Retail Loss Prevention: 6 Strategies to Mitigate Loss

Retail stores lost nearly $122 billion to theft last year. By 2026, that figure is projected to increase to over $150 billion. While these material losses are concerning to retailers, what’s just as worrying is that they’re often also accompanied by violent, aggressive behavior from shoplifters.

Violence towards employees is a huge concern, but retail loss encompasses more than petty theft and organized retail crime (ORC). And that puts retail security and loss prevention teams under pressure to monitor a wide range of potential threats. From employee safety to supply chain integrity and crime prevention, there’s a lot to consider.

Effective loss prevention strategies give complete visibility into critical events happening both in-store and off-site, helping reduce retail loss by enabling timely interventions and proactive measures. In this article, we’ll cover six strategies loss prevention professionals should implement—and share additional loss prevention tips from today’s top retail experts.

What Is Loss Prevention in Retail?

Retail loss prevention refers to the tactics and strategies implemented to reduce retail theft, fraud, and other forms of inventory shrinkage. “It’s about much more than dealing with kids stealing bubble gum,” says Jacque Brittain, Editorial Director at Loss Prevention Magazine. While small-scale thefts like these might be the first thing that springs to mind, Brittain notes that loss prevention measures in retail need to address inventory shrinkage and a wide range of criminal enterprises.

Types of shrinkage in retail

According to the National Retail Federation, retail shrink is attributed to five main types of loss:

• External theft: 36%
• Internal (employee) theft: 29%
• Process, control failures, and human errors: 27%
• Unknown: 6%
• Other: 1%

Here’s a detailed look at each of these categories:

External theft

As the largest cause of retail loss, external retail theft—sometimes called external shrink—costs retailers billions of dollars annually. Common types of external theft include:

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

Internal theft

While many loss prevention strategies focus on external theft, internal theft by staff members accounts for 29% of retail business shrink. Even though most employees are honest and ethical, those who aren’t can significantly impact an organization’s bottom line. The top four methods of employee theft are:

• Merchandise theft
• Refund fraud
• Cash or deposit theft
• Passing merchandise to friends

Process failures, control failures, and human errors

Human and operational errors are inevitable in retail, but they can quickly erode profits. This type of shrinkage covers a wide range of scenarios, including:

• Shipping errors
• Improper pricing
• Misplaced goods
• Cash handling mistakes
• Administrative errors (paper shrink)
• Point-of-sale (POS) transaction errors
• Damaged inventory or inventory loss due to critical incidents (fires, floods, etc.)

Is vendor theft internal or external shrink?

Supplier fraud, also called vendor fraud or procurement fraud, isn’t included in the latest NRF figures, but it can be costly. It’s generally considered external shrink because it happens when outside vendors come in-store to monitor or stock inventory.

There are numerous types of vendor fraud, with some of the most common being:

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

Retail Security and Loss Prevention Examples

When Jim Mires, Vice President of Loss Prevention and Strategy at Sally Beauty, wanted to reduce loss and protect store associates, he focused on updating security devices, enhancing policies, collaborating with retail industry peers, and prioritizing effective communication.

Mires and his team implemented a range of protections, including lone worker safety devices, remote CCTV systems, and protocols for active shooter scenarios.

Emphasizing the importance of collaboration and communication, Mires states: “It’s about speed, accuracy, and knowledge. Fast information is useless if it’s inaccurate.” To ensure reliable information, Mires often validates information with industry peers. “We can help each other to a certain degree. Most of our stores are located in centers with other retailers, and we frequently communicate about what we’re seeing. It’s important to have a network of people that you can rely on.”

6 Actionable Retail Loss Prevention Strategies

While there’s no way to eliminate retail loss, you can minimize it. Here are six strategies that can help reduce retail shrinkage, enhance security measures, and ensure employee safety:

1. Employee training

Brittain notes that there’s sometimes a disconnect between retail store staff and loss prevention teams. While your team’s priority might be theft prevention, theirs is making sales. “How do you get them to do what you want them to do and follow the different protocols necessary to keep the business running smoothly from that side of the business?” he says.

The answer lies in training employees.

Retailers can put their teams through all types of emergency response training programs to help deal with those types of things, Brittain adds. For retail stores, the primary types of training to consider include:

• Situational awareness: Do employees know how to recognize threats or what to do if they notice suspicious behavior? Many stores have rules limiting what employees can do to confront a potential shoplifter, so ensuring they know what they can (and can’t) do is crucial.
• Workplace violence: Workplace violence is becoming more common, with employees in retail typically being exposed to criminal intent, customer aggression, and even worker-on-worker violence. Nearly one in four employees have experienced some kind of violence at work, and workplace violence prevention plans, including training, can help them respond effectively.
• Loss prevention training: Employee theft accounts for a large percentage of retail loss. Employee training and awareness, along with the use of tip hotlines and rewards, can help reduce employee theft.
• De-escalation training: Retail employees can be exposed to potentially hostile scenarios. Knowing how to identify warning signs of aggression and defuse potential confrontation until law enforcement arrives, if needed, can help keep store associates safe.

