goods can all add up and eat into your hard-earned profits.

Unsurprisingly, the more manual processes are involved, the more they are prone to human error. These oversights and operational missteps include:

• Improper pricing
• Point of sale (POS) transaction errors
• Cash handling mistakes
• Damaged inventory resulting from a critical incident (e.g. fire, flood, accident, etc.)

How Technology Supports Retail Loss Prevention

While retailers have to factor loss into their bottom lines—there’s no way to eliminate it completely—there are steps they can take to minimize it. By implementing loss prevention policies and procedures backed by modern technology, retailers can reduce shrinkage, bolster security, and keep employees safe. With emergency communication and threat intelligence technology, managing loss prevention across multiple retail locations is significantly easier and far more effective.

Threat intelligence

With real-time situational awareness, retail loss prevention teams can improve store security, decision-making, and employee safety. Using a threat intelligence solution, retail businesses can ensure employees are aware of any emerging threats or nearby critical events—such as civil disturbances or unlawful protests—that may put safety and security at risk.

Many retail businesses use threat intelligence to view incident feeds of critical events near their stores’ locations. This can help loss prevention team members contact those locations to help safeguard assets and keep employees at that location out of harm’s way.

For retailers with multiple locations, automating and operationalizing threat intelligence at scale is critical to effective loss prevention. Using an emergency notification solution with integrated threat detection, response, and communication capabilities like AlertMedia can help retailers reduce the impact of a wide range of safety, security, and operational threats.

Emergency communication

Successful retail loss prevention requires seamless communication between your store associates, security team, and regional leadership. With modern emergency communication software, retailers can facilitate two-way communication and give employees a channel to discreetly report an incident or request assistance using store computers or personal devices—from the floor, a break room, or another secure area.

Multichannel, two-way emergency communication solutions enable employees to instantly and discreetly report theft incidents as they are happening—without having to get involved in a potentially dangerous confrontation. With the ability to notify security, loss prevention teams, and even law enforcement about incidents in real time, retail associates can stay safe while actively preventing loss.

Additionally, by giving store managers and employees the ability to send and receive important messages across multiple channels—including email, phone, text, and mobile app—your retail employees always have a lifeline to help.

The Changing Face of Retail Loss Prevention

Successful asset protection and loss prevention require a strategic focus. Faced with evolving threats and a constantly changing retail risk landscape, new technology can offer loss prevention teams the situational awareness they need to stay ahead of the risks. By using emergency communication and threat intelligence software, retail security and loss prevention teams can dramatically reduce shrinkage, improve safety, and enhance security across all their retail locations.