2. Security technology

Strong, visible deterrents can help reduce both internal and external theft. Effective options include:

• Security cameras: Display surveillance systems in prominent locations around the store. Consider adding video surveillance to areas that are harder to observe—like corners and behind higher displays. Live, customer-visible CCTV is also becoming a popular option.
• Security tags: Attach electronic article surveillance (EAS) and radio-frequency identification (RFID) tags and labels to high-value items or packaging. These tags allow for real-time tracking and monitoring of items within the store and can trigger security alarms if removed without deactivation.
• Artificial intelligence (AI): AI can enhance security by identifying products placed on self-serve checkouts and detecting unusual customer behavior, helping to prevent theft and fraud.
• Point-of-sale (POS) system analytics: These systems can help reduce internal or employee theft by flagging anomalous transactions or discrepancies within your POS system.

Another thing to consider is using threat intelligence software to improve store security and employee safety. For large retailers with a lot of locations or physical assets, continually monitoring emerging threats used to be impossible. But now, threat intelligence solutions can proactively inform employees of potential threats or vulnerabilities affecting their stores. An emergency communication solution with integrated threat intelligence like AlertMedia can help retailers reduce the impact of a wide range of safety, security, and operational threats.

3. Local networking with other retail organizations

Retailers can’t combat crime alone. But community partnerships can help reduce retail crime by sharing best practices. One of the goals behind RILA’s new Vibrant Communities Initiative is for retailers to share information, work together, and reduce retail losses.

Retailers can collaborate to fight retail crime by identifying repeated theft patterns and sharing what works. For instance, local retailers in a shopping district might share information about shoplifting incidents and implement consistent security measures, such as installing CCTV cameras and training staff to recognize suspicious behavior. This cooperative effort not only deters theft but also enhances the overall safety and security of the retail environment, benefiting all involved.

4. Comprehensive communication plan

Minimizing retail loss requires seamless, two-way communication at all organizational levels. Information from store associates on the shop floor is as important as communications from regional leadership or the security team.

Within an organization’s communication plan, leaders need to consider how to facilitate this type of two-way communication. The right emergency communication solution will allow employees to instantly and discreetly report incidents or request assistance without getting involved in a potentially dangerous confrontation.

Mass notification systems that allow employees to communicate across multiple channels—including email, phone, text, and mobile app—also make it easier to send and receive critical messages without delay. This capability is especially important for employees on the shop floor who may not have regular access to email or desktop notifications.

5. Store layout changes

Adapting store layouts to maximize visibility can help deter external theft by making it harder for shoplifters to steal stock. Consider implementing the following changes:

• Adjust product placement: To keep high-value items in sight, place them near checkouts or in areas with high foot traffic.
• Ensure clear sightlines: Ensure employees have clear lines of sight throughout the store. Avoid elevated product displays that can create blind spots.
• Update lighting: Identify and address dark or dim areas, ensuring the entire store is well-lit.
• Place registers near exits: Position cash registers near the exits so customers must pass staff when leaving, increasing the likelihood of observing potential shoplifters.
• Install mirrors: Use mirrors in strategic locations to eliminate blind spots and help employees quickly scan hidden corners of the store.
• Add clear signage: Prominently display signs announcing the use of security technology to deter shoplifters.
• Restrict access to controlled areas: Secure back-of-store stockrooms and staff areas, allowing only authorized personnel to enter.

6. Company policy changes

Effective loss prevention hinges on all employees working together. The only way to achieve that is through well-crafted company policies that have buy-in at all levels of the organization.

Evaluate the effectiveness of current policies and update them, so you can establish and enforce clear guidelines for addressing retail loss. Policies to review and consider updating include:

• Returns
• E-commerce
• Point-of-sale
• Inventory management
• Trespassing
• Employee screening

Meet Evolving Retail Challenges Head On

Successful asset protection and loss prevention efforts demand a strategic approach. In a constantly changing risk landscape, loss prevention technology gives retailers the situational awareness needed to stay ahead of threats. Retail security and loss prevention teams can dramatically reduce shrinkage, enhance safety, and improve security across all retail locations by implementing emergency communication and threat intelligence software and robust communication, training, and community initiatives.

Is your retail organization ready for any threat? Download the threat assessment template to identify and prioritize the threats that will have the most significant impact